The Real Estate Market in 2025: Strong Demand, Insufficient Supply, and Rising Prices
The year 2025 has confirmed something we had already been anticipating in our quarterly reports: the Spanish real estate market has not only withstood the complex macroeconomic environment of recent years, but has also consolidated a phase of sustained expansion, supported by robust demand and structurally limited supply.
According to our latest report, the year was characterized by the convergence of several factors—macroeconomic, financial, and demographic—that reinforced pressure on prices and kept activity at high levels.
A More Stable Macro Environment, but with a Structural Deficit
On the macroeconomic front, 2025 was marked by moderating inflation, which ended the year at 2.9% year-on-year in December, and by a less restrictive monetary policy than in previous years. The European Central Bank’s main refinancing rate stood at 2.15%, supporting a more predictable financial environment.
This context has made mortgage financing cheaper and more stable compared to the peaks of 2023–2024, reactivating purchase decisions that had previously been put on hold.
But beyond the economic cycle, the real differentiating factor remains structural: the accumulated housing deficit. The Bank of Spain estimates that the gap could be around 700,000 homes through 2025, as a result of a construction pace that is clearly insufficient compared to population growth and the formation of new households.
This imbalance explains why demand remains strong even in a context of rising prices.
Prices: Widespread Increases and Record Highs
Price performance was clearly upward throughout the year. According to data included in the report, the average value of completed housing (new and existing) increased by 13.1% year-on-year in the fourth quarter of 2025.
Meanwhile, the Property Registry Statistics place the average price at €2,354/m², with growth of 9.5% for the full year. The differences are due to different methodologies (appraisals vs. actual transaction prices), but both sources agree on the diagnosis: 2025 was a year of strong appreciation.
In new-build housing, the year-on-year increase stood at 8.9%, reaching nominal record highs in many provincial capitals. Rising construction costs, the scarcity of development-ready land, and the accumulated supply deficit continue to put pressure on the developer segment.
From a territorial perspective, tensions were particularly intense in major economic hubs and tourist areas. The Community of Madrid (+19.6%), the Valencian Community (+15.9%), Cantabria (+15.8%), and the Balearic Islands were among the regions with the largest increases.
In cities such as Madrid, with prices close to €4,900/m², demand pressure remains particularly high.
Home Sales at Their Highest Since 2007
If prices were a key story, activity was no less significant.
In 2025, 714,237 home sales were recorded, 11.5% more than the previous year and the highest figure since 2007. The market has thus returned to levels of dynamism not seen since the period before the financial crisis.
Existing homes accounted for more than 78% of transactions (558,327 deals, +10.3%), while new housing grew especially strongly (+16.1%), reaching its highest volume since 2011.
At the same time, the mortgage market also showed a clear recovery: 501,073 mortgages were issued (+17.8%), with an average amount of €163,738 and an average interest rate of 2.87%. The predominance of fixed-rate mortgages (63.4%) reinforces the financial prudence of the current cycle.
This is compounded by the role of foreign buyers, who accounted for 13.8% of total home sales in 2025, with particular relevance in the Balearic Islands, the Valencian Community, the Canary Islands, and Murcia. This international component acts as a structural support in certain areas.
Rental Market: Persistent Pressure
The rental market also ended 2025 with significant increases.
The average price stood at around €14.21/m² per month, with year-on-year increases ranging from 6.9% to 8.5%, according to different sources included in the report.
Pressure is concentrated in Catalonia, the Balearic Islands, and Madrid, where supply remains clearly insufficient. The adjustment continues to occur more through prices than through any meaningful increase in available stock.
Bubble or a Different Cycle?
Against this backdrop, the debate over a possible bubble has returned to the forefront. However, structural indicators show substantial differences compared with the cycle prior to 2008: household indebtedness is more contained, credit issuance is more prudent, and loan-to-value ratios remain at moderate levels.
Moreover, although in nominal terms some areas have already exceeded the peaks of 2007, in real terms—adjusted for accumulated inflation—prices are still below those levels.
Outlook for 2026: Normalization Without a Change in Cycle
Looking ahead to 2026, the most likely scenario is a normalization in the pace of growth, but not an abrupt change in cycle. Forecasts point to more moderate increases, supported by still-active demand and supply that continues to fall short of fully meeting market needs.
As long as the structural housing deficit persists and the financial environment remains relatively stable, the Spanish real estate market will continue to show strength, although in a more selective way and with increasingly differentiated regional dynamics.
For investors, the message is clear: this is not a homogeneous market, but rather an environment that requires analysis, judgment, and careful selection of opportunities. In that context, understanding the dynamics of supply, demand, and financing will be more decisive than ever.
These are just some of the conclusions included in Urbanitae’s Report for the fourth quarter of 2025, which you can consult in full and in detail at the following link:
