House Prices In Spain Keep Going Up. So What Next?

The end of the year is fast approaching, which means it’s the perfect time to look at what’s happened to the property market over the last year, and forecast what’s going to happen next!

If you’re already on the Spanish property market then there’s good news for you. As we approach the end of the year we have seen Spanish property prices increase again. In the third quarter of 2024 they have increased by an additional 8.1%. This is the biggest spike over any quarter in the past 2 years.

What does this mean in real terms? Well if you’re already on the property market you probably feel much wealthier! But if you’re not on the property ladder and you want to be, it’s going to be more expensive to get on the first rung.

An Issue Of Supply And Demand

One of the main reasons why property prices are so high in Spain? It’s a simple question of supply and demand. Demand for property in Spain is at a significant high.

There is severe shortage of new properties being constructed in Spain. Credit conditions in the country are favourable, and to put it as simply as possible, people want to buy homes! 300,000 new households are generated in Spain each year, but only 100,000  new homes are constructed. Which means demand is consistently greater than demand, and this is a problem that isn’t going anywhere.

The outcome? High demand and competition for properties means sky high prices. It is estimated that for every property that goes on the market in Spain their are 28 interested buyers (or 1 lucky homeowner and 27 other disappointed parties).

As a result, some platforms are reporting that growth at the back end of the year has been even bigger. In November Idealista reported that there had been a 10.7% increase in property prices, with an even more pronounced surge in major cities like Valencia, Malaga, Madrid, and Barcelona.

Property In Spain Is Unaffordable For Many Families

For many families in Spain, buying property in their home country is becoming nothing more than a pipe dream. Middle and upper-middle-class families are still able to invest in property. They are the ones conducting the vast majority of property transactions in the country. But young people and lower income families are struggling to secure affordable housing in the current climate.

And it’s easy to see why. The average property price in Spain now exceeds €2,244 per square metre nationally. In Barcelona alone, this figure is doubled. Spain is officially in the grips of a housing crisis, with properties for sale and rent soaring in value.

If we break down who’s involved in 2024’s record-breaking 620,000 projected property transactions, what we see is that these largely involve just two main groups. Firstly, Spanish middle-class families who are taking advantage of accessible credit in the country. Secondly affluent foreign buyers who continue to be drawn to the dream of their own place in the sun. You will find a lot of foreign buyers snapping up properties in coastal regions. These buyers are interested in second homes in locations such as the Costa del Sol and Balearic Islands.

The result? Resentment directed towards foreign buyers, particularly in regions where there is property scarcity such as the Canary Islands. We have seen protests and demonstrations in major cities across Spain. Although these seem to be targeting tourists and foreign buyers, the reality is that the Spanish government need to do more to alleviate the housing crisis and stimulate property development in the country.

What To Expect In 2025?

As promised at the start of this piece, we will look ahead to 2025 and attempt to predict what you can expect from the property market. In reality, the smart money is on more of the same.

Experts predict another year of price increases, albeit at a slightly tempered pace of 7%. Demand will remain just as high as it has this year too. But something has to give, and unless there is an improvement in housing supply, we will continue to see marginalised groups struggle to get on the property market.

Are you currently looking for your dream Spanish villa or apartment on the Costa Del Sol? The team at Right Casa real estate agency is perfectly placed to offer all of the help and support you need. Why not get in touch today?