Inflation is at historic highs, with a direct impact on all sectors of the economy and a tangible impact on the daily lives of all Portuguese people.

In construction, since February 2021, we have been witnessing an appreciation of raw materials, with historical increases considered the highest in the last 30 years.

With the pandemic, the world stopped. China, Europe’s leading supplier, has blocked exports, which were even more affected during the Suez Canal blockade period. These events accentuated the imbalance between supply and demand, accelerating the increase in production costs.

To make matters worse, the conflict in Ukraine, which is associated with an already chronic difficulty and shortage of human resources, contributes significantly to the escalation in labour costs and the increase in the prices of goods and services.

In the housing market, the lag between the pressure of demand and the scarcity of supply has fostered the worsening of the situation, which, associated with the devaluation of the Euro and an expected increase in demand from international investors, will inevitably affect the residential market. In our opinion, this reality significantly contributes to price pressure.

In short, the impacts of inflation are reducing margins, placing more significant risk on operations, forcing projects that, due to their locations and characteristics, carry a greater chance to be removed from the pipeline, leaving some of the housing solutions in the “drawer” which could make it possible to increase supply levels.

Thus, in the residential market, it is expected that the square meter value will follow its upward trajectory, and a slowdown is not to be expected immediately. In the field, particularly with the revisions of the PDMs that are underway, it is likely that, in the medium term, we will see a downward correction in their values. This fact will make it possible to mitigate this “inflation”, amortizing the abnormal appreciation that they have suffered in recent years and contributed to the rise in prices.

This and other articles on this topic can be consulted in the printed edition 237 of the magazine Vida Imobiliária, whose central theme is: Housing and new ways of living: the challenge of a decade. See more here.