Is 2025 a good time to buy property in Spain?

Spain’s real estate market remains a strong contender for international buyers seeking financial potential, lifestyle advantages, and long-term stability. In 2025, the decision to invest requires a closer look at market trends, price evolution, economic conditions, and opportunities for return on investment. Let’s break down why this year could be the right time to buy.

How prices have evolved and where they are heading

Over the past few years, Spain’s property market has experienced steady price increases. According to the Spanish National Statistics Institute (INE), national house prices rose by 8.1% in 2024, with newly built homes leading the way (+9.8%). This continues a trend of consistent growth seen since 2021, reflecting the market's resilience and appeal to buyers.

Historical price trends (2019-2024)

Below is an overview of Spain’s average house price growth over the last five years:

Price forecast for 2025

Economists predict moderated price growth in 2025, ranging between 2.8% and 6%. The moderation reflects a natural stabilization as the market adjusts from the high demand driven by the post-pandemic recovery. Regions with strong demand, such as coastal areas and key cities like Madrid and Barcelona, are expected to continue leading the way, while inland and northern regions offer more affordable entry points with growth potential.

Multiple financial institutions, including BBVA Research and CaixaBank, expect slower but steady price growth in 2025. Factors such as improved affordability, strong demand in emerging markets, and lower interest rates will drive further stability. Buyers seeking high appreciation potential may find inland and northern regions particularly attractive due to their affordability and infrastructure improvements. Understanding these trends ensures buyers can make informed decisions in this evolving market.

How economic factors impact property affordability

Spain’s economy is forecast to grow steadily in 2025, with GDP expected to rise from €2.516 trillion in 2024 to €2.614 trillion. This stability fosters confidence among property investors and lifestyle buyers alike. Key economic trends influencing the market include interest rates, inflation, and wage growth.

• Interest rates: The European Central Bank's monetary policy and adjustments to the Euribor rate are expected to influence Spain’s mortgage market in 2025. Projections from financial institutions such as Bankinter and CaixaBank research suggest the 12-month Euribor could decline from approximately 2.65% at the end of 2024 to 2.1%-2.5% by late 2025, depending on economic conditions. This downward trend would likely enhance borrowing affordability, making mortgages more accessible to local buyers and stimulating demand in both urban and emerging markets.
• Inflation and wages: While inflation has been a concern, wage growth in some sectors has preserved the purchasing power of many households. This balance has sustained property affordability in cities like Madrid and Valencia, where demand remains strong. For example, Madrid experienced a 4.2% wage growth in 2024 (BBVA Research), supporting property demand.
• Foreign exchange: The strong U.S. dollar continues to attract American buyers, while British interest remains stable despite Brexit-related challenges.

Why 2025 offers favourable conditions for buyers

A combination of economic stability, declining interest rates, and strong rental demand creates a unique window of opportunity for buyers in 2025, whether they are seeking personal use properties or lucrative investments.

Declining interest rates make financing easier

The European Central Bank (ECB) is projected to reduce interest rates in response to stabilising inflation. Forecasts suggest the 12-month Euribor rate, which influences mortgage rates, will decline from approximately 2.65% at the end of 2024 to around 2.1%-2.5% by late 2025. This makes mortgages more affordable and encourages borrowing. For buyers financing their purchase, this offers a golden opportunity to secure favourable mortgage terms.

Attractive rental yields and return of investment potential

Investors can expect competitive rental returns, particularly in major cities and tourist-driven coastal areas. Cities like Madrid and Barcelona offer long-term rental yields of around 5.5%, while tourist-heavy regions like Costa del Sol deliver even higher seasonal returns, with yields exceeding 8% for luxury rentals.

Affordable emerging markets

Northern Spain and inland areas may offer excellent opportunities for buyers willing to explore less saturated areas. These regions provide lower entry points and potential for long-term appreciation as infrastructure and tourism grow.

Potential risks in 2025

While the outlook is positive, there are risks that could impact the Spanish market:

1. Geopolitical factors: unforeseen global events could disrupt buyer sentiment and investment flows.
2. Economic shocks: a slowdown in the Eurozone could affect Spain's broader economy, influencing property demand.
3. Regulatory uncertainty: changes to housing or tax policies could alter the investment landscape.

Market trends shaping investment opportunities

Spain’s property market in 2025 is shaped by a dynamic interplay of supply, demand, and shifting buyer preferences. Key trends include a growing focus on sustainable housing, challenges in meeting supply in high-demand areas, and the emergence of new opportunities in less saturated regions. Understanding these trends is crucial for identifying the most promising investment opportunities and navigating the complexities of Spain’s real estate landscape.

Housing supply constraints

Housing supply remains a challenge in Spain, particularly in high-demand areas. Developers face hurdles such as bureaucratic delays, high construction costs, and limited land availability. This has led to fierce competition among buyers, especially in metropolitan regions and tourist hotspots.

Sustainable homes

Developers are focusing increasingly on new-build properties, particularly in urban and luxury segments, with a growing emphasis on energy-efficient housing. Features like solar panels, smart systems, and eco-friendly materials are in high demand, reflecting buyer preferences for sustainability. These homes not only align with eco-conscious trends but also often command premium prices, due to their appeal and long-term benefits, such as reduced energy costs and proximity to green spaces.

Remote work opportunities

The lingering impact of the pandemic continues to reshape buyer behaviour. Remote work trends are driving demand for properties in smaller cities, rural areas, and regions offering a mix of affordability and connectivity. Popular destinations include Galicia, Asturias, and the interior of Spain.

How foreign buyers are shaping the market

Foreign investment continues to play a crucial role in Spain’s property sector. International buyers are drawn to Spain for its combination of climate, affordability compared to other European countries, and strong rental markets. While updated data for 2024 is expected soon, in 2023, international buyers accounted for over 21% of property transactions (General Council of Notaries).

Key trends:

• Coastal regions like the Costa del Sol and Costa Blanca remain top destinations for lifestyle buyers and investors.
• Northern European retirees and American buyers lead demand, driven by lifestyle preferences, favourable currency exchange, and Spain’s high quality of life.
• Emerging regions like Galicia, Asturias, and Extremadura are attracting buyers looking for affordable alternatives with growth potential.

Regional spotlights: Where to invest in 2025

Each region of Spain offers unique opportunities based on its characteristics. Here’s an overview of the most prominent markets:

Madrid

Madrid remains one of Spain’s most sought-after markets, driven by its robust economy and status as the nation's capital. The city appeals to professionals and investors alike with its strong rental demand and long-term stability.

• Average price: A three-bedroom apartment in central Madrid now averages around €483,150, based on an average price of €4,831.5 per square meter for residential properties. Rental yields in the city average 5.5%, with some properties achieving even higher returns in prime areas.
• Rental market insight: Monthly rents for similar properties can exceed €3,000, making Madrid a lucrative option for buy-to-let investors.

Barcelona

Barcelona continues to attract buyers with its mix of culture, strong economy, and vibrant tourism sector. Its appeal is bolstered by international interest, though stricter regulations on holiday rentals have made the city less favourable for short-term investors.

• Average prices: Luxury properties in prestigious neighbourhoods like Eixample command prices of around €5,500 per square meter. A high-end three-bedroom apartment in this area could cost over €550,000, depending on location and amenities.
• Rental market insight: Despite the restrictions on holiday rentals, long-term rental demand remains robust, particularly among professionals and expatriates.

Costa del Sol

The Costa del Sol continues to be a magnet for high-end international buyers, particularly in Malaga and Marbella. Known for its Mediterranean climate and luxurious lifestyle, this region offers excellent investment potential in the luxury segment.

• Luxury villas: Villas in Marbella’s prestigious Golden Mile range from €2 million to €10 million, with peak-season rental returns often exceeding 8% for well-maintained properties. Properties near golf courses and beaches are particularly popular.
• Rental market insight: The region’s rental market thrives on its year-round tourism appeal, with high demand for both long-term and vacation rentals.

Inland regions

Spain’s inland markets, such as Salamanca, Zaragoza, and Toledo, are gaining popularity among retirees and remote workers. These areas offer affordability, charm, and lifestyle benefits, making them ideal for buyers seeking quieter environments with growth potential.

• Average prices: Restored farmhouses in Toledo and surrounding areas can be acquired for under €150,000, providing excellent value for lifestyle buyers.
• Rental market insight: While rental yields may be modest compared to major cities, these properties often attract niche markets such as expatriates or digital nomads.

Practical tips for buying property in Spain in 2025

To navigate Spain’s property market effectively, consider the following steps:

1. Understand local markets: Research the regulations, market trends, and cultural nuances of your chosen area.
2. Budget for additional costs: Plan for 10-15% in taxes and fees, and factor in potential renovations.
3. Secure favourable mortgages: Leverage declining interest rates to lock in competitive mortgage terms.
4. Engage professionals: Work with real estate agents, lawyers, and financial advisors to ensure compliance with Spanish law.
5. Define your goals: Whether buying for personal use, rental income, or investment, clarify your objectives to shape your strategy.
6. Explore tax incentives: Look into regional incentives for property purchases, such as Andalusia’s reduced transfer tax or rebates for eco-friendly renovations.

What to know about regulations and taxes in 2025

Government policies play a pivotal role in shaping Spain’s property market. In 2025, several regulatory measures and tax structures affect buyers and investors:

• Cities like Barcelona and Palma de Mallorca have tightened regulations on holiday rentals, capping the number of properties that can operate as short-term accommodations. This impacts potential yields for investors in these areas.
• In 2025, Spain maintains its property tax structure, with buyers expected to pay between 10-15% of the purchase price in taxes, notary fees, and other transaction costs. However, regional differences in taxation and incentives should not be overlooked. For example, Andalusia recently reduced its transfer tax, making it more attractive to buyers compared to other regions.

Making an informed decision about buying property in Spain in 2025

Spain’s property market in 2025 offers a compelling mix of opportunities and favourable conditions. Declining interest rates, attractive rental yields, and regional tax incentives make this an excellent time for both lifestyle buyers and investors.

However, market complexities—such as regional variations and supply constraints—emphasise the importance of thorough research and strategic planning. By leveraging professional advice and aligning your goals, you can successfully navigate Spain’s evolving real estate landscape.

For those seeking financial returns, a better quality of life, or both, 2025 holds significant potential to secure property in Spain’s thriving market. Whether you are a first-time buyer or a seasoned investor, the Spanish real estate market remains a stable and rewarding choice for the year ahead.