Spanish property market - 2025 Q2 Review: Continued resilience and growth

Building on the Q1 2025 review, the Spanish property market has continued to demonstrate remarkable resilience and dynamic shifts throughout the second quarter of 2025. The average value of completed properties, encompassing both new builds and resales, recorded a substantial year-on-year increase of 9.8% and a quarter-on-quarter increase of 2.6% with a real annual growth of 7.7% when adjusted for inflation.

This sustained strength is underpinned by a compelling interplay of economic factors, including resilient employment and robust demand, significantly influenced by easing mortgage costs following the European Central Bank's 25-basis-point reduction in key interest rates. This widespread growth throughout the first half of the year underscores the broad-based strength of the market.

At the regional level, the momentum was particularly evident, with year-on-year growth accelerating or remaining high in 16 of Spain's 19 autonomous regions. Four regions stood out with exceptional growth exceeding 10%: Madrid led with a 16.1% increase, followed by the Balearic Islands at 14.4%, Cantabria at 14.1%, and Asturias at 11.6%.

Notably, the Balearic Islands (25.3%) and Madrid (6.8%) have now surpassed their 2007 property bubble peaks in nominal terms, though they remain below their inflation-adjusted peaks (9% below in the Balearics and 24% below in Madrid, considering CPI at 2.3% in June 2025). The "Madrid effect" is also creating a ripple effect, activating prices in surrounding provinces like Toledo, Segovia, Guadalajara, and Ávila as buyers seek more accessible options.

Provincial hotspots and economic hubs in Spain

At the provincial level, the property market displayed widespread dynamism, particularly in key employment hotspots and all coastal provinces. Several provinces recorded year-on-year growth exceeding 10%, including Madrid (16.1%), the Balearic Islands (14.4%), Santa Cruz de Tenerife (14.2%), Cantabria (14.1%), and Malaga (13.5%). The enduring appeal of coastal regions and major urban centres is evident, benefiting from robust tourism, strong international demand, and thriving local economies. This has also led to an "outward migration of demand" or "ring effect," where buyers priced out of primary hotspots seek more affordable, well-connected neighbouring provinces.

Underlying drivers: Economy, mortgages, and policy shifts in Spain

The robust performance of the Spanish property market in Q2 2025 is rooted in the country's economic resilience, favourable mortgage market dynamics, and recent governmental policy shifts. Spain's economy continues to show strength, with resilient employment (unemployment rate at 10.29% in Q2 2025) and robust GDP growth (1.1% quarter-on-quarter, 3.0% year-on-year).

The ECB's reduction in key interest rates on June 5, 2025, bringing the deposit facility rate to 2.00%, has begun to lower mortgage costs, stimulating residential demand. In Q1 2025, the average mortgage in Spain stood at €145,193, with average monthly payments of €756. This has seen a slight rise in Q2 2025 to an average mortgage of €149,733, with average monthly payments remaining largely unchanged from Q1 at €757. Lending practices remain responsible, with the doubtful loan rate falling to 2.25%.

Recent Spanish government housing policies introduced in Q2 2025 reflect a strategic response to affordability challenges and housing shortages, aiming to curb speculation and protect local buyers. A significant change is the abolition of the Golden Visa program through "Ley Orgánica 1/2025," which previously granted residency to non-EU citizens investing at least €500,000 in real estate. Additionally, new regulations for tourist rentals now mandate registration in a central government database and display of a unique identification code, aiming to restore the local housing stock.

Capital city property price dynamics in Spain

The property market in Spain's major capital cities continues to exhibit dynamic price changes, often with significant variations at the district level.

• Madrid: Average price €4,457 per square metre, with 16.1% year-on-year change. Usera (18.7%) and Ciudad Lineal (15.8%) saw the highest year-on-year growth. The most expensive areas include Barrio de Salamanca (€6,851/m²).
• Barcelona: Average price €4,116 per square metre, with 8.7% year-on-year change. Sant Marti (8.1%) and Nou Barris (7.6%) showed the strongest growth. Sarrià-San Gervasio (€5,403/m²) had the highest average values.
• Valencia: Average price €2,408 per square metre, with a remarkable 15.1% year-on-year change. Patraix (23.7%), Jesús (21.3%), and Rascaña (20.9%) all recorded over 20% growth, indicating high capital appreciation potential.
• Seville: Average price €2,354 per square metre, with an 11.4% year-on-year change. Casco Antiguo (10.6%) and San Pablo-Santa Justa (10.1%) showed strong growth.
• Zaragoza: Average price €1,884 per square metre, with an 8.6% year-on-year change. Delicias (9.9%) and Las Fuentes (8.7%) led growth.
• Malaga: Average price €2,660 per square metre, with a 10.8% year-on-year change. Teatinos-Universidad (18.0%), Palma-Palmilla (17.5%), and Ciudad Jardín (16.8%) all experienced over 15% growth.

Overall, the data from the six largest cities demonstrates a diversification of investment opportunities within Spain. While Madrid and Barcelona remain premium markets, cities like Valencia and Malaga are showing exceptional growth, offering a blend of urban amenities, coastal appeal (for Malaga and Valencia), and a comparatively lower entry price point. This makes them highly attractive to a broader range of buyers, including expats seeking a vibrant lifestyle at a more accessible cost.

Affordability: A persistent challenge in high-demand areas in Spain Q2

While Spain's property market shows robust growth, affordability remains a significant consideration. The "annual theoretical effort" (percentage of household income for first mortgage payment) stood at a national average of 34.1% in Q2 2025. However, seven provinces recorded an affordability rate higher than the reasonable 35% threshold, with Malaga at 58% and the Balearic Islands at 49% facing the highest pressure. In provincial capitals, 15 out of 52 cities had affordability rates higher than 35%, with Cadiz, Madrid, Malaga, Barcelona, and San Sebastián requiring over 50% of disposable income. Among the six largest cities, only Zaragoza (31.6%) maintained reasonable levels, offering a unique opportunity for buyers.

At the district level within these major cities, the affordability challenge becomes even more pronounced. In Madrid, central districts like Centro (79.4%), Salamanca (69.2%), and Chamberi (67.6%) demand a substantial portion of household income. Similarly, in Barcelona, Ciutat Vella (66.7%) and L'Eixample (57.4%) show high pressure. Malaga's Centro (72.3%) and Palma-Palmilla (59.4%) also highlight intense affordability challenges. This trend poses a significant social and economic challenge, potentially leading to demographic shifts as younger generations or lower-income families are pushed out of major urban centres. It also reinforces the need for government policies aimed at increasing affordable housing supply and potentially regulating rental markets more strictly, as seen with the new tourist rental laws.

Market activity and investment returns in Spain Q2

The Spanish property market's activity indicators in Q2 2025 reveal strong sales and increasing development efforts, though with a notable lag in new supply. Property sales increased by 10.3-15.9% and new mortgages by 22.1-25.1% between January and April 2025 compared to the previous year. Building licences continued their upward trend with 19.4% growth, but the number of completed properties decreased by 7.9%, reflecting ongoing construction difficulties and a short-term supply deficit. The national average 5-year Compound Annual Growth Rate (CAGR) was 5.2%. Regions delivering the highest returns on investment (over 7%) included Malaga, the Balearic Islands, Santa Cruz de Tenerife, and Valencia. This scenario suggests that properties available for immediate purchase will likely retain their value or continue to appreciate for those seeking to invest now.

Navigating the Spanish real estate market

The Spanish property market in Q2 2025 presents compelling opportunities, but expats and international buyers must navigate its regional variations and evolving policy environment strategically. Prime areas, such as Madrid, the Balearic Islands, Málaga, Barcelona, and Valencia, offer strong capital appreciation but come with significant affordability challenges. Emerging hotspots such as Toledo, Guadalajara, Seville, and Alicante offer a compelling balance of growth potential and better affordability. At the same time, Zaragoza stands out for its reasonable affordability within a major urban setting.

Understanding recent policy shifts is crucial. The abolition of the Golden Visa programme means property investment no longer grants direct residency for non-EU citizens. New regulations for tourist rentals also aim to restore the local housing stock. Expats should be financially prepared, meticulously factoring in the "annual theoretical effort" for their chosen region. Given the complex and evolving nature of the Spanish real estate market, engaging with local real estate agents, financial advisors, and legal experts is indispensable. These professionals can provide up-to-date information on local market nuances, policy changes, and economic implications tailored to individual circumstances, ensuring a smoother and more informed purchasing process.

Despite affordability challenges in popular hotspots and recent policy adjustments, Spain's strong underlying economic fundamentals, including resilient employment and robust GDP growth, coupled with its enduring international appeal, suggest a positive long-term outlook for the property market. For those who navigate these dynamics strategically, Spain continues to offer compelling opportunities for property ownership and investment. To learn more about buying property in Spain, check out our section on helpful information and guidance.