T
he Spanish real estate market experienced a significant acceleration in 2024, driven by declining interest rates and strong demand. This was fueled by factors such as migration flows, job creation, and foreign investment. However, the supply of new housing failed to keep pace with demand, leading to rising house prices. The mismatch between supply and demand is expected to continue into 2025.
The Spanish economy performed well in 2024, recording a GDP growth rate of 3.2%. This was driven by population growth, which boosted economic activity, job creation, and household consumption. The real estate market reflected this buoyancy, with sales steadily increasing throughout the year. In the second half of 2024, housing demand surged by 34.3% year-on-year.
New home sales grew by 23.4% in 2024, while existing home sales increased by 6.9%. The majority of transactions involved unsubsidized housing, highlighting the limited stock of affordable homes in Spain. Foreign buyers accounted for 14.6% of total sales, with a significant increase compared to previous years.
Mortgage activity also picked up in 2024, with the number of mortgages increasing by 11.2%. The ratio of mortgages to sales rose slightly, indicating that approximately two-thirds of transactions involved mortgage financing. However, there is no evidence of an increase in investment purchases or a relaxation of credit granting standards.
The housing supply in Spain began to show signs of improvement in 2024, with new construction permits increasing by 16.7%. Construction completion certificates also rose, and cement consumption grew after two years of declines. Despite this revival, the supply remains insufficient to meet demand, leading to rising house prices.
House prices accelerated in 2024, with growth rates increasing from 4.3% year-on-year in Q1 to 7.0% in Q4. The price growth differential between new and existing homes narrowed due to stabilizing material costs. However, the affordability ratio remained relatively stable, with the median household income keeping pace with house prices.
The Spanish rental market is highly stressed, with a significant increase in demand for rental housing driven by positive migration flows. Rental prices rose by 6.0% in 2024 and have accumulated a 30.0% increase since 2019. The lack of affordable rental housing is a major concern, particularly for households who rent and live close to the poverty line.
Looking ahead to 2025-2026, we expect the boom in the housing market to continue due to factors such as lower interest rates, regaining household income, population growth, and economic expansion. However, the supply of new housing is expected to remain below new household creation, keeping house price growth steady in 2025 and potentially moderating in 2026 as supply gradually increases.
