Why Spain's property prices are rising much faster than in the rest of Europe

Local Spain

11-04-2025

New data has shown that property prices in Spain are rising faster than almost anywhere else in Europe.
Spain was the second country in terms of price rises across the Eurozone in 2024 - 11.4 percent - behind only the 11.6 percent rise recorded in neighbouring Portugal.
For context, in Italy the annual rise was 4.5 percent, in Germany 1.9 percent and in France prices decreased by -1.9 percent.
The Eurozone average was 4.2 percent, while in the EU more widely prices grew by 4.9 percent.
Even on a quarterly basis, Spain stands out. The increase in Spain during the fourth quarter of 2024 was 1.8 percent compared to the previous three months, when it had been 2.8. However, this still represents a tripling of the quarterly rate for the Eurozone and more than double the EU as a whole, where the increases were just 0.6 percent and 0.8 percent, respectively, according to Eurostat data.
Experts point to a number of factors, including Spain's strong economic performance pushing up prices and the underlying structural combination of high demand and low supply in the property market.
Domestic economic performance can influence property markets, according to property experts. 'Since the pandemic, the behaviour of housing has been very different from country to country,' José García Montalvo, professor at the Pompeu Fabra University, told El País.
'The dynamics of the economic cycle have a strong influence on the dynamics of housing prices,' he adds.
Judit Montoriol, chief economist at Caixabank Research, shares this view: 'In the last year, Spain is one of the places where house prices have risen the most, but it is also a year in which it has stood out very positively as the best performing European economy.'
This partly explains why prices in Spain have continued rising in recent years, and are now almost 20 percent more expensive than at the start of 2022 when Russia invaded Ukraine.
The inflationary crisis that came from that was experienced across Europe, and yet Spain still stands out for its price rises.
Analysis from Bank Inter shows that there are several other contributing factors. Growth in demand for housing, spurred by population growth mainly driven by foreigners, plays a large part.
A Bank of Spain report points out that the demand for housing has been driven, to a large extent, by population growth and the arrival of non-residents. It highlights that foreigners now represent more than 20 percent of housing purchases in Spain, reaching a volume of 130,000 units per year.
Often they are wealthier foreigners who inflate the market. The average price per m/2 of housing purchased by non-resident foreigners in 2023 was 70 percent higher than that of resident nationals.
The other side of the equation is the lack of supply. According to INE data, the construction of new housing remains low in Spain at around 90,000 homes per year. Yet calculations from the Banco de España estimate that Spain will have a shortfall of 600,000 homes by 2025.
Experts also point to rapidly rising rents also inflating the property market and putting up prices. In many cities, average rental prices are up by as much as 10 percent year-on-year. Staggeringly, the price rise on room rentals is 90 percent when compared to figures from 2015, according to new data published by property portal Idealista. In many of Spain's provincial capitals, average rents are north of €1,000 per month.
Monetary policies at the European level could've also contributed to price increases in Spain because the European Central Bank's interest rate cuts in recent months are another factor driving housing demand.
According to the forecasts of Bankinter's Analysis team, the ECB's cuts and the forecast of further reductions will cause the Euribor, the rate tied to most mortgages in Spain, to continue to moderate, easing credit, making buying more attractive and bringing more buyers into the market.