Record rise in housing prices: winners and losers
Last Updated on 3 October 2025 by Equipo Urbanitae
With the end of summer, housing prices in Spain continue their record-breaking climb, reflecting a complex social reality that shows no signs of resolution in the short term.
The latest data confirms this. According to the real estate portal Fotocasa, the average price of a second-hand home in Spain reached €2,738/m² in August 2025. Compared to the past five years, this represents a 45% increase, particularly in large cities and metropolitan areas, where supply remains unable to absorb overwhelming demand, making affordable housing an impossible mission for much of the population.
Javier Santacruz, economist, financial analyst, and university professor, explains: “We have a serious supply problem. There are very few building permits for new homes compared to potential demand, which keeps pressure on the second-hand market. Only about 120,000 to 130,000 new homes come onto the market each year, when we would need at least 1 million to stabilize the situation. This is completely inexplicable in a country like Spain, where there is an abundance of land suitable for development.”
Several problems have converged at the same time, turning this into a national issue: alongside the lack of new housing, there is the greater purchasing power of foreign investment, which, combined with the absence of effective policies, has made access to housing increasingly unaffordable for Spaniards. At the same time, international demand — particularly in tourist cities and economically attractive areas — further intensifies price pressure. As a result, the housing deficit continues to grow and threatens to become entrenched without decisive policies.
This situation, which calls for a comprehensive reform plan, has a clear beneficiary: the regional administrations. Spain’s Autonomous Communities are seeing their public coffers swell thanks to two key taxes on property transactions: the Transfer Tax (ITP) and the Stamp Duty (AJD). The first applies to the purchase of second-hand homes, while the second applies to deeds and notarial documents during the process. Both taxes are ceded to the regions, meaning that each increase in the sale price directly boosts regional tax revenues — creating a paradoxical situation: at a time when citizens are forced to allocate an ever-larger share of their income to housing, regional governments reap a direct financial benefit.
Santacruz explains: “The price escalation has substantially increased the revenue from ITP/AJD for the Autonomous Communities, which has boosted their budgetary capacity. This increase in income improves the financial position of the regions in the short term and could facilitate social spending or housing investment. However, it is a volatile source: it rises sharply when the market grows and falls in downturns.” In practice, when revenues increase, some regions choose to allocate part of the funds to current expenditure or tax rebates; others direct it toward housing policies (land acquisition, public development, subsidies).
The comparison between the number of property transactions and revenue growth highlights this imbalance. Although in recent quarters sales have shown signs of stagnation or even decline, ITP and AJD revenues continue to grow because transactions — though fewer — are closing at higher prices. This contrast reveals a tax system misaligned with social reality, as the higher yield from these taxes does not reflect greater economic activity in the sector.
The social impact is evident, especially among young people. Spain’s youth emancipation rate barely exceeds 15%, according to the latest Emancipation Observatory from the Spanish Youth Council, one of the lowest in Europe. A decade ago, it was 20%. Average salaries, stagnant for years, bear no relation to the cost of buying or renting, forcing households to dedicate an ever-greater share of income to housing. This gap has made leaving the parental home a privilege accessible only to a few.
Then need for structural reform
Against this backdrop, the need for a serious debate to find real solutions is increasingly urgent. One of the most cited measures is the promotion of social rental housing, which would expand the public stock of affordable housing, as seen in other European countries, where it represents a much higher share. Another proposal is to mobilize vacant housing, through incentives or penalties, to bring some of Spain’s millions of empty homes onto the market. In addition comes a review of taxation, so that taxes like ITP and AJD do not act as an added barrier to access, and the design of urban policies that encourage construction and public-private cooperation to guarantee affordability.
Santacruz points to the need for “an urgent reform of the Urban Lease Act, coordinated with the powers of the Autonomous Communities, to bring a massive supply of homes to the rental market with full legal guarantees of property rights.” Such a measure would automatically lower prices. He also proposes the creation of a “single permit regulation to harmonize regional and national competences, promote new construction and renovation, and a pact among all stakeholders to pass a Land Act strictly defining no-build zones, which would spur development in high-demand areas where construction is allowed.”
The challenge is to achieve a model that truly guarantees the constitutional right to decent housing for present and future generations.
