The cost of housing construction in Portugal: an input - output proposal

Abstract

Portugal has a serious problem related to the housing market, or rather, to the financial capacity of most of the population to acquire or rent housing at current prices, especially in large urban centres. This reality of the housing market is, in good part, explained by the reduced supply that exists today. However, before the buying and selling and renting market, there is an ex-ante imperative to construct buildings. For structural reasons, such as the long and costly bureaucratic processes involved in the construction of new housing, taxation, or the lack of manpower, are factors that have been pointed out for the fall in construction, with negative implications for supply. A downstream effect is the maintenance costs of the properties, which tend to divert attention from their necessity over time. Construction costs include the costs of land acquisition, the costs of inputs and construction for housing development. In this way, we seek to analyse how housing construction costs can be forecasted, using endogenous and exogenous variables that influence the final cost of each residential property. For this purpose, we identify a set of variables, e.g., labour costs in the construction industry, the demand for steel and cement, and the land available for construction. The survey data considered were collected from several official statistical sources for Portugal. For this purpose, we use the dynamic Leontief model, also considering the similar Wagner model, based on the mathematical model proposed by Williams, in his book “Model Building in Mathematical Programming”. The objective to be maximized is the construction of new housing, to increase the housing supply to produce effects on the decrease of market prices and rents, making housing more affordable