Key facts
- The average asking price for a home in Portugal was €430,500 in May 2026.
- A government scheme offers young buyers financing up to €450,000 with state guarantees.
- The IMF recommended suspending some government housing measures due to market imbalances.
- Shortages of skilled construction workers are driving up labour costs.
- Construction material costs have risen by 3.7% year-on-year as of March 2026.
- Land prices account for approximately 20% of a construction project's budget.
The Portuguese housing market is experiencing significant price increases, with the average asking price reaching €430,500 in May 2026, according to the Imovirtual Barometer. This surge is attributed to a combination of factors, including a scarcity of available properties and high demand, as explained by Patrícia Barão, president of APEMIP.
Several cost-related elements are contributing to the elevated prices. Barão highlighted the rising costs of land, construction, and labor, alongside project fees, taxes, and planning charges. Ricardo Vagarinho, CEO of MomentVM, pointed to a government scheme that allows young people to purchase properties up to €450,000 with state-backed guarantees. This financing availability, he noted, has pushed prices up across the market.
The International Monetary Fund (IMF) recently advised Portugal to suspend some of these housing support measures, including the public guarantee for young buyers, arguing that they have exacerbated market imbalances by increasing demand without a corresponding increase in supply. Barão emphasized the need for a comprehensive, multi-faceted approach to address the housing crisis.
The shortage of skilled labor in the construction sector is another critical issue. Vagarinho detailed a lack of bricklayers, electricians, and plumbers, partly due to a 'brain drain' following past economic difficulties. He estimated that 80,000 workers are missing from the sector, leading to increased labor costs as companies compete for available talent. Large infrastructure projects also compete for these workers.
Furthermore, the cost of construction materials has seen inflation, with a 3.7% year-on-year increase in March 2026, partly driven by energy price hikes linked to geopolitical events like the war in Ukraine. Materials such as glass, copper wire, and concrete blocks have become more expensive. Vagarinho stressed that energy costs directly impact material prices, which in turn affect construction costs.
Land prices and the lengthy process of obtaining planning consent also significantly contribute to the final cost of housing. Vagarinho estimated land costs at 20% of a project's budget, noting that 'location is the big issue.' Delays in planning consent, sometimes taking one to two years, represent an indirect cost for developers, as invested capital sits idle, which is factored into the final product price.
As of March 2026, the average asking price per square metre across Portugal was €3,693. The Lisbon district is the most expensive, at €5,796 per square metre, followed by Faro (€4,804) and Madeira (€4,333). In contrast, districts like Guarda (€739), Bragança (€943), and Castelo Branco (€981) offer significantly lower prices. Barão stated the necessity of developing new housing in locations accessible to young people and families, emphasizing the need for efficient transport networks to connect these areas to workplaces without creating mere dormitory towns.