Spanish property market - 2025 Q1 Review

Despite the ongoing fluctuations in the global economy, Spain's real estate market has demonstrated remarkable resilience and growth in the first quarter of 2025. This positive trend is largely attributed to a combination of limited property supply and consistently strong demand, particularly in regions that are popular with tourists and those boasting thriving employment sectors. For expats considering a move to Spain, understanding these market dynamics is crucial for making informed decisions about buying or renting property.

Rising property prices across Spain

The average price of both existing and newly constructed homes across Spain has increased significantly. Figures indicate a 7.5% rise compared to the same period last year and a 2.9% increase over the previous quarter. This upward trajectory is not isolated to specific areas; most regions throughout Spain have experienced a surge in property values. Notably, Madrid and Catalonia have shown particularly strong growth, with annual price increases nearly double what was observed in the previous quarter. The most substantial increases were recorded in Santa Cruz de Tenerife (+13.2%), the Balearic Islands (+12.8%), Madrid (+12.6%), Málaga (+12.5%), Cantabria (+12.2%), Alicante (+10.1%) and Valencia (+10.1%).

For expats, these figures highlight the importance of budgeting for potential price increases and considering a range of locations to find properties that align with their financial capabilities.

Coastal cities and economic hubs in Spain lead the way

House prices in the majority of Spanish cities have risen sharply, with coastal locations and key economic centres experiencing the most pronounced growth. Cities such as Madrid, Valencia, and Palma de Mallorca have seen the most significant price increases, reflecting their attractiveness to both domestic and international buyers. This is driven by a combination of factors, including the appeal of the Spanish lifestyle, the strength of the Spanish economy in certain sectors, and the continued influx of foreign investment. For expats, this concentration of growth in specific areas means that competition for properties in these locations can be fierce, and prices may be higher.

Factors driving market growth in Spain in 2025

Several key factors are contributing to the ongoing strength of the Spanish property market:

• Limited supply: A shortage of available properties, particularly in desirable locations, is putting upward pressure on prices. This is a long-term trend in many parts of Spain, exacerbated by recent slowdowns in construction. For expats, this means it may take longer to find suitable properties, and they might need to act quickly when they do.
• Strong demand: Demand for Spanish property remains robust, driven by both domestic buyers and international investors. Spain's appeal as a place to live, work, and invest continues to attract interest from across the globe. The enduring popularity of Spain can create a competitive market, particularly in sought-after areas.
• Tourism: The resurgence of tourism in Spain is having a positive impact on the property market, particularly in coastal regions and popular holiday destinations. For expats considering buying property to rent out, tourist hotspots can offer strong potential returns, but they also come with seasonal fluctuations.
• Economic growth: While global economic conditions remain uncertain, certain sectors of the Spanish economy are performing well, contributing to increased confidence and investment in the property market. Expats moving to Spain for work should research the economic stability of their chosen region.
• Low interest rates: Although interest rates are beginning to rise, the ECB's shift in 2024 towards a less restrictive monetary policy has made credit more accessible. This can be a significant advantage for expats seeking to finance a property purchase, but it's essential to stay informed about potential future rate changes.

A positive outlook for the remainder of 2025 in Spain

The prevailing sentiment within the Spanish real estate market is one of optimism. The forecast indicates that the strong growth observed in the first quarter of 2025 is expected to continue throughout the year. This positive outlook is underpinned by the continued high demand and the ongoing limitations in property supply. However, it is important to note that external factors, such as changes in the global economy and potential shifts in interest rate policies, could influence market dynamics in the coming months. For expats, this suggests that property values are likely to remain stable or increase, making it a potentially good time to invest, but also highlighting the need for careful financial planning.

Regional variations and specific market trends in Spain

While the overall forecast for the Spanish property market is positive, there are significant regional variations and specific market trends that are particularly important for expats to understand. The table below provides a clear snapshot of these differences as of the first quarter of 2025.

Spanish autonomous community breakdown

A closer look at the data from the table above, published in the 1st Quarter Report by Tinsa, reveals further nuances in price dynamics across Spain's Autonomous Communities:

• Price leaders: Communities with the highest average prices per square meter (€/m²) include the Balearic Islands and Madrid, both of which exceed €3,300/m².
• Strong annual growth: Most communities show positive year-on-year price growth, with a significant portion experiencing increases between +4.0% and +9.0%. The Balearic Islands (+12.8%), Madrid (+12.6%), and Cantabria (+12.2%) lead in growth.
• Moderate growth/decline: Conversely, a few communities exhibit slight decreases or stabilisation in prices, such as Melilla (-1.3%), Ceuta (-0.4%), and Extremadura (-0.5%).
• Quarterly momentum: Quarterly price variations reflect a general upward trend. Madrid (+4.8%), Cantabria (+3.7%), the Balearic Islands (+3.6%), Comunidad Valenciana (+3.2%), and Cataluña (+3.0%) demonstrate the most significant quarterly increases.
• Recovery from lows: Property prices in most communities continue to recover from the lows reached during the post-2008 recession, with Madrid, the Balearic Islands, Cataluña, and Comunidad Valenciana showing the most substantial recovery.
• Comparison to historical peaks: Some communities, namely the Balearic Islands and Madrid, have exceeded their previous peak values from the 2007/2008 bubble in nominal terms. However, when adjusted for inflation, prices in these communities remain below those historical highs.

Implications for expats

• Budgeting: Expats need to factor in these regional price differences when budgeting for a property purchase.
• Investment Potential: The growth rates suggest potential investment opportunities in certain regions, but also the risk of lower appreciation in others.
• Lifestyle Considerations: Price often correlates with lifestyle. Coastal regions or major cities may offer more amenities but come at a higher cost.

Capital city property price dynamics in Spain

The trend of price growth extends to the provincial and capital city levels, with specific areas experiencing particularly strong momentum:

• Strong growth: Prices in most capital cities are experiencing significant increases, particularly in coastal areas, employment hubs, and secondary cities near major activity centres.
• High-growth capitals: A notable number of capital cities (28) have recorded price increases exceeding 5% year-on-year. Madrid, Valencia, Vigo, Palma de Mallorca, and Soria have seen increases above 13%.
• Madrid's acceleration: Madrid stands out with the highest year-on-year growth among major cities, at +15.1%, showing a significant acceleration compared to the previous quarter.
• Capital vs. province: In many cases (26 out of 52), capital cities are experiencing more intense price growth than their respective provinces, indicating a concentration of demand and price pressure in urban centres.
• Exceeding historical peaks: Some capital cities, including Palma de Mallorca, Málaga, Madrid, and Santa Cruz de Tenerife, have surpassed their nominal peak values from the 2007/2008 bubble. However, when adjusted for inflation, none of these cities has reached those previous highs.

A close-up on popular Spanish cities and regions

• Madrid: As the nation's capital, Madrid continues to be a key driver of the Spanish property market. In the first quarter of 2025, Madrid showed a particularly strong performance, with prices in the capital accelerating significantly. The city's districts have seen substantial year-on-year price increases, with growth ranging from 3.9% to 13.6%. Districts such as Ciudad Lineal, Usera, and Moncloa-Aravaca have experienced some of the most significant increases. For expats considering Madrid, it's important to note the wide range of property values across different districts. Areas like Barrio de Salamanca, Chamberí, and Chamartín are among the most expensive, while districts such as Villaverde, Puente de Vallecas, and Usera offer more affordable options.
• Barcelona: Barcelona remains a highly desirable city, and its property market reflects this. Districts in Barcelona have generally seen price increases between 2.4% and 7.9% year-on-year. Expats looking at Barcelona should be aware that like Madrid, it's a city of contrasts. Districts like Sarrià-Sant Gervasi, Les Corts, and Eixample are at the higher end of the price spectrum, while Nou Barris and Horta-Guinardó offer more budget-friendly alternatives.
• Valencia: Valencia's property market has demonstrated robust growth, with districts showing year-on-year variations in price between +4.7% and +24.0%. Patraix is one of the districts with the most significant growth. For expats, Valencia presents a range of options, with districts like Ciutat Vella and Ensanche being the most expensive, and areas further from the city centre, such as Poblados del Oeste and Poblados del Norte, being more affordable.
• Seville: The property market in Seville has seen more moderate growth compared to Madrid and Valencia, with year-on-year variations ranging from -1.3% to +8.1%. Expats considering Seville will find that the city centre (Casco Antiguo) and Los Remedios are the most expensive areas, while districts like Cerro-Amate and Norte offer lower-priced properties.
• Zaragoza: Zaragoza's districts have experienced year-on-year price changes between +2.5% and 9.2%. For expats, Zaragoza offers a generally more affordable market compared to Spain's largest cities, with the most expensive areas around the city centre.
• Málaga: Málaga has been one of the strongest-performing markets in Spain, driven by tourism and increasing economic activity. Expats are drawn to Málaga by its climate and lifestyle, but should be prepared for higher property prices, especially in prime locations.
• Coastal regions: Beyond the major cities, Spain's coastal regions (Costa del Sol, Costa Blanca, Balearic and Canary Islands) remain highly attractive to expats. These areas often see a mix of demand from tourists, retirees, and those seeking a second home. Expats interested in coastal properties should be aware of factors like seasonal price fluctuations (in tourist-heavy areas), the potential for rental income, and the importance of proximity to amenities.
• Rural areas: While urban and coastal markets tend to dominate the headlines, rural Spain is also seeing increased interest from expats seeking a quieter lifestyle and more affordable properties. Expats considering rural locations should weigh the benefits of lower prices against factors like accessibility, infrastructure, and job opportunities.

Affordability: A growing challenge in Spain

While the real estate market exhibits positive momentum, a significant concern is the increasing challenge of affordability, particularly in high-growth areas. The percentage of the average household's income allocated to mortgage payments is increasing year on year.

• Effort rate: The theoretical annual effort rate (esfuerzo teórico anual) measures the percentage of the average household's gross annual income required to cover the first year of a mortgage. This metric provides insight into how accessible housing is for the average buyer.
• National average: The national average effort rate is 34.9%, slightly down from 35.5% in the previous quarter. However, this seemingly reasonable level masks significant regional variations.
• High-stress regions: Several provinces have effort rates exceeding the 35% threshold considered reasonable, indicating significant affordability challenges. These include Málaga (59%), the Balearic Islands (49%), Cádiz, Madrid, Alicante, Sevilla, and Barcelona.
• Regional disparities: The effort rate varies significantly across regions. Coastal and island communities, along with major metropolitan areas, exhibit the highest effort rates.
  • Málaga: Leads with a concerning 59% effort rate, indicating that the average household in Málaga would need to allocate over half of its income to mortgage payments.
  • Balearic Islands: Follow closely with a 49% effort rate.
  • Madrid: Shows a high effort rate of 43.1%.
  • Andalusia: As a whole, the region has an average effort rate of 40.5%, with specific provinces like Cádiz also facing high affordability pressures (43.9%).
• Capital city stress: An analysis of major capital cities reveals that more than a third (19 out of 52) have effort rates exceeding the 35% threshold.
  • Most stressed: Cádiz, San Sebastián, Madrid, Málaga, and Barcelona have effort rates above 50%, signalling acute affordability challenges in these urban centres.
  • Intermediate stress: Sevilla, Granada, Salamanca, Valencia, Palma, Santander, Pamplona, and Bilbao have effort rates between 40% and 50%.
  • Moderate stress: Alicante, La Coruña, Valladolid, Segovia, Córdoba, and Guadalajara have effort rates ranging from 35% to 40%.

The six largest capital cities demonstrate varying degrees of affordability stress:

• High stress: Madrid (57%), Málaga (56%), Barcelona (55%), and Sevilla (47%) face significant affordability concerns.
• Moderate stress: Valencia (44%) also exceeds the reasonable threshold.
• Relatively affordable: Only Zaragoza (32%) remains within a reasonable effort rate.

Market activity and investment returns

From an investor's perspective, key metrics include not only price appreciation but also transaction volume and the profitability of property investments. Investment returns can be analysed utilising the Compound Annual Growth Rate (CAGR) to evaluate the financial performance of property investments across various regions.

Sales and new construction

• Sales volume: Housing sales remained robust in early 2025, supported by sustained demand.
• New construction: Permits for new construction have remained relatively stable, indicating that supply continues to lag behind demand in many areas.

Investment returns:

• CAGR: The Compound Annual Growth Rate (CAGR) over the past 5 years provides insight into the returns generated by property investments.
• National average: The national average CAGR is 4.7%, with regional variations ranging from 1.4% to 7.6%.
• High-return provinces: Málaga, the Balearic Islands, and Valencia have shown strong 5-year returns, exceeding 7%. Santa Cruz de Tenerife and Guadalajara also performed well, with CAGRs between 6% and 7%.
• Moderate-return provinces: Several provinces, including Pontevedra, Madrid, Toledo, La Rioja, Alicante, Cádiz, Zaragoza, and Cantabria, have achieved CAGRs between 5% and 6%.

Navigating the Spanish real estate market

For expats, navigating the Spanish property market can be complex. Here are some tips:

• Seek professional advice: Engage with reputable real estate agents who have experience working with international clients. Consult with independent legal and financial advisors.
• Thorough research: Conduct extensive research on different locations, property types, and market trends. Visit potential properties in person if possible.
• Language skills: Although many people in tourist areas speak English, having basic Spanish language skills can be particularly helpful, especially in more rural areas.
• Patience: Finding the right property can take time. Be prepared for a potentially lengthy process.

The outlook for Spain's property market in 2025 remains largely optimistic. Analysts forecast that housing prices will continue to climb throughout the year, especially in real estate hotspots such as Madrid, Málaga, Valencia, and popular coastal areas. While the growth rate may slightly taper as demand moderates in response to higher prices, there is currently little reason to fear an abrupt slowdown.

For prospective buyers, securing a property is becoming increasingly competitive, especially in areas where demand outstrips supply. Adding to this dynamic is the growing presence of foreign purchasers and equity-rich domestic buyers who can effectively navigate the constrained supply landscape.

For investors, Spain remains a highly attractive destination. The ongoing demand for housing, particularly in tourist-heavy regions and thriving economic centres, means the potential for both rental returns and capital appreciation remains substantial.

Although challenges persist, such as the lack of new construction in high-demand areas, the market continues to benefit from stable employment, favourable financing conditions, and a steady inflow of investment.

This presents both opportunities and challenges for expats considering a move to Spain. Understanding the regional variations, financial considerations, and legal requirements is crucial for making informed decisions. By conducting thorough research and seeking professional advice, expats can successfully navigate the Spanish property market and find the ideal place to call home.