Spain’s housing shortage continues to drive property prices

Spain’s real estate market enters 2026 under sustained pressure, shaped by a persistent imbalance between strong demand and structurally constrained supply. While transaction volumes remain historically elevated, the underlying dynamics reveal a market increasingly defined by housing scarcity, regional divergence, and worsening affordability.

According to CaixaBank Research’s latest report, the core of the issue is a growing housing deficit that continues to distort pricing, limit access to homeownership due to affordability and supply, and shift demand patterns across the country.

Spain has accumulated a housing deficit exceeding 730,000 homes since 2021, the result of rapid household creation combined with insufficient new constructions to meet demand. Over that period, approximately 1.2 million households were created, while only about 474,000 homes were completed.

Household creation is when individuals or families establish their own homes, such as moving out, forming a couple, separating, or migrating, and it drives housing demand because each new unit requires its own property regardless of population growth.

This imbalance is not evenly distributed. Nearly half of the national deficit in housing is concentrated in just five provinces: Madrid, Barcelona, Valencia, Alicante and Murcia. These are also among the country’s most economically dynamic regions, where demand remains strongest.

Despite an increase in construction permits, supply continues to lag behind need. In 2025, permits reached around 162,200 units, while net household creation stood at roughly 226,000. The gap between permits and completed homes has widened, with only about 83,500 homes completed over the trailing 12 months to September 2025.

Where housing demand is highest in Spain

The housing deficit is both geographically concentrated and uneven in intensity. Large urban markets dominate in absolute terms, but relative shortages highlight a broader set of pressure points.

The Mediterranean corridor stands out, alongside parts of southern and southeastern Spain and the island regions, where housing shortages are particularly pronounced relative to population growth.

At the same time, some provinces show high relative shortages due to weak supply growth rather than strong demand. Areas such as Galicia, as well as provinces like Badajoz, Salamanca and Toledo, show elevated deficits driven by limited additions to housing stock.

New homes needed to close the deficit in five years

A key issue is that new housing is not being built where it is most needed. In several high-deficit provinces, including Tarragona, Castellón, Murcia and Almería, new construction permits cover less than 10% of the accumulated deficit.

Best value areas to buy property in Spain in 2026

Since 2015, price growth has been strongest in large cities, metropolitan areas and tourist municipalities, where demand is most dynamic and supply remains constrained. In contrast, inland provinces and smaller municipalities have experienced more moderate increases, and in some cases price declines in recent years.

This divergence suggests that relative value opportunities are more likely to be found in secondary cities and inland regions where price growth has lagged and affordability pressures are less acute. However, these areas often come with weaker demand fundamentals and slower economic growth.

How much mortgage can you afford? Analyze monthly payments and interest with a mortgage calculator to find your ideal budget.

The CaixaBank Research report also highlights a process of spatial diffusion. Price increases tend to begin in core urban markets and gradually spread outward to surrounding areas. As affordability constraints intensify in city centers, demand shifts toward metropolitan peripheries, suggesting that some suburban areas may offer near-term value as this trend continues.

Madrid and Barcelona housing remain under pressure

Madrid and Barcelona remain at the center of Spain’s housing imbalance and are expected to continue seeing upward pressure on prices. These markets have led cumulative price growth since 2015, with increases significantly above the national average. The underlying drivers include strong demand, limited land availability and slow supply response.

Prices in these cities have risen faster than in surrounding metropolitan areas, although recent data suggests that growth is beginning to spread outward as affordability constraints push buyers toward the periphery. Despite some moderation, the structural shortage of housing in these cities remains unresolved, meaning pressure on prices is likely to persist.

Foreign buyers in Spain decline as market shifts

The share of non-resident foreign buyers in Spain’s housing market has declined, signaling a shift in demand composition. Their share of total transactions fell from 7.9% in 2024 to 6.8% in 2025, subtracting more than one percentage point from overall sales growth.

At the same time, purchases made without a mortgage declined from 35% in 2024 to around 30% in 2025, suggesting fewer high-liquidity buyers in the market, which had been a key driver of demand.

It may feel like there are more Americans in Spain as US citizens ramp up property purchases—rising 3% last year—driven by political concerns. While Americans largely seek high-end homes, British demand has fallen 16% over six years. Still, U. citizens remain the largest group of foreign investors in the Spanish real estate market.

Foreign buyers accounted for 19% of Spanish home purchases last year, with U. citizens representing 2% of the total, according to data from Spain's General Council of the Notariat.

Rental prices in Spain and affordability challenges

Affordability remains one of the defining challenges of Spain’s housing market, particularly in the rental sector. The median rental cost burden stands at around 30% of household income, close to the threshold of financial strain. In around 30% of cases, this burden exceeds 40%, widely considered excessive. In large cities, median rental burdens rise to around 35%, and reach between 35% and 40% for new contracts.

How much mortgage can you afford? Simulate your position with the mortgage calculator.

New rental agreements are seeing double-digit increases, exceeding 10% year on year in late 2025. This contrasts with existing contracts, where rent increases are typically capped and aligned with inflation.

This dynamic is increasingly limiting households’ ability to save for a deposit, delaying access to homeownership and reinforcing demand pressures in the rental market.

Spain house price forecast for 2026 and 2027

House prices in Spain are expected to continue rising through 2026 and 2027, although at a slower pace than in 2025, according to CaixaBank Research. Transaction prices are projected to grow by around 10.1% in 2026 and 5.5% in 2027, down from 12.7% in 2025.

This deceleration reflects some stabilization in demand and gradual improvements in supply, but the fundamental imbalance remains.

Will housing become more affordable in Spain?

The outlook for resolving Spain’s housing shortage remains slow. Under a baseline scenario, the housing deficit is expected to peak around 2029 at approximately 922,000 homes and would not be fully corrected until 2037.

To eliminate the current deficit within five years, Spain would need to build roughly 330,000 homes annually, more than triple current completion levels. While increased supply would help moderate price growth and improve affordability, structural constraints in construction and land availability mean progress is likely to be gradual.

Potential homebuyers should be cautious of pressure tactics used to force a sale tied to specific financing partners; consult a lawyer to review all paperwork before signing.

Outlook for Spain real estate market

Spain’s housing market remains defined by a structural shortage, strong demand and increasing regional divergence.

Major cities such as Madrid and Barcelona are expected to continue experiencing price pressure, while relative value may emerge in secondary markets and metropolitan peripheries. At the same time, rising rental burdens and shifting buyer profiles are reshaping access to homeownership.

Without a sustained increase in housing supply, the imbalance between supply and demand is likely to persist, keeping prices elevated and affordability under pressure in the years ahead.