Portugal

Overall construction activity

According to the quarterly national accounts of the National Statistics Institute (INE), Portuguese GDP grew by 2.3% in 2023, with all of its components showing positive behaviour, albeit more moderate than in the previous year.

This was the case for Gross Fixed Capital Formation (GFCF), which grew by 2.4% in real terms (after +3.0% in 2022). Investment in construction fared even worse, falling by 0.4% in real terms. 

In line with the positive GDP evolution, the labour market experienced favourabledevelopments throughout 2023, with an increase in total employment (+1.6%). Nevertheless, the unemployment rate increased from 6.1% to 6.5% between 2022 and 2023.

In terms of price changes, the consumer price index increased by 4.3% during the year (after +7.8% in 2022).

According to the Bank of Portugal's forecasts, the Portuguese economy will continue to grow in the coming years, albeit at a moderate pace. The Bank of Portugal expects GDP growth of +1.2% in 2024, +2.2% in 2025 and +2.0% in 2026. 

According to FEPICOP estimates, real output in the construction sector will grow by 3.4% in 2023.

After this year, the cumulative growth in the sector's global production over the 2017-2023 period is more than 33% in real terms, which is still not enough to offset the 59% decline in the global value of construction production observed during the recession period that began in 2002 and lasted until 2016.

This recovery in production in the sector has been accompanied by an increase in the number of construction workers, from an average of 290,000 in 2016 to an average of 344,000 in 2023. Looking ahead to 2022, employment in construction grew by 8.3%, outpacing total employment in the economy, which grew by 1.6%. As a result, unemployment in the construction sector will fall by 2.0% (compared with 3.7% for total unemployment).

According to data from the Institute for Employment and Vocational Training (IEFP), 18,300 unemployed from the construction sector were registered in employment centres in December, representing 6.3% of the total number of registered unemployed (288,500). 

Total employment in the economy is expected to grow by 0.1% in 2024 and + 0.3% in 2025, while the unemployment rate is expected to rise to 7.1% in 2024 and 7.3% in 2025. 

Production in the construction sector is expected to increase by +3.0% in 2024, with the building segment growing by 1.6% and the civil engineering segment by 4.5%.

Housebuilding

In 2023, the volume of production in the residential segment grew by around 3.0% in real terms.

Contrary to the previous two years, the residential segment recorded a decline in demand, both in terms of number of transactions and value. According to INE data, up to the end of September 2023, 102.4 thousand dwellings were transacted (-21.0% year-on-year), for a total amount of 20.8 billion euros, a value 15% lower than that observed in the same period of 2022. 

This decline, which will be observed throughout 2023, is due to the increase in the interest rate implicit in housing credit contracts, which, according to data provided by the INE, will rise from 1,689% for contracts signed throughout 2022 to 4,394% for contracts signed throughout 2023.

Production in both the new housing construction segment and the repair and maintenance segment increased by almost 3.0% in real terms compared to the previous year.

According to INE data, the number of new housing permits during the year 2023 reached 31.7 thousand, reflecting an increase of 5.0% compared to the previous year, while the new housing conclusions grew 8.8%, until September (with 16.2 thousand house conclusions until the end of this month).

For 2024, forecasts point to a positive evolution of +2.0% in the production of the housing segment, the least intense growth in the last 10 years. 

This more moderate growth in 2024 will be due, among other things, to the high level of interest rates on housing loans, house prices that continue to rise in many areas of the country and the climate of uncertainty that is expected to dominate the year.

Both components of this segment are expected to grow up to 2024, with the new construction component growing more strongly than the maintenance/rehabilitation component (+2.3% and +1.5% respectively).

Non-residential construction

In 2023, output in the non-residential buildings segment increased by 0.7% (+1.0% in the previous year).

After a slight recovery in 2022 in the area authorised for the construction of new non-residential buildings, there was a new decline in 2023, with the total area authorised for the construction of new non-residential buildings falling by 1.6%.

The area authorised for the construction of buildings for non-market purposes recorded the most positive evolution with +56.8%, followed by the area authorised for the construction of buildings for general use: +36,2%. The area authorised for the construction of buildings for agricultural use recorded the largest decrease (-27.2%), followed by the area authorised for the construction of buildings for industrial use (-15.7%).

The 781.0 thousand m2 licensed for industry, despite a decrease compared to the previous year, maintains industrial buildings as the main destination of the licensed area in 2023: 27.2% of the total.

Regarding the evolution of the public component of this construction segment, it is important to highlight the favourable evolution of public investment in 2023, which, according to the data provided by the Ministry of Finance, will record an annual growth rate of 10.6%.  In 2023, the total amount of this investment will reach EUR 7.4 billion, a significant part of which will be realised in construction works. 

Non-residential construction output is expected to increase by 1.0% in volume terms in 2024, a more significant development than that estimated for the previous year.