Spain looks set to remain Europe’s house price outlier for the rest of the decade, with growth running well ahead of its peers even as momentum cools elsewhere.
According to S&P Global, Spain will record the strongest house price growth of any major European market through to 2028. In it’s latest European Housing Markets report the rating agency forecasts prices rising by 9.3% this year, more than double the European average, cementing Spain’s position as the continent’s standout performer.
While growth is expected to moderate after 2026, it will remain robust by European standards. S&P expects Spanish house prices to rise by 7.4% in 2027 and 6.2% in 2028. That is a clear deceleration, but still comfortably ahead of most neighbouring markets, many of which are struggling to regain momentum after the post-pandemic boom.
Across Europe as a whole, S&P forecasts price growth of 6.1% in 2025 and 4.3% in 2026, highlighting a gradual cooling rather than a sharp correction.
A patchy European picture
The report underlines how uneven the European housing cycle remains. Countries such as Portugal and Ireland have seen prices rise faster than expected, helped by resilient labour markets and record employment. At the other end of the spectrum, weaker job markets have weighed on prices in Sweden and the UK.
S&P also points to country-specific supply constraints. In Switzerland, housing supply remains effectively frozen. In Germany, high material and energy costs continue to restrict new construction. The Netherlands suffers from both problems simultaneously. France stands apart for different reasons, with political uncertainty undermining household confidence and temporarily suppressing demand.
Why prices keep rising
Despite softer economic growth and higher borrowing costs, S&P argues that the underlying drivers of house price growth remain firmly in place. Demand is being fuelled by population growth, shrinking household sizes and accumulated household wealth, while supply remains structurally constrained by planning rules, regulatory friction and persistent labour shortages in construction.
A key insight from the report is that household formation is outpacing population growth by a wide margin. In Europe, the number of households is increasing around 2.5 times faster than the total population, a trend reinforced by lifestyle changes since the pandemic. This helps explain why demand remains strong even in ageing societies with modest demographic growth.
Less overvalued, but not cheap
S&P also notes that European housing markets are generally less overvalued than they were four years ago. During 2021–22, price-to-income ratios surged well above long-term norms, implying overvaluations of around 10% in the eurozone, 15% in the UK and 20% in Sweden. Much of that excess has now been worked off.
That said, Portugal and Switzerland still stand out as the most stretched markets, with affordability lagging both European and OECD averages and little sign of relief. By contrast, France and Belgium appear among the most undervalued, though S&P does not expect that gap to persist indefinitely.
What it means for Spain
For Spain, the message is clear: strong fundamentals, tight supply and resilient demand are likely to keep prices rising faster than incomes for now. With limited scope for further interest rate cuts from the European Central Bank, affordability pressures are unlikely to ease quickly. For buyers, that means fewer bargains ahead; for owners and sellers, continued price support looks baked in.
