Spain | Economic cycle and housing prices

Summary

The observatory analyzes the cyclical evolution of the Spanish economy and housing prices in 2025. GDP closed the year with solid growth (2.8%), supported by domestic demand (contributed 3.6 pp to growth), while the labor market remained strong. The rise in the relative price of housing stands out in the current cycle.

Key points

• Key points:
• GDP per working-age person stood in Q4 2025 at 0.5 percentage points above its trend, confirming the recovery of Spain’s historical potential growth rate, at around 1% annually.
• The recent increase in housing prices reflects a combination of robust demand and insufficient supply, with a key difference from the pre-2008 cycle: the main bottleneck lies in residential capital, while credit is not acting as a factor driving housing price increases.
• Housing investment per working-age person remained below pre-pandemic levels for several years and only slightly exceeded them at the end of 2025. This reinforces the idea that a substantial part of the adjustment must come from the supply side, increasing the elasticity of the housing stock and improving the efficiency with which investment is transformed into available housing.
• Housing demand in Spain continues to be supported by relatively favorable financial fundamentals, with the ratio of housing costs to disposable income clearly more contained than in the final phase of the previous boom, and with household debt below the EU8 average.
• On the supply side, residential construction remains insufficient to absorb demand pressures, especially in a context of strong population growth. This helps explain why, compared to the slight decline in prices in the EU8 since 2022, housing prices in Spain have grown at an average annual rate of 7.5% over the last three years.

Geographies

Topics

Tags