Mortgage 'cheaper than rent' in Spain's biggest towns

RENTING a home in Spain will cost you more than paying a mortgage on it – and, in most cases, by a considerable margin.

Extensive research on prices in all towns and cities of at least 100,000 inhabitants shows that only two of these in the whole of Spain – or 3% of the total – offer homes to rent for the same or less than you would pay if you owned them.

According to Spanish national news agency EFE, as at September 2024, renting a home was on average 83% more expensive than monthly mortgage repayments on the same property. That's despite interest rates having rocketed in the past three years, pushing home loan payments up to levels not seen in over a decade and a half.

Mortgages in Spain soar, but rent is higher still

Spanish mortgages are linked to the Euribor, or Eurozone interest rate, which has seen unprecedented hikes since early 2022 in response to spiralling inflation.

In just over a year, Spanish mortgage payments typically shot up by over 50% as the Euribor went from minus figures to above 4%.

Even then, the only major towns where monthly mortgages cost more than rent were Marbella (Málaga province), Cádiz, Palma de Mallorca, or San Sebastián (Basque Country). But over 2024, rates began to fall again, meaning that's now only the case in Cádiz and Palma.

Predicted to close February 2025 on an average of 2.377%, mortgages due for their annual rate review this month will be slightly cheaper than those updated in November 2024 (2.506%) and December 2024 (2.436%).

Research methodology

A detailed study by quantity surveyors UVE Valoraciones used advertised homebuying prices in December 2024 for the 64 Spanish towns and cities with a minimum population of 100,000, and worked out how much a mortgage would cost on them.

They took the current average loan: A term of 24 years and eight months at 3.2% interest, for 80% of the market price, per the Spanish Mortgage Association (AHE).

For a main residence, the minimum deposit required is normally 20% of the sale price and, for second or subsequent homes, at least 40%. The study did not account for taxes and fees involved in buying, which are usually added to the loan: Approximately 10% of the purchase price.

Researchers then calculated advertised rent prices for December, and divided these, and average mortgage repayments, by the size of each property in square metres. As a benchmark, they took average rent price of €11 per square metre (m2) of property per calendar month (pcm), and for illustrative purposes, a starter-home one-bedroomed flat of 50 square metres costing €550pcm to rent.

In every case, renting was more expensive – although, if the 10% in taxes and fees had been factored in, the difference may be less stark.

Whilst the resulting figures showed mortgages on Cádiz and Palma homes were cheaper than rent, the near-parity means that, incorporating this additional 10%, renting becomes slightly cheaper than a mortgage - but notin the remaining 62 towns.

Rent price trends in major Spanish cities

In 'around 30' of the 64 locations, rent is higher than the €11/m2 pcm average, and rising faster.

The monthly mortgage-to-rent ratio has remained stable for around a decade in Málaga, Valencia and Alicante cities and in towns of over 100,000 residents in their wider provinces. Whilst renting has always been more expensive, the margin is not as pronounced, and the two have risen in line with each other.

Barcelona, Sevilla, Las Palmas de Gran Canaria, and Zaragoza (Aragón) have shown similar trends over the past 10 years, although the price gap has been gradually widening since 2023.

Why renting costs more than buying in Spain

UVE Valoraciones' chairman, Germán Pérez, said it 'would be logical' for monthly mortgage and rent prices to be 'about equal', and that in an ideal world, rent should be the lower of the two. But if this 'ideal' scenario was the norm, homes available for rent would be extremely scarce: Landlords need to charge enough to cover their own mortgage and expenses on the property.

Although it's a sound long-term investment, few would consider a buy-to-let if it cost them more than they earned from it in the shorter term. That means landlords would be almost exclusively cash buyers, limiting the field somewhat.

This is changing, though: In 2023 and 2024, 56% of homes were bought in cash and, from 2008 to 2020, nearly half were bought, not by individuals, but by companies, with at least eight properties in their existing portfolio. In the past decade, property sales to corporations and major investors already owning 10 or more went up by 20%.

These data, from the Spanish government's land values department (Dirección General del Catastro), have raised concerns that prices rises are being 'artificially' fuelled by a demand for investment, not for actual homes.

Germán Pérez notes that, although monthly mortgages fluctuate over time, 'rent prices have consistently gone up, never down' in 'the majority of towns'.

In some cases, rent has gone from €12 per square metre to €34 in just one year. Renting the aforementioned one-bedroomed flat would have gone from an already above-average €600 per calendar month to an eye-watering €1,700pcm.

Rent prices in Madrid and Barcelona

Madrid and Barcelona are Spain's biggest housing-crisis hotspots: Demand far outstrips supply, causing prices to soar.

In Spain's capital, tenants would fork out €20.40/m2 (€1,020pcm) for the benchmark one-bedroomed flat and in Barcelona, €23/m2 (€1,170pcm).

By comparison, a mortgage comes in at €18.30/m2 in Barcelona (€915pcm), 78.2% of the rent price, and 19.30€/m2 in Madrid (€965pcm), or 95%.

Year-on-year rent price rises to December 2024 were 13% in Barcelona and 15% in Madrid. Although purchase prices went up even more - 14% and 20% respectively – the impact was far greater for tenants than for buyers in real terms.

The rent/mortgage price gulf is widest in large Barcelona-province towns such as L'Hospitalet de Llobregat (€495pcm in mortgage versus €865pcm in rent); Badalona (€435pcm in mortgage, next to €765pcm in rent); and Santa Coloma de Gramenet (€405 in mortgage, compared with €715 in rent). Buying homes remains relatively affordable in these towns, but you'd pay 75% more to rent them. Mortgage-rent ratio in tourist areas

Mortgage-rent ratio in tourist areas

Housing crisis hotspots outside Madrid and Barcelona provinces are mainly in popular coastal tourism belts, but the rent-mortgage gap varies considerably.

For the benchmark flat in Marbella, a mortgage would cost €17.60/m2 (€880pcm), with rent 12% more at €19.70/m2 (€985pcm); whilst in Palma de Mallorca, a mortgage would cost €17.20/m2 (€860pcm) and rent just 0.6% more at €17.30/m2 (€865pcm).

Prices are also near-identical in Cádiz: €11.40/m2 (€570pcm) for a mortgage, with rent only 3.5% more at €11.80/m2 (€590pcm).

On the Costas and islands, towns with the widest rent-mortgage breaches included:

• San Cristóbal de la Laguna (Tenerife): Mortgage €420 per month; rent €585
• Telde (Tenerife): Mortgage €310 per month; rent €505
• Huelva (Andalucía): Mortgage €275 per month; rent €445
• Reus (Tarragona province): Mortgage €270 per month; rent €440
• Murcia: Mortgage €265 per month; rent €435

Whilst these five locations offer some of the cheapest housing in Spain's largest towns, rent is 39% higher than mortgage in La Laguna, and between 62 and 64% higher in the other towns.

Rent vs mortgage gulf may not affect affordability

Dramatic differences between monthly costs for renting versus buying property within the same municipalities do not necessarily mean the average wage-earner is priced out of the market.

The three Spanish cities with the cheapest rent (€7.50/m2 or €375pcm) are Badajoz (Extremadura), Ourense (Galicia), and Jaén; a mortgage is €5.80/m2 (€290pcm) in the first two, and €4.80/m2 (€240pcm) in the third.

Renting, therefore, costs between 29% and 56% more than mortgage in these towns.

In Algeciras (Cádiz province), the cheapest big coastal town for property, rent is €7.70/m2 (€385pcm), and mortgage, like Jaén, is €5.80/m2 (€240pcm). That means it's over 60% more expensive to rent than to buy.

Yet, despite the price gulfs, both rent and mortgage are affordable in these towns if you earn more than the minimum wage.

Affordable coastal locations for renting and buying homes in Spain

Despite Spain's tourism-heavy coasts being considered housing-crisis hotspots, UVE Valoraciones' data show it is still cheaper to either buy or rent in several of their largest towns; even where rent is above average prices and far higher than mortgage.

Coastal or pre-coastal large towns with affordable – or reasonably-affordable – housing include:

• Santa Cruz de Tenerife: Mortgage €420 per month; rent €585
• Alicante: Mortgage €440 per month; rent €595
• Tarragona: Mortgage €395 per month; rent €530
• Jerez de la Frontera (Cádiz province): Mortgage €290 per month; rent €450
• Almería: Mortgage €300 per month; rent €430
• Castellón and Elche (Comunidad Valenciana): Mortgage €270 per month; rent €415
• Roquetas de Mar (Almería province): Mortgage €260 per month; rent €405
• Cartagena (Murcia): Mortage €255 per month; rent €400

The cost disparity, however, is significant: Rent is between 34% and 57% more than a mortgage.

UVE Valoraciones warns of a growing divide in society: Those who can afford to buy spend less and get richer, whilst those who cannot, spend more and become poorer.

Defining 'affordable' housing

Announcing the end of the 'golden visa' scheme that granted non-EU citizens automatic residence rights for buying Spanish property priced over €500,000, national president Pedro Sánchez expressed concerns about 'the average worker' being unable to afford a home.

The socialist (PSOE) leader's eventual goal is for residents to spend no more than 30% of their monthly take-home pay on rent or mortgage.

Yet for tenants in Spain's housing-crisis hotspots, this barely seems achievable.

According to the National Institute of Statistics (INE), the mean average gross annual salary in the most recent year on record (2022) was €26,948.87, or about €1,763.10 a month net. Last year, salaries rose by around 4% and a 3.5% increase is forecast for 2025, whilst the annual minimum wage has risen to €16,576.

Rent vs mortgage: How much is 30%?

To spend only 30% of your income on renting UVE Valoraciones' benchmark one-bedroomed flat in Spain's cheapest cities, you'd need a monthly take-home pay of €1,250, or a gross annual €18,100.

In Madrid and Barcelona, though, you'd need €3,400 a month (€58,500 per annum) and €3,900 a month (an annual €68,200) respectively.

For homeowners, the maximum housing spend of 30% is a little more feasible. In Spain's cheapest cities, a mortgage on the benchmark flat requires a gross annual salary of €10,750 to €12,730, a monthly take-home pay of €800 to €967, which only means working 26 to 31 hours a week on minimum wage.

The median average mortgage €441 per month means a gross annual salary of €21,800 (€1,470 net per month). But in Barcelona and Madrid, you'd need a monthly income of €3,050 and €3,217 (a gross annual €51,540 and €54,710) respectively.

If mortgages are cheaper, why do people in Spain rent?

Outside of Madrid and Barcelona, it's not mortgage repayment amounts that are the problem: It's the size of the deposit required.

Buyers have to add on between 8% and 12% to the purchase price for taxes, then find 20% of the total in cash to be granted a loan. Unless you have equity from a previous property, that means considerable saving efforts.

Minimum-wage earners, and those already paying over the odds in rent, would take a lifetime to amass the necessary funds.

Home value rises do not impact greatly on mortgage repayment affordability, but they force up the deposit needed. For example, buying a €100,000 property means spending an average of €110,000 including taxes, so you have to save up €22,000. If you could only manage €100 a month, it would take you 18 years and four months to raise the deposit.

For those who already have equity, though, it makes more financial sense to buy rather than rent if you plan to stay in your home long term.

Prices differ enormously nationwide, and are often lower in smaller towns. Generally, buying a home remains consistently cheaper in most of Spain than elsewhere in northern Europe, and practically any budget can be catered for. You can filter for this and other preferences in our Find Your Place in Spain section.