More than half a million immigrants helped increase Spain’s population for a second year in a row last year, and most of them are heading for areas where housing markets are already tight.

A rising population increases demand for housing, which can add to price pressures if supplies are limited. This comes after years of a declining population, thanks to the economic crisis, and Spain’s low birth rate.

Immigration rises and falls with the Spanish economy. In the boom years several million immigrants came to live in spain, mainly from South America and Morocco, but in the bust and post-crisis years between 2009 and 2015 the Spanish population shrank due to emigration and one of the lowest birth rates in the world. The declining population reduced demand for housing, and increased the country’s level of debt per capita, leaving it harder to pay. Both those factors made the economic crisis and housing crash even worse.

Now a clear sign of Spain’s economic recovery, with big implications for housing markets in regional hotspots, is that immigration is growing fast, and has driven up the population for a second year in a row. Immigration increased 28% last year, according to recent data from the National Institute of Statistics.

The biggest number of immigrants last year came from Morocco (40,413), followed by Colombia (36,778), Rumania (30,393), and the United Kingdom (28,785). But in terms of annualised change the number from Venezuela increased the most (+44%), followed by Colombia (+16%), whilst numbers from the UK showed one of the biggest declines (-2,6%), almost certainly thanks to our old friend Brexit.

Heading for hot housing markets

Where are all the immigrants heading? To Spain’s economic hotspots where the jobs are but housing markets are already tight, which is bound to be putting upward pressure on prices. Madrid had the biggest absolute increase in population last year (+73,274), followed by Catalonia (+47,067), the Canaries (+22,231), and the Balearics (+15,668). So, thanks to immigration, the population is increasing the most in the two biggest cities and the islands, where the housing supply is restricted (in the islands and Barcelona by lack of space and planning restrictions, and in Madrid just due to planning restrictions). Whist the population continues to grow in these areas, upward pressure will be maintained on house prices.

Meanwhile, in the Spanish interior, one of the last populated parts of Western Europe, in regions like Castilla-La Mancha, Castile & Leon, and stunningly beautiful Extremadura and Galicia, the population is still falling, and so are house prices.