Read this article in French German Italian Portuguese Spanish
Portugal’s fractured election result could reshape housing, infrastructure policy
29 May 2025
Portugal’s 18 May snap legislative election resulted in a fragmented parliament, raising uncertainty over the country’s infrastructure pipeline. Despite the centre-right Democratic Alliance (AD) winning the most seats, the lack of a clear majority has left the formation of a new government in flux.
Luís Montenegro, candidate for the Democratic Alliance (AD), delivers a statement following the election victory results in Lisbon, Portugal, on 18 May, 2025. (Image: Luis Boza/NurPhoto/Reuters Connect)
Back in March, the country’s elections ushered in a centre-right government for the first time in nearly a decade, but a vote of no confidence collapsed that effort before a new round of voting was held earlier this month.
The centre-right Democratic Alliance (AD), led by Luís Montenegro, won the most seats but fell short of a majority, securing 89 in the 230-seat Assembly. The Socialist Party (PS) trailed with 58 seats, while far-right Chega matched that number, a big rise from its 2022 showing. Liberal Initiative and the Left Bloc followed with 8 and 5 seats, respectively.
The outcome will have immediate implications for contractors, developers, and investors in the country’s housing and infrastructure sectors, experts said.
“The vote shows that public frustration is not just about cost of living, it’s also about how long it takes to get anything built,” Gonçalo Peixoto told Construction Briefing; he is head of operations for real estate firm BE Global Properties, based in Lisbon, Portugal. “That sentiment doesn’t favour the left’s more bureaucratic approaches. Even if Chega stays outside of government, the shift in the Assembly will likely push through faster permitting reforms.”
AD campaigned on a platform that included cutting VAT on new housing, reducing planning bottlenecks, and boosting private investment incentives. In contrast, PS had supported rent controls and greater public housing investment, while Chega’s focus on limiting immigration has raised concerns about future labour availability in construction.
What the combination of parties working together, or what a minority government can achieve, for construction will be the next major question.
Portugal’s contractors “relieved” by election results
Aerial view of Lisbon, Portugal. Image: Adobe Stock
Peixoto said many contractors are “quietly relieved” by the result, even if coalition talks remain unsettled.
“They’d like stability, yes; but more than that, they want policies that unlock projects. And this outcome probably gets them closer to that than a PS-led coalition would have,” he added.
Forming the new government may still take weeks. AD is expected to attempt forming a minority government, possibly with support from Liberal Initiative, but will likely need issue-by-issue backing from other parties to pass legislation. As of 27 May, Montenegro has ruled out forming a collation government with Chega, which could further delay the formation of a new government.
Still, Peixoto thinks whatever the path forward, contractors and constructors should get favourable news regarding loosening regulations.
“Chega’s gains are disruptive, no doubt,” Peixoto noted. “But in practical terms, the direction of infrastructure policy may actually become more favourable to developers, especially if it means faster project approvals and looser land-use controls.”
With housing affordability at the centre of political debate, the construction industry is watching closely as potentially coalition talks unfold and economic priorities are reshaped.
A political reset for housing and infrastructure
Construction in Portugal. Image: Adobe Stock
“Housing is a very big deal at the moment,” said Peixoto. “We have on the one hand housing prices higher than we’ve ever seen and, on the other hand, developers that are struggling to keep their costs as low as possible due to rising construction prices, lots of red tape and bureaucracies when it comes to licensing and increasing difficulty in hiring and retaining talent.”
Peixoto said “red tape” could be among the first items cut (or at least rolled back), as the government seeks solutions to a burgeoning housing crisis.
“There’s no question that we are lacking housing now, but we are also lacking some instrumental parts of the recipe that allows for a healthier and quicker construction industry,” Peixoto added, noting how each party may approach the dilemma.
The centre-right AD and its likely allies campaigned on reducing VAT for new housing, easing licensing bottlenecks, and creating tax incentives to boost supply, and Peixoto expects the party to stay in these lanes.
By contrast, left-wing parties pushed for rent caps, public housing expansion, and restrictions on foreign ownership, which will remain priorities in this bloc.
Far-right Chega, now with 50+ seats, campaigned on tighter labour access and immigration laws, while also supporting regulatory easing.
“We believe that most construction contractors and developers [were] mainly casting their vote towards AD and IL due to the fact that [these] are the main ones defending that taxes should be lowered to allow the construction industry to grow again,” said Peixoto.
He added that support also stemmed from immigration policy concerns: “Some are definitely struggling with hiring and retaining talent, so the idea of bringing workers from abroad makes a lot of sense. They might [have been] scared away from parties like Chega that defend the exact opposite.”
Rising material costs are another factor, with contractors drawn toward parties proposing tax relief and simplification of procurement and permitting.
A fragmented parliament in Portugual, but a clear signal for construction
A Doosan excavator works a residential site in Portugal. Image: Adobe Stock
While no party holds an outright majority, most agree on the fundamentals: Portugal needs more housing, faster permitting, and better coordination between public and private sectors.
The disagreement lies in how to do it and who bears the cost.
“Time will tell,” Peixoto said. “Surely we’ll see the parties negotiating between themselves now to see how they can form a government for the next four years, but this election has already shown that construction is at the heart of what comes next.”
The 2025 election has underscored the complexities of Portugal’s political landscape, and the construction and infrastructure sectors are at a crossroads, awaiting clarity on the new government’s composition and policy direction.
While the Democratic Alliance’s platform promises regulatory easing and incentives for development, the path to implementing these policies remains uncertain amidst ongoing negotiations.
Industry stakeholders are cautiously optimistic that, regardless of the eventual government formation, the pressing need for housing and infrastructure development will drive policy decisions.
The coming weeks will be critical in determining whether Portugal can navigate its political fragmentation to deliver on the infrastructure promises that are vital for its economic growth and social stability.
STAY CONNECTED
Receive the information you need when you need it through our world-leading magazines, newsletters and daily briefings.
CONNECT WITH THE TEAM
