A recent analysis reveals that in 94% of Spain’s most populated municipalities (those with over 100,000 residents), renting a home is more expensive than paying a mortgage.
This striking statistic underlines the mounting pressure on the housing market, driven by a chronic lack of supply, pushing rental costs through the roof, and making life harder for renters.
The report by appraisal company UVE Valoraciones points to a situation where, while mortgage rates are generally more affordable than rental payments in most major urban areas, the barrier to homeownership remains high due to steep deposit requirements. The analysis highlights Barcelona and Madrid as particularly affected cities, with the underlying issue across the country being a structural shortage of housing that can only be addressed through a significant boost in construction.
Key findings from the report
Renting exceeds mortgage costs: In 94% of Spain’s largest municipalities, renting is more expensive than paying a mortgage. This flips the traditional logic that renting is a cheaper, more flexible option.
Few exceptions: Only four municipalities bucked the trend at the end of 2024 – San Sebastián, Marbella, Cádiz, and Palma de Mallorca. This is down from nine municipalities a year earlier.
Barcelona’s rental squeeze: Despite rent controls imposed by the Catalan government, rents in Barcelona rose by 14% in 2024, while sales prices increased by 13%. The average rent reached €23.40 per square metre, compared to a mortgage cost of €18.31. The data suggests rent caps have failed to tame rental inflation.
Madrid’s record highs: Rental costs surged by over 15% in Madrid last year, setting new records in many districts. Mortgage payments also rose by 20%, but rents remained higher: €20.70 per square metre versus €19.29 for mortgage costs.
Other hotspots: Valencia, Seville, Zaragoza, and Malaga also reflect the same pattern of rents outpacing mortgage costs.
Homeownership hurdles: While mortgage payments are often lower than rent, many aspiring buyers are priced out due to the hefty deposit required – typically 28%-32% of the property price, covering the down payment, taxes, and associated fees.
San Sebastián’s exception: Historically, San Sebastián has been one of the few cities where mortgage payments exceed rent. Even after an interest rate dip in 2024, mortgage costs remained higher at €22.13 per square metre, compared to an average rent of €18.
Supply shortage: The underlying problem is a housing supply deficit. UVE Valoraciones president Germán Pérez Barrio estimates that Spain needs to build at least 350,000 homes annually for five consecutive years to stabilise prices, a target far out of reach given the current pace of development.
What this means for the market
Pressure on renters: Renters are bearing the brunt of rising costs, especially in the major cities, leaving many stretched to their financial limits.
First-time buyer struggle: High deposit requirements continue to keep first-time buyers locked out of the market, despite the lower cost of mortgage payments compared to rent.
Housing affordability crisis: The combination of spiralling rents and homeownership barriers is fuelling a broader housing affordability crisis, particularly affecting younger generations.
Policy rethink required: While rent control policies may be politically popular, the evidence from Barcelona suggests they may not work as intended. Boosting housing supply is crucial to achieving long-term stability and affordability.
Suggested solutions
Build more homes: Prioritise policies that incentivise construction, unlock land for development, and support builders in increasing output.
Ease deposit burdens: Explore government-backed schemes to help first-time buyers with deposits, such as guarantee programmes or more flexible mortgage options.
Rethink rent controls: Re-evaluate the effectiveness of rental caps and consider alternative ways to address rental affordability.
Long-term housing plan: Develop a national housing strategy focused on increasing supply and improving affordability over the long term, with sustained public and private sector investment.
The message from the data is clear: Spain needs more homes, and fast. Until that happens, renters will continue to face rising costs, and homeownership will remain an elusive dream for many.
