THE SPANISH HOUSING MARKET ENTERS A NEW PHASE: WHAT TO EXPECT IN 2025–2026

Spain’s housing market has regained momentum on firmer ground than in past cycles. Roughly 700,000 sales were closed in the 12 months to June 2025, supported by cheaper financing, stronger household income and population growth. New construction is improving but still trails household formation, so the balance remains tight. For developers, buyers and investors, reading these drivers is essential to act with clarity.

Demand at multi-year highs and a broader buyer base

After mid-2024, demand accelerated across buyer segments, with foreign purchasers playing a visible role. In the year to Q1 2025, foreign purchases reached about 18% of total transactions, with 133,000 deals and a wider spread of nationalities and destinations beyond traditional hotspots. This extra demand, on top of Spanish buyers, keeps the market in an expansive phase.

Supply lag and a deficit behind price pressures

Permits climbed to around 132,000 in the 12 months to May 2025 and could reach 140,000 in 2025, yet the gap since 2021 is large: 515,000–765,000 homes, depending on the approach. Concentrated in urban and tourist provinces such as Madrid, Barcelona, Alicante, Valencia and Málaga, this deficit could explain up to 39% of recent price gains. Pressure in both rental and purchase markets will persist unless affordable development scales up.

Rising prices with contained risks

Headline indices show double-digit growth early in 2025 and new nominal highs, with some aggregate overvaluation signals. Still, today’s context differs from the 2000s: banks’ exposure to developers is far lower, fixed-rate mortgages dominate, household leverage is much lower and there is no supply glut. Sector employment is also more stable, with sharply reduced temporary contracts, helping operational resilience.

Outlook for 2025–2026 points to elevated transactions (circa 720,000 per year) and further price gains, making faster supply the critical lever, especially in high-demand areas. Buyers should prepare financing and timelines; sellers can optimize exits; developers and investors should prioritize well-located, affordable product that addresses the structural shortfall.