Spain is expected to have one of the fastest-growing housing markets in Europe for the rest of the decade, which is good news for homeowners but increasingly painful for those struggling to get on the property ladder.

According to ratings agency Standard & Poor’s (S&P), Spanish house prices will rise by 9.1% this year, followed by another 7.4% in 2027 and 6.2% in 2028. That would make Spain the strongest-performing housing market in Europe over the next few years.

The main reason, according to S&P, is simple: there aren’t enough homes being built. Strong job creation, rising wages and immigration are all increasing demand, while new supply remains constrained by planning delays, labour shortages and high construction costs.

The outlook is not unique to Spain. S&P expects house prices across Europe to keep rising until at least 2029. However, Spain, Portugal and Ireland stand out because they suffer from deep structural housing shortages that are unlikely to be solved any time soon.

Governments across Europe have announced housing plans and spending programmes, including Spain’s €7bn State Housing Plan, but S&P warns that these measures will take years to have any meaningful impact. In some cases, policies that stimulate demand without increasing supply could even push prices higher.

Winners and losers

For homeowners and investors, this is encouraging news. Rising property values boost household wealth and reward those already on the housing ladder.

But there is another side to the story.

Rapid house price growth also creates winners and losers. First-time buyers face ever higher barriers to entry, while rising prices tend to feed through into higher rents, putting additional pressure on tenants. Housing affordability is becoming a growing political issue across Europe, and Spain is no exception.

The frustration of younger generations locked out of home ownership is already fuelling political anger and demands for government intervention. That’s one reason why Spain has seen a growing appetite for policies such as rent controls, higher taxes on investors and restrictions on tourism accommodation, even if many of these measures do little to address the underlying problem.

The fundamental issue remains a shortage of homes. Until Spain builds significantly more housing, the country’s property owners can probably expect further gains in value, while those trying to buy or rent will continue to feel the squeeze.