window.location.replace(''); .
HomeFINANCEBuilding a house in Portugal is 13.4% more expensive

Building a house in Portugal is 13.4% more expensive

Building a new house in Portugal is significantly more expensive. Construction costs are steadily increasing 10 years ago – since June 2012 – but the price escalation has accelerated sharply in recent months.

According to the most recent data from the National Statistics Institute (INE), the costs of building new houses in the country grew 13.4% in Julycompared to the same month last year, after having already increased 12.5% ​​in June.

To illustrate this evolution, it is enough to think that a house that cost, a year ago, 300 thousand euros to be built, today it costs 340,200 euros.

Construction prices began to accelerate at the end of the first quarter of last year, but it was from March this year that they began to grow at double digits: the biggest increase took place in May and amounted to 13.6%.

Also read: Are you going to build a house? Learn more about construction credit

Material crisis dictates rising costs

The index used by INE to estimate new housing construction costs takes into account two variables – materials and labour. And it is the first variable that has dictated the sharp rise in prices in recent months.

According to the statistical institute, the price of materials rose 17.5%in July, while the labor force increased by 7.7%.

Among the materials that most contributed to this evolution are the ceramic products, with year-on-year growth of around 70%. Diesel showed year-on-year growth of over 30%. Wood and wood derivatives, cement, agglomerates and cork tiles, carpentry works and PVC pipes showed year-on-year growth of over 20%.

Until the end of the first half of 2021, it was mainly the cost of labor that motivated the rise in construction prices. However, this reality changed from mid-2021, when the sector began to be faced with the so-called materials crisis: in a first phase due to the disruptions caused by the covid-19 pandemic in terms of supply and demand throughout the production chain and the evolution of prices of certain raw materials in the markets. For example, copper and aluminium, widely used in construction, recorded increases of more than 20% last year.

The energy crisis and the constraints in the supply chain that have been accentuated this year have further worsened the scenario, leading material prices to record a 20.4% rise in April.

Also read: How does housing construction credit work?

man building the interior of a house, works by a window

Can I use credit to build?

Despite rising costs, building their own house has been the option of many familieswho try to “escape” the high prices of the real estate market, while giving shape to the home of their dreams.

If you are considering this alternative, be aware that banks do not only finance existing housing, but also provide credit for construction. It is a mortgage loans, but with different characteristics from traditional credit for acquisition. Several entities also include the purchase of land in the credit.

As with housing credit, construction loans there is no entity that finances 100%, so you will always have to guarantee some initial capital to take this step. Some banks will lend a maximum of 90% of the land and project appraisal. But if you ask for a credit for the purchase of land and a credit for construction, you can get, for example, 80% for the land and reach 100% for the construction.

After approval, credit is made available in tranches as the work progresses. During the process, you will have several evaluations carried out by an expert, who will site inspections and ensuring the progress of the workso that the bank can release the financing installments.

In this type of credit, you can benefit from a capital grace period whose maximum term varies between 24 and 36 months, that is, during this period, you will only pay the interest, which allows some financial relief at the beginning of the process.

Also read: Subsidized credit: Did the pandemic stop the construction of your home?

Hang tags
  • #construction,
  • #housing loan for construction

Must Read