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Housing demand in Spain will remain solid driven by employment, wages, and immigration. However, the shortage of new supply will limit sales and maintain strong upward pressure on prices. Furthermore, the profitability of the construction sector remains low compared to Europe.

Spain needs more housing, but investment in the sector is not taking off, largely because it is not profitable; even though margins have recovered, developers face years-long construction timelines, keeping assets (land) on their balance sheets without generating revenue.

Economic growth will continue to support the dynamism of the real estate sector in the coming months. The decline in interest rates, the strength of the labor market, and positive net migration will sustain strong demand in 2025, although it is expected to decelerate in 2026 as a result of slower economic growth.

Falling interest rates, the gradual recovery in the eurozone and a more positive demographic outlook are expected to boost residential demand, which in a context of relatively limited housing production will lead to house price growth in the current biennium.

The residential market is in a process of adjusting sales due to rising interest rates and the slowdown in neighboring economies, yet the level of sales remains relatively high. Nevertheless, housing prices continue to grow as a result of the shortage of supply.

This document aims to show the main causes behind the lower growth of housing prices in Spain, and most of its autonomous communities, compared to what has been observed in other developed economies that have faced the same macroeconomic scenario.

Housing demand will be restricted by the increase in interest rates and new housing production will remain at similar levels to 2019. Unlike in other countries, there are no price imbalances and the moderation in growth will come mainly from used housing.