Mark StücklinMadrid has overtaken all other global cities for house price growth in 2025, according to UBS. But despite a 14% surge, the Spanish capital is still only rated a “moderate” bubble risk.
Madrid has emerged as the world’s fastest-rising housing market in the latest UBS Global Real Estate Bubble Index. Prices in the Spanish capital grew by 14% in real terms over the past year – the strongest performance of all 25 global cities analysed – yet UBS still classifies Madrid as only a “moderate risk” market.
From steady gains to global leader
In the 2024 edition of the index, UBS highlighted that Madrid’s bubble risk score had risen as rents and household formation tightened supply. Prices rose about 5% in real terms then, despite elevated financing costs.
One year later, Madrid has taken centre stage. While most Eurozone cities saw flat or negative growth in 2025, Madrid stood out with double-digit gains, ahead of Dubai (+11%) and Tokyo (+5%).
What’s driving the surge?
UBS points to several forces behind Madrid’s performance:
- Housing shortages – construction has slowed, leaving demand chasing too few homes.
- Robust rental market – real rents continued to rise, supporting valuations.
- International capital – Madrid, like Dubai and Miami, has attracted strong foreign investor interest in recent years.
Bubble risk still “moderate”
Madrid’s bubble risk score rose from 0.56 in 2024 to 0.77 in 2025 – an increase, but still within the “moderate” range. By comparison, Miami (1.73), Tokyo (1.59), and Zurich (1.55) are firmly in high-risk territory.
A key reason for this relative safety is history: despite recent gains, Madrid’s real house prices remain around 25% below their 2007 peak. UBS also notes that affordability metrics, while worsening, are not yet at the extremes seen in cities such as London or Paris.
What this means for Spain
UBS doesn’t rate Spain as a whole, but Madrid’s results are a bellwether. They underline a market shaped less by speculative lending than by structural shortages and international demand. For now, that keeps bubble risk moderate – but a 14% real price surge in one year is not sustainable if mortgage rates stay high and active listings keep rising.
The takeaway
Madrid has jumped from a warming market in 2024 to the hottest performer worldwide in 2025. As far as UBS are concerned, Spain’s capital is not yet flashing bubble warnings, but the combination of surging prices, tight supply, and strong foreign demand makes it a city to watch closely.
You can download the report here.
