In recent years, Spain has faced an increasingly complex housing market landscape, with prices spiking dramatically. Whether for locals or foreigners, buyers or sellers, or the state and consumers, housing has become a matter of central concern.
Generally speaking, housing prices have been rising consistently over the past few years. Monica Da Silva is an IE University student who has lived her entire life in Madrid. “I think that in general prices have increased mostly in the 2020s, after Covid,” Da Silva said.
According to a study conducted by CaixaBank, among municipalities with more than 25,000 inhabitants in Spain, 41.7% “registered a year-on-year increase of more than 10% in Q4 2024.” In the previous quarter, 27.1% registered such an increase. The study predicts that in the 4th trimester of 2025, 58% percent of these municipalities will have experienced the same increase, up 11% from the end of 2024.
The standard in Spain is that banks finance 80% of a mortgage. Therefore, to buy a house one has to save up that remaining 20%, making it a difficult feat. Housing prices, which have been rising above inflation rates, only make it more challenging.
There are multiple factors contributing to such rapidly rising prices and the converse inability to access housing faced by many citizens. First, there are simply not enough houses available.
“You can see that there is a lot of demand. People are really demanding housing, and they are looking for houses but they are not being offered anything. A main problem in Spain is that there are not enough houses,” Da Silva said.
Not to mention, even with home availability in certain areas, when considering a home purchase, location preferences do play a large role. “People want to live in the city center, and that’s impossible because all the houses there are already occupied. And, it’s actually impossible to build more houses because there’s no physical space… It’s also very hard for people to have access to a house where they want to have a house. In the outskirts of Madrid, there is a lot of space, but people don’t want to live there,” Da Silva added.
At the end of 2024, housing prices had risen in 19 out of Madrid’s 21 districts compared to the previous year. In 14 of these districts, the price increases surpassed 10%. And, three particular neighborhoods in the desirable city center – Recoletos, Castellana, and Jeronimos – surpassed the 10,000 €/m2 mark for purchase.
The problem is not in the prices alone. The issue also has to do with the fact that people have no ability to pay for housing, independently from the current extremely high prices. Salaries are not up to par with current cost of living.
For this reason, “the most affected parties are younger people, no doubt,” Da Silva said. “One of the main problems of this country is that younger adults… are still living with their parents because they don’t have the resources or money to live by themselves… I think the reason that this happens is because salaries are super bad, you know. And, even if you have a stable job, that doesn’t mean that you are going to have access to [buying] a house because sometimes half of your salary is taken by having to pay rent. It’s very hard for people to buy a house.”
A possible solution is indeed to try and counter the prices directly by building houses and expanding the supply of housing, for example. In January, Pedro Sánchez, the Prime Minister of Spain, announced the PERTE de Viviendas project. The project aims to make housing more affordable through the construction of 40,000 homes this year.
While the government may seem to be working toward a solution, it also poses an obstacle. “Speaking about the topic of building more houses, that’s already been done. And, people already know that we have to build more houses. The problem is that licenses are very hard [to get] … We need a regulation that is passed that allows for houses to be built. Because, right now what happens is that even if you want to build a building you need the permission of the Madrid ayuntamiento,” Da Silva said.
The expansion of the housing market’s supply side could also occur via private means alongside the government’s actions, but this would require the government to make such expansion processes accessible and efficient.
In order to promote the use of existing spaces, Da Silva suggests regulating the tourism industry. “One thing that could be done is regulating the amount of houses that are used for Airbnbs, or that are used for bookings, or promote staying in hotels,” Da Silva said.
As reported by La Moncloa, Sánchez plans to present a tax reform in Parliament that will enforce taxation of tourist flats in the same manner as other economic activities. This could potentially lead to lower incentives to list homes on Airbnb and promote renting them out long-term instead.
Through the aforementioned PERTE de Viviendas project, the government also plans to increase “financial aid for young people and families in vulnerable situations.” Though it remains unclear how exactly. Additionally, the government plans to implement a 100% tax for home purchases by non-EU residents as part of this project.
While these measures may help improve accessibility and increase the number of homes on the market, they do not seem to be the most effective solutions. The 100% tax on home purchases by non-EU residents, for example, may be excessively restrictive.
Ultimately, the solution should directly help those most affected by the current situation. “I think the greatest problem is that young adults don’t have access to housing and they won’t have it until something changes,” Da Silva said. “For me, the most important thing, and what really should be done, is to have higher wages.”
The reason that so many are unable to access housing is because their wages do not make homeownership feasible. While policies focused on expanding housing supply may have valuable impact, it remains important to pay attention to the central reason citizens are suffering: many do not earn enough to afford a down payment on a house, let alone secure a stable future.
“Even if you have a salary and a job, half of it goes to your house. It’s impossible to form a family. My grandmother and grandfather lived with four kids just with my grandfather’s salary, and they lived perfectly well. They all had access to education, they weren’t missing anything. It’s crazy,” Da Silva said.
It is sufficiently evident that Spain’s housing crisis cannot be solved solely through price and supply management. The issue is not just about price but affordability. A long-term solution to the complexities in Spain’s housing market requires a holistic approach, combining supply-side policies with wage reforms and other methods of increasing younger generations’ purchasing power and financial stability. Spain needs to invest in its youth so that its youth can invest in it in return. The government needs to familiarize itself with this two-way street.
Featured image provided by El Independiente.
