Apartment purchases are skyrocketing, but prices are driving away young people and low-income earners.
The real estate market is once again experiencing a boom. 2024 was a year of record highs. 715,429 homes were sold, 12.4% more than in 2023. Second-hand homes that come on the market are listed for only a few days, and the same is true for new homes being built, which are even sold off-plan. The housing market is experiencing an exceptional situation and is approaching bubble transaction levels, when in 2005 it reached nearly one million transactions.
This good real estate market has also been accompanied by an exceptional increase in prices. The average square meter of a freehold home is now approaching €2,000, according to the Ministry of Housing's official observatory. Property registrars reported this week that the price curve will continue to rise in the first quarter of 2025. Increases are expected in 47 of the 52 provinces. The ranking of the most expensive cities is led by San Sebastián (€5,824/m² on average), Madrid (€4,716/m²), Barcelona (€4,538/m²), Palma (€3,735/m²), and Bilbao (€3,129/m²).
Home sales are increasing, and even so, without any warning signs in the mortgage market. The Bank of Spain highlighted this week in its annual report that 86.5% of loans are for the purchase of a primary residence. Furthermore, 38% of purchases are made in cash, according to the INE (National Institute of Statistics).
Spain is also an attractive country for investment, and foreigners play a significant role in the market. According to the Registrars, the foreign share is expected to reach 14% by March 2025. However, in some areas the alarm is more pronounced. During the first quarter, foreigners purchased 30% of the homes sold in the Balearic Islands, 28% in the Valencian Community, and 25% in the Canary Islands. Foreigners are distorting the market in tourist areas, warns the Bank of Spain.
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In an attempt to discourage these purchases, the PSOE has proposed a new tax on non-EU investors for up to 100% of the transaction. In other words, the tax would double the value of the acquisition. The tax would particularly affect Britons, Moroccans, Chinese, and Ukrainians.
The sector expects transactions and prices to continue growing this year.The main problem with housing sales is the limited public housing stock capable of providing decent shelter for families who are excluded from the free housing system. Currently, subsidized housing accounts for 3.4%, far from the EU average of 8%. During 2024, 9,567 properties were classified as subsidized, the majority (5,884) for sale. These are still small numbers.
Ignasi Martí Lazuna, a researcher in Esade's Department of Society, Politics, and Sustainability and a professor at the University of the Basque Country (URL), warned this week at the Construmat fair that access to housing has become one of the major factors of inequality. "There is more tension in society," he lamented. The professor explained that housing is the main focus for the vulnerable, with the rising phenomenon of room rentals, known as "vertical shantytowns."
At the fair, Gad3's president, Narciso Michavila, highlighted the demand shock the market is experiencing. "Demographics are the main factor explaining this increase in demand for housing, with a large influx of working-age migrant population in large cities in need of a home," he noted. The pace of construction, he continued, is not keeping up with the rapid increase in population. "A large amount of housing is being built in Madrid, and even then they won't be able to meet the needs of the entire incoming population," he concluded. Competition for apartments is increasingly fierce, and this excludes the less well-off. The Housing Barometer of the General Council of Technical Architecture and Gad3 puts figures on this problem: finding an apartment is increasingly difficult for young people, and 30% of those under 30 need parental help to buy.
For 2025, the real estate sector and economists predict that sales will continue to grow. The year began with the highest number of transactions since 2007, 183,140, representing a 20.7% increase compared to 2024. Prices also continue to rise, with an average increase of 40% over the last decade, according to official data from the Ministry of Housing.
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