Many independent experts, analysts and real estate professionals are concerned about the current situation in Spain and believe that the country is on the verge of another bubble. At the same time, the Bank of Spain firmly maintains a different position: despite a clear overvaluation of real estate by 10%, there are no grounds to speak of a crisis, let alone compare it with the 2008 crisis. Let us try to look at the situation from the outside, compare different opinions and assess the real state of affairs.
The position of the Bank of Spain and the European Central Bank
In mid-November 2025, the Bank of Spain reported that housing prices in Spain are still roughly 20% below the historical peaks recorded during the 2007–2008 real estate crisis. According to the bank’s Director General for Financial Stability, Daniel Pérez Silla, these figures do not allow the current situation to be equated with the previous crisis. “At present there are no signs of a bubble,” he said, explaining that the current increase in real estate prices is mainly due to the gap between limited supply and high demand, as well as insufficient new construction. However, the market distortions typical of the beginning of the real estate crisis in the first decade are currently not being observed. Also, unlike in that period, there is no uncontrolled surge in demand or excessive indebtedness, either among households (whose financial situation has become more stable) or among developers. Moreover, price growth is more evenly distributed across the country: sharp increases are seen in the autonomous communities and municipalities where supply shortages are most acute, while in many provinces there has been only a slight rise or none at all, which contrasts with the boom phase of the real estate market in the 2000s.
The Bank of Spain also emphasises that commercial banks are maintaining strict criteria for granting mortgage loans. Mortgage lending continues to recover, having reached a ten-year high, but it remains below the levels of 2000–2008. As of June 2025, the mortgage portfolio accounts for only 42.5% of total bank lending to households and companies.
Bloomberg takes a similar view, stating that Spain is currently not among the countries facing a real risk of a bubble.
The Vice-President of the European Central Bank, Luis de Guindos recently stated that Spain’s housing problem lies in regulation which, in his view, limits supply in the long-term rental market. He also noted that the solvency of the Spanish financial system and the competitiveness of its economy guarantee its ability to continue growing above the European average. In response to a question about whether he sees a risk of a bubble emerging, he pointed out that the situation between 2008 and 2011 was different, since in addition to a very sharp rise in prices there was an expanding credit bubble.
Real statistics
Looking at the statistics, property prices in Spain in 2025 are hitting new record highs in all major municipalities: Madrid, Barcelona, provincial capitals, popular resorts along the Mediterranean coast and on the islands. These are the most pressured areas, where the population is growing due to immigration and a natural increase in the number of households, while prices are skyrocketing against a backdrop of declining supply and a severe shortage of rental housing.
The dynamics of prices are well tracked by the portal Idealista, and the data it publishes show that for many locations 2025 has been a year of continuously renewed record highs.
Independent economists note that Spain’s rapid economic growth (the Spanish economy is showing some of the best results in the EU) is overshadowed by the relentless rise in housing prices, which poses a real danger and is becoming the country’s main social and economic problem. Property prices in Spain today are simply out of reach for the majority of the population: under these conditions, even a family with two stable sources of income cannot afford to buy an apartment.
Data from the Ministry of Housing itself confirm that after reaching a low in the first quarter of 2014, housing prices have risen by almost 48%. Figures from the National Statistics Institute (INE) on price developments over the last decade are even worse than those of the Ministry: according to them, over the past ten years apartment prices have increased by 70%. The problem is that the average annual wage of an individual worker has risen by only 22.71% since 2014. Therefore, analysing price trends without taking income trends into account gives a misleading picture of the situation in the country.
Buying a home of one’s own has become an unattainable dream for most working citizens. According to a recent report by the UGT trade union, in Madrid it takes 58.89 years of net wages to buy a 60-square-metre home.
The rental housing market promises an even bleaker outlook. Here, too, price increases are expressed in double-digit figures. According to Idealista, the average rental price in Spain has risen by 21.8% over the last two years. In order to be able to pay the rent, an average family in Spain has to allocate 36% of its total net income. Worst of all, there are no signs that this trend is changing.
Experts’ forecasts
The average cost of housing in Spain in October 2025 reached €2,101.4/m². This figure beat the previous record set in the first quarter of 2008, which coincided with the peak of the real estate bubble that burst a few months later.
Many economists who argue that a new property bubble is inflating base their position on the fact that housing, as a basic necessity, has turned into an object of speculation, like gold or bitcoins. Prices have long since ceased to be proportional to household incomes and potential financing capacity. The price bubble is fuelled by cheap mortgages after the ECB’s interest rate cuts and by speculation. More affordable housing is losing ground in the market.
According to Idealista, over the last five years the share of homes priced below €200,000 has fallen from 60% of total supply to less than 38%. Only 30% of apartments for sale are priced below €150,000, while the share of apartments costing more than €500,000 has doubled and now accounts for 23.5% of the market. In fact, in such expensive cities as San Sebastián, Palma de Mallorca and Madrid, more than half of the homes on the market cost more than half a million euros.
The current boom in Spain’s real estate market differs from the one 20 years ago. Today, industry associations and the political right claim that the main problem is a lack of supply, whereas back then Spain was building more housing than the market could absorb. It was in the first decade of the 2000s that bold claims were made that Spain had built more homes than France, Italy and Germany combined.
The 2008 bubble was a classic real estate bubble, when a significant share of loans went into large projects, infrastructure, new residential developments and so on. At that time, lending was extremely inflated and the market collapsed when house prices and the income they generated stopped rising as fast as interest on the debt. Panic suddenly broke out, prices began to fall, heavily indebted builders and developers were unable to service their debts, and a chain of bankruptcies followed.
Today, Spain’s real estate market remains very active. Analysts forecast that the current year will end at a level similar to that of 2007. But there are nuances:
- First, the share of purchases made without a mortgage stands at 40%, which points to limited involvement of households but strong speculative interest on the part of large investors.
- Second, on the Mediterranean coast foreigners buy every third home. It is precisely foreign demand that is the key factor explaining the resilience of the housing market in the current growth cycle. Foreign buyers have taken the place of Spanish families.
So where have the latter gone? The inability to buy housing at an affordable price has forced many to move into the rental market. However, rents have risen much more than the prices of properties for sale. As a result, we are witnessing in real time the process of society splitting into two parts: on one side of the barricade is a rentier class that lives off a significant portion of the population, and on the other are those who have fallen into the rental trap and are becoming ever more stuck in it.
Housing conditions in Spain function like a regressive tax, whereby people with fewer resources pay the better-off in order to be able to live in separate accommodation, even if it is far from ideal. And that is without even mentioning young people, for whom having a home of their own is becoming something out of the realm of fantasy.
Time to sell or buy?
In mid-November, the National Federation of Real Estate Associations of Spain (FAI) called on the government to immediately launch a National Emergency Action Plan. As the organisation stated in a press release, the market is in an unstable situation, since rising prices and a structural shortage of supply are not being taken into account in current public policy. In response to these statements, the Ministry of Housing replied that things are not as bad as they are being painted and that the real market situation should not be exaggerated.
Tinsa, the largest independent appraiser of the Spanish real estate market, has called for time to be given to the construction sector, which is also suffering from a lack of resources, to expand the housing stock. The imbalance between supply and demand is based on the fact that the pace of new housing construction is lagging far behind population growth. At present, around 90,000–100,000 housing units are built each year, while 200,000–250,000 new households are being formed. Developers themselves rule out any significant increase in housing activity in the short term.
In the end, we have the following picture: the government does not deny that there are serious problems in Spain’s real estate market, the Bank of Spain states that there is no bubble and that it will not allow one to form, while the current situation contributes to a growing social divide and to housing becoming a luxury item accessible only to the few.
Optimistic forecasts state that in 2026 the market will continue to grow: the number of transactions will not fall, and sale and rental prices will continue to show positive dynamics. The logic behind this reasoning is that increased demand for housing will continue to clash with limited supply and an insufficient volume of new construction. The expected result will be rising prices in 2026, especially in the areas with the highest demand.
The current situation raises doubts even among industry professionals, since the economic and fiscal policies being pursued by the state do not solve the housing problem and the situation will only get worse. However, even they recommend taking advantage of the moment, assuming that anyone who buys now will almost certainly save on the double-digit price increases expected next year and will also be able to obtain a mortgage on very favourable terms. Current mortgage payments may be much lower than rent in the most sought-after and stressed locations.
It should also be borne in mind that while the real estate market may be unpredictable in the short term, in the long term the overall trend in prices in Spain is upwards.
