For the new year, experts forecast a continued rise in Spain's housing prices, driven by several key factors. Limited supply, falling interest rates, moderate inflation and population growth are key factors driving the housing market. Population growth is partly fuelled by immigration, with some newcomers possessing high purchasing power to invest in luxury homes, while others take on lower-paid roles. This dynamic will further heighten housing demand, sustaining pressure on prices in the market.
In 2024, the housing market experienced a significant rise in property prices, both for sales and rentals. According to idealista data, the price of resale homes surged by 10.7% in November, reaching €2,244/m² – the largest increase since 2006 – marking seven consecutive months of growth. Meanwhile, rental prices also saw double-digit growth, rising by 11.1% to an average of €13.3/m² per month, just 0.7% shy of the record high set in June.
Housing supply plays a pivotal role in the market, and there is currently a significant shortage. Economist Miguel Córdoba estimates a deficit of around one million homes for sale and nearly half a million rental properties. He argues that this shortfall can only be addressed by building more homes – not the luxury properties favoured by developers, but medium-quality, smaller-sized homes. With over six million single-person households in need of no more than 50 square metres, such housing should be constructed in non-central areas to mitigate the soaring impact of land values in major cities.
- Why the price of housing for sale will continue to rise in 2025 and beyond
- What will the price of new housing do?
- Rent in 2025
Why the price of housing for sale will continue to rise in 2025 and beyond
Bankinter predicts a 5% rise in house prices for sale by 2025, followed by a gradual market moderation. “Price increases should progressively slow, reaching just over 3% in 2026 and aligning with inflation at around 2% by 2027,” the bank explains. Similarly, Solvia anticipates growth in house prices of between 4% and 5% in 2025.
Here are some of the key factors driving continued housing price increases, beyond the existing supply shortage:
Lack of land
For years, developers have voiced concerns about the shortage of land available for housing in high-demand areas. In May 2024, the Spanish government was unable to present the Land Law to Congress due to a lack of support, with parties such as Sumar, Podemos, ERC and Junts refusing to back it.
This legislation is strongly supported by the developer sector, as it aims to provide the legal certainty needed to improve access to housing. The law's primary goal is to prevent the paralysis of a city’s territorial planning due to minor, correctable defects. It seeks to establish a regulatory framework that ensures the legal certainty of urban planning, facilitating smoother development processes.
Antonio de la Fuente, managing director at Colliers, highlights that the rise in construction prices over recent years has been driven by increases in material costs, improvements in building quality, upgrades to technical building codes, and higher construction labour costs.
In his view, "We can expect housing prices to continue rising in 2025, both for sale and for rent. While it's true that salaries and disposable income in Spain are not increasing at the same rate as housing prices, we are seeing that in high-demand areas, a segment of the population will always be able to afford access and be willing to pay higher prices."
Rate cuts and inflation
In 2024, the European Central Bank (ECB) reduced interest rates four times, bringing them down to 3%, the lowest level since March 2023. The forecast suggests that further cuts are likely in 2025, which will continue to improve the mortgage market and exert additional pressure on the housing market. Currently, there is a significant imbalance between the limited supply and the rising demand for housing. Over the coming months, further decreases in the Euribor are expected, alongside more adjustments to mortgage offerings by banks, which will provide an additional boost to an already strained residential sector.
Luis Corral, CEO of Foro Consultores Inmobiliarios, anticipates a resurgence of buyers that will further fuel demand and drive up prices. However, he believes that price growth will moderate in 2025, as prices have already reached high levels and more supply is expected to enter the market, particularly with new developments in the Community of Madrid.
"Overall, the upward trend in prices will persist, albeit at a more restrained pace, as there remains an imbalance between supply and demand, which won't be corrected in the short term. This situation will continue to affect large cities, the Mediterranean coast and the islands. The average increase in Spain in 2025 is expected to be around 4%."
Population growth
The real population growth in Spain is largely driven by immigration, which can be divided into two categories: those who come to fill low-paying jobs that Spaniards are unwilling to take, and who often rely on renting in more marginal areas or sharing rooms, and wealthy foreigners with the financial means to purchase luxury properties.
The arrival of foreign nationals is expected to keep pressure on housing prices, both for sale and for rent. Economist Miguel Córdoba predicts that prices "will continue to rise (and if government intervention increases, cash supplements will be paid)," with price hikes varying by region. Cities like Madrid, Barcelona, Mallorca, Ibiza and Málaga are likely to see significant increases (between 5% and 10% by 2025), while areas with less demand may experience growth in line with the CPI or a specific housing index," the expert adds.
Miguel Córdoba concludes, "The best approach is to consider the current conditions, the sitting government and the existing geopolitical circumstances. A change in government in 2025 could likely alter many things. If initiatives for large-scale housing construction are introduced, price expectations could shift, leading to a plateau as we await new developments. But for now, what could happen remains speculative and uncertain."
What will the price of new housing do?
Spanish Statistics Institute (INE) data confirms a sharp rise in home sales for October. According to the statistics agency, 69,418 transactions were recorded in Spain during the tenth month of the year, marking a 51.3% increase compared to October 2023. This is the highest monthly figure since May 2007, contributing to a 7.5% year-on-year increase in the total number of transactions for the year.
Specifically, the number of transactions for new homes rose by 83.4% compared to October 2023, with 16,224 units sold, while the number of used homes increased by 43.6%, reaching 53,194 sales. Both markets have shown a positive annual balance, although new home sales have experienced a stronger growth rate in the first 10 months of the year, with an 18.9% increase.
With these factors in mind, David Martínez, CEO of the developer Aedas Homes, looks towards 2025 with optimism and strong prospects, predicting that it will be a dynamic and positive year for the Spanish residential market.
In his opinion, several reasons drive this strong tailwind for the residential market:
- The current economic context is marked by macroeconomic stability, with sustained growth.
- Easing monetary policy (with rate cuts by the ECB)
- Perhaps most notably, there is an increasing gap between the creation of homes and new construction. According to the latest data from the INE, it is estimated that an average of 246,000 homes will be created annually in Spain between 2024 and 2039, while the annual production of new homes is expected to range between 85,000 and 90,000 units. However, as of October, new construction permits had reached 107,098 units, marking a 16.48% increase compared to the previous year, according to data from the Spanish Ministry of Housing.
For this reason, the CEO of Aedas Homes anticipates that new-build housing prices will continue to rise at a moderate pace, with an increase of 4%-5% in 2025.
"However, despite the strong tailwinds for the residential market, all stakeholders in the sector must work together to tackle several ongoing challenges: the shortage of suitable land, attracting capital and producing affordable housing," says David Martínez.
Rent in 2025
Regarding rentals, the upward trend is expected to continue in 2025, although there could be some changes in the years ahead. As Luis Corral points out, with Public Administrations focusing on increasing the availability of rental housing, "despite any doubts their promises may raise, it is natural that more affordable housing will be released onto the market. Furthermore, private initiatives are already contributing to the creation of protected rental housing. In addition, stricter regulations on housing not intended for traditional rental may push more properties back into this market segment. All of these factors will lead to a moderation of prices and a reduction in demand for property sales," says the CEO of Foro Consultores.
For his part, Córdoba believes that price caps and the lack of efficiency in the eviction process for squatters—despite the introduction of an expedited eviction law that does not fully address the issue of squatting tenants—make it highly unattractive for property owners to rent out their flats. As a result, only high rents are likely to persuade them to lease their properties.
Antonio de la Fuente also argues that simplistic, short-term measures, such as rent controls, will only worsen the supply situation and further discourage the investment needed to produce new housing.
Currently, according to idealista data, rental prices have increased in 48 Spanish capitals compared to November of last year. The most significant rise is in Madrid, where the price reached €20.5/m², with landlords' expectations rising by 15.5%, although this month the prices have not yet hit their peak.
There are 23 capital cities with record rental prices. Barcelona remains the most expensive with rents at €23.2/m² after a 14.4% increase. Following Barcelona are San Sebastián (€17.9/m²), Palma (€17/m²), Málaga (€15/m²) and Valencia (€14.7/m²), with only the latter two recording their highest prices in November.
Source: Idealista
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