Spain’s housing prices are expected to keep rising in 2025, driven by a shortage of available homes, lower interest rates, inflation, and population growth. Immigration plays a key role, with high-income buyers investing in luxury properties and low-income workers increasing rental demand.
In 2024, property prices surged. Resale home prices rose 10.7% year-over-year in November to €2,244/m², the highest increase since 2006. Rentals also jumped 11.1%, averaging €13.3/m² per month. Housing supply remains critically low, with a shortfall of around one million homes for sale and half a million rental units. Economist Miguel Córdoba suggests building smaller, more affordable homes outside major city centers to address the gap.
Why Prices Will Keep Rising
- Land Shortage & Rising Construction Costs: Limited land availability, bureaucratic hurdles, and rising material and labor costs keep housing supply constrained. Developers support the stalled Land Law, which aims to streamline urban planning.
- Interest Rate Cuts & Inflation: The ECB cut interest rates four times in 2024, lowering borrowing costs and boosting demand. More cuts are expected in 2025, further straining the already tight market.
- Population Growth & Foreign Buyers: Immigration fuels demand, with both low-wage workers renting and wealthy foreigners investing. Cities like Madrid, Barcelona, and Málaga could see price increases of 5–10% in 2025.
New Housing & Market Outlook
Home sales surged in late 2024, with October transactions up 51.3% year-over-year, reaching the highest monthly total since 2007. New home sales saw an 83.4% jump.
Despite growing demand, construction lags. Spain needs 246,000 new homes annually, yet only 85,000–90,000 are built each year. Prices for new homes are expected to rise by 4–5% in 2025.
Rental Market Trends
Rents are expected to keep climbing in 2025. In November, 23 cities hit record-high rental prices, with Barcelona (€23.2/m²) and Madrid (€20.5/m²) leading. While public and private efforts aim to expand rental supply, strict regulations and rent caps could discourage landlords, sustaining high rental costs.
Conclusion
Spain’s housing market will remain under pressure in 2025, with rising prices driven by low supply, growing demand, and interest rate cuts. While some measures may help increase affordability, a significant shift is unlikely in the short term.