Portugal's house prices are rising far faster than the cost to build them

Portugal's house-price index for newly built homes — Eurostat's sub-index that isolates new construction from resales — rose 55% between 2020 and 2025, according to Eurostat, while the country's own index of new-home construction costs rose 33% over the same period, according to INE, the national statistics institute. Prices grew at a compound rate of 9.1% a year — about one and a half times the 5.9% annual pace of construction costs, this analysis found.

The two measures started at the same level in 2020, and construction costs briefly grew faster than prices did before prices overtook costs in 2023 and pulled steadily further ahead each year after. By 2025 the house-price index had reached 154.5 against a construction-cost index of 133.2 — a gap of 21.3 percentage points, almost all of which opened in the final three years of the period. Among eight European countries with complete Eurostat data through 2025, Portugal's 55% increase is the largest, though only narrowly ahead of Spain's 50%; the Netherlands (45%) is a more distant third. Austria and Italy rose about 27% and 26%, Belgium 23%, and Germany and France — Europe's two largest economies — 15% and 13%.

A construction-cost index measures materials and labour — concrete, steel, wages on a site. It says nothing about land, profit margins or financing, so when prices pull away from it, the gap has to be explained by something else.

Portugal's gap isn't a European default — it's the widest of eight economies tracked here, and the pattern splits cleanly between countries that lean on mortgages and those, like Portugal, where a meaningful share of buyers pay in cash.

The same growth rates, mapped: darker means prices climbed further above their 2020 starting point. Countries in grey aren't part of this comparison.

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Two tax and residency programmes made Portugal unusually attractive to foreign buyers for over a decade. The Golden Visa, in place since 2012, granted residency in exchange for investment — real estate was for years its most popular route — while the Non-Habitual Resident regime offered qualifying foreign residents a flat 20% tax rate. Bloomberg reported the Golden Visa alone had drawn €6.8 billion into Portugal by 2023, most of it into property; a 2021 study in Regional Science and Urban Economics found a one-percentage-point rise in a municipality's Airbnb listings was linked to a 3.7% rise in house prices nationally.

Facing a housing crisis in which Lisbon rents had jumped 37% in a single year, the government passed the "Mais Habitação" package in 2023, ending new Golden Visa real-estate applications and new short-term rental licences outside rural areas; the real-estate route was formally removed that October. The NHR regime closed to new applicants in 2024 and was replaced by a narrower scheme, IFICI, limited largely to science and technology professionals, according to a 2025 client alert from KPMG. Demand proved resilient anyway: Bloomberg reported Portuguese prices kept climbing through the European Central Bank's 2022–23 rate increases, in part because many foreign buyers paid in cash and were largely insulated from mortgage costs.

Supply hasn't caught up either. Foreign workers make up roughly 30% of Portugal's construction workforce, Reuters reported in July 2026, and net immigration roughly halved in 2025 after the government tightened its rules — squeezing exactly the labour supply needed to build more housing even as officials tried to fix the shortage. Zoning, heritage-preservation rules and permitting delays in Lisbon and Porto add a further constraint that has nothing to do with the price of materials, according to research from real-estate firm Cushman & Wakefield; a Banco de Portugal study found the steepest price increases — homes more than doubling in value since 2017 — concentrated precisely in these supply-constrained metro areas, the Portuguese outlet O Mirante reported in June 2026.

Portugal's trajectory isn't the European default. The European Central Bank's February 2025 Economic Bulletin found the recent eurozone house-price correction led by "core" economies — Germany, France, the Netherlands, Austria, Belgium — reversing the pattern of the 2008 crisis, when peripheral countries led the declines. Germany's prices fell 4.1% in 2023 after a 9% jump the year before, the Bundesbank reported, as high inflation and the ECB's rate rises pushed buyers toward renting instead; a Reuters poll of property analysts in May 2024 forecast a further German decline even as annual housing completions fell toward 195,000 units — evidence, the poll suggested, that Germany's weakness reflects an affordability shock hitting demand rather than a glut of new supply. The ECB's own breakdown of housing investment found Germany down 18% and France down 13% since 2022, while Italy and Spain grew. The same rate-rise cycle that cooled demand in the core, in other words, left Iberian markets largely undisturbed — because a meaningful share of buyers there weren't relying on mortgages in the first place.

This analysis compares two indices, not two prices in euros — it measures how fast each grew from a common 2020 baseline. Portugal is the only country here with a construction-cost series running to 2025, so it isn't possible to say from this data alone whether Spain's or the Netherlands' price growth outpaced their own building costs by a similar margin; INE's construction-cost figure was checked against a second, independent Eurostat series through 2023, the two agreeing within 1.1 percentage points. Nor does any single factor above fully explain the 21-point gap, or why it opened specifically from 2023 on — foreign and tax-driven demand, tourism conversion of housing stock, a shrinking construction labour pool and slow permitting are contributing pressures identified in the reporting cited here, not a complete accounting. Ireland, whose post-2008 market dynamics aren't comparable to the rest of this sample, was excluded from the country comparison.