According to the latest data published by Eurostat for the second quarter of this year, Spain ranks fifth in the EU for housing price growth – 12.8% year-on-year. Only four EU member states, smaller in size and economic weight, show higher growth, underscoring the complex situation in Spain’s housing market.
Leaders in the EU
The frontrunners are:
- Portugal, where house prices rose by 17.2% from April to June compared to the same period a year earlier;
- Bulgaria (15.5%);
- Hungary (15.1%);
- Croatia (13.2%).
In Spain, the cost of buying a home is growing more than twice as fast as the EU-27 average (5.4%). It is also significantly higher than in other large eurozone countries – such as the Netherlands (9.5%), Italy (3.9%), Germany (3.2%) or France (0.5%). Spain’s increase is also more pronounced than in Slovakia (11.3%), the Czech Republic (10.5%) and Lithuania (8.8%).
Demand vs. supply
Stable demand growth and a gradual tightening of supply in Spain – driven by a shortage of new construction and policies that have removed thousands of properties from the market – have created ideal conditions for the price spiral seen in recent years. Unsurprisingly, housing has become the main concern for Spaniards, even though, according to the CIS, four years ago it ranked only 31st.
Q2 dynamics
Eurostat’s latest report reveals another notable point: while the growth rate across the EU-27 remained stable compared to the previous quarter, at 5.4% year-on-year, Spain moved in the opposite direction, with growth 1.9 percentage points higher.
Policy and lending effects
This is further evidence that the government’s housing policies not only fail to curb the seemingly relentless rise in prices, but may even exacerbate the problem. In this context, Spain’s housing price growth in Q4 of last year reached double digits for the first time since 2017.
ECB assessment
The latest statistics from the European Central Bank (ECB) on residential property valuation in the eurozone for Q1 of this year indicate that Spain’s housing market is overvalued by 26%. This far exceeds the figures for Germany (1%), France (-4%) and Italy (-1%) over the same period.
Bubble or structural deficit?
Despite some warnings of a potential real estate bubble reminiscent of 2007, the vast majority of experts agree the situation is fundamentally different. Today’s price increases are primarily driven by a widening gap between supply and demand caused by rising immigration and a gradual decrease in average household size.
Housing deficit
In this context, a few weeks ago the Bank of Spain updated its estimates of the housing shortfall, putting it at around 700,000 units needed this year to meet overall demand (other sources suggest up to 860,000). This is 100,000 more than the estimate made by the same institution just a year earlier.
Role of new builds and the resale market
Despite a record number of purchase transactions in July last year (in the historic series), the number of signed contracts for new housing construction amounted to half the contracts registered in July 2007. According to these INE figures, it is clear that resale transactions are driving the market in the absence of sufficient new projects to meet demand, and that the modest increase recorded last year (about 2,500 per month) is not enough to satisfy demand.
Signals from construction
One of the few indicators offering some hope is the rise in cement consumption, according to the Ministry of Industry. From January to September it increased by 9.7% to roughly 12 million tons, after a sharp 20% jump in September. Spain’s cement producers’ association, Oficemen, believes there is still substantial room to grow toward the 20 million tons per year target to meet housing needs.
Possible implications for the economy
Housing shortages – and the associated price growth – could put Spain’s economy in a difficult position in the near future. The think tank Funcas indicates that insufficient supply could slow the inflow of foreign population by 19% through 2027. This would affect private consumption and firms’ access to labor, leading to slower economic growth in the short term. In this regard, Funcas has upgraded its 2026 GDP forecast to 2.9%, but lowered projections for 2027 and 2028.
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