Spanish bank Bankinter anticipates a slowdown in Spain’s housing market over the next two years, with fewer transactions and more modest price increases. The downturn is expected to stem from weaker economic growth and ongoing supply shortages.
Housing sales to drop while prices keep climbing, albeit more slowly
According to Bankinter’s latest Property Market Report, housing transactions in Spain are forecast to fall by around 5% annually in both 2025 and 2026. This trend would bring transaction numbers closer to the historical average, following a period of robust activity.
Despite the expected dip in activity, prices aren’t likely to follow suit. Bankinter projects Spanish house prices will rise by 5% in 2025 and 3% in 2026. This is a marked deceleration compared to the 11% surge forecast for 2024, but still represents positive price growth—indicative of the persistent imbalance between demand and supply, and continued buyer interest, particularly in key locations.
An economic chill sparked by global tensions
A key reason for the housing market’s expected loss of momentum lies well beyond Spain’s borders. Bankinter points to the economic uncertainty arising from the trade war initiated by a second Trump administration, with sweeping tariffs now affecting almost all imports to the US. The associated global instability is expected to dampen economic sentiment and growth in the eurozone, dampening housing demand in turn.
No housing bubble in sight, but rental pressures continue to mount
Despite the surge in property prices over recent years, Bankinter’s analysts argue there is no evidence of a real estate bubble—except perhaps in luxury and “prime” markets. While house prices are currently around 10% above their previous cyclical peak, disposable household income has grown by around 30% since then, improving the overall affordability profile for buyers.
The current mortgage effort rate—a measure of the percentage of income households devote to housing payments—is at 35%, which aligns with historical norms and Bankinter expects it to continue moderating if interest rates fall further.
By contrast, the rental market is under “unprecedented stress”. Rental effort rates (the proportion of income spent on rent) are now above 50% in many areas, roughly 15 percentage points higher than for purchases. Combined with soaring rents (nearly doubled in the past decade), this puts significant pressure on households reliant on the rental sector.
Supply shortfall and high demand to keep prices buoyant
The persistent lack of housing supply is one of the defining features of today’s Spanish property market. According to Bankinter’s report, Spain currently has an annual housing deficit of over 150,000 units. This gap is expected to widen substantially over the next decade, with a cumulative shortfall of 1.5 million homes projected unless construction accelerates.
The causes are twofold: new housing deliveries are expected to remain below 100,000 units per year over the next two years, while demand is projected at more than 250,000 units annually. That includes around 200,000 from domestic household formation, with the remaining 50,000 driven by foreign buyers—particularly in coastal and urban hotspots.
This supply crunch will continue to exert upward pressure on prices in high-demand locations—particularly Madrid, Barcelona, Valencia, Bilbao, the Mediterranean coast, and the islands—where population growth is concentrated.
Back to the future for traditional commercial assets
Though the spotlight often shines on residential real estate, Bankinter also sees opportunities on the commercial side. Assets like office buildings and shopping centres, which have suffered valuation discounts of 25% to 30% in recent years, are now showing signs of stabilisation. With occupancy levels high and rental income rising faster than inflation, these assets are poised for gradual recovery.
Conversely, Bankinter expects that logistics facilities, data centres and hotels—which have enjoyed investor favour during recent boom years—may face headwinds from slowing economic growth and a potential oversupply.
In sum: a tale of two markets
The Spanish property market is entering a new phase. On one hand, we’ll likely see fewer sales and slower price growth as the economy cools and geopolitical uncertainty rises. On the other, a chronic housing shortage and resilient demand—particularly from foreign buyers—will prevent a major downturn and ensure the market remains competitive.
Meanwhile, simmering tensions in the rental sector and shifting dynamics in commercial property mean investors and policymakers will need to tread a careful line in the years ahead. As ever in Spanish real estate, location—and timing—will be everything.
