Construction costs for new housing in Portugal rose 4.3% year-on-year, driven by an 8.6% increase in labor and a 0.9% rise in materials.
In December 2024, the landscape of construction costs in Portugal has undergone a notable transformation, with an estimated year-on-year increase of 4.3%. This marks a significant uptick from the previous month’s figure of 3.4%. The National Statistics Institute (INE) has disclosed that the price of materials has risen by 0.9%, while the cost of labor has surged by an impressive 8.6%.
This acceleration in costs can be attributed, in part, to the base effects stemming from the quarter-on-quarter reductions observed in December 2023, which saw labor costs decrease by 0.5% and materials by 0.8%. The labor component alone contributed 3.8 percentage points to the year-on-year change in the Construction Cost Index for New Housing (ICCHN), a slight increase from the 3.5 percentage points recorded in the previous month. Meanwhile, materials accounted for a modest 0.5 percentage points, a recovery from the negative contribution of -0.1 percentage points in November.
Among the materials that have notably influenced the aggregate price variation, Bitumen, Carpentry, and Ready-mixed Concrete have experienced increases nearing 10%. Conversely, Wood and wood products, along with Galvanised mild steel sheet, have seen declines of approximately 10%. Other materials, including Steel pipes, cast iron pipes, plumbing equipment, Glass and mirrors, and Sanitary articles, have also faced reductions in the same ballpark.
On a monthly basis, the ICCHN recorded a stable rate of change at 0.2%, mirroring the previous month’s performance. Both materials and labor contributed equally to this monthly rate, each accounting for 0.1 percentage points. The average annual change of the ICCHN for 2024 stands at 3.3%, a slight decline from the average change of 3.9% in the preceding year.
The materials index, however, has not fared as well, registering an average annual change rate of -0.3%, a stark contrast to the 0.9% increase observed in 2023. In contrast, the labor index has maintained its trajectory, reflecting an annual change of 8.1%, consistent with the previous year.
The construction sector in Portugal is navigating a complex interplay of rising labor costs and fluctuating material prices, underscoring the challenges faced by the industry in an ever-evolving economic landscape.
