Spain's Property Market: End of the Boom or Just a Pause?

"Popping a bubble is painful. It's like being at a party and suddenly a guy walks in, turns off the music, and says: 'It's over!'" This definition comes from Miguel Sebastián, the former Minister of Industry and Tourism under José Luis Rodríguez Zapatero, who has now fallen from grace. Sebastián was referring to Spain's situation before 2008 and how some voices that saw the abyss from afar did not dare to step forward and warn before everything blew up. Almost two decades have passed since that crisis. No one could have imagined then that housing would be sold again at the frenzied pace it has been in recent years or that its prices would approach the record levels of then again, but it has happened, and some have feared that the party of then would be repeated now. This has not been the case, and we are not at that stage. According to economists and experts, there is no real estate bubble in Spain, and signs are beginning to appear that the song is changing its rhythm and that the last brick boom is coming to an end. Without alarmism.

Anyone subscribed to alerts from major housing portals can see this, as it is increasingly common to receive notifications with price drops on houses for sale. It is harder to sell, operations take longer to close, and organizations like Asprima, the Association of Real Estate Developers of Madrid, warn of a drop in completion certificates in the region. But there are also other statistical indicators that already point in that direction: sales, for example, accumulated a 2.6% decrease in the first quarter of the year compared to the previous year, according to data published this week by the National Statistics Institute. As for rentals, rents fell by 1.2% in April compared to the previous month, and although they rose by 5.2% year-on-year, this is the lowest increase in the last twelve months, according to the real estate portal Fotocasa. Are we, then, at the beginning of the end of the last real estate boom? Can we talk about a change of cycle?

"Rather than a change of cycle, we are entering a phase of moderation or deceleration in the traditional residential segment, where access to financing and the loss of purchasing power are marking a certain social ceiling in some areas," points out José Antonio Muro, Director General and Vice President of Grupo Tecnitasa.

"We come from an absolutely exceptional period in which housing practically flew off the shelves. Phenomena like express purchases or even purchases without visiting the house became generalized. Properties came onto the market and were sold in less than a week with strong competition among buyers. Now the cycle is changing, and we will emerge from that real estate boom that lasted for five years," argues María Matos, Director of Studies at Fotocasa.

Ferran Font, her counterpart at Pisos.com, describes this new phase as a "change of speed" after a 2025 that was a record in terms of housing transactions. He recalls that "it had been 20 years since so much was sold," which is why the price drops now catch our attention, but in his opinion, they are within the expected in the current context.

This context is marked by a lack of supply, a demand whose payment capacity is reaching its limit, banks that are beginning to withdraw from the mortgage war, and rising interest rates. Does this mean that housing prices will fall? Spoiler: only in some areas.

The sector argues that "buying now will be cheaper than buying next year," but they are also clear that the increase in property prices will be modulated. "All the factors that drive demand and sustain prices are about to lose strength: migratory flows will decrease, leading to a gradual cooling of the labor market, while interest rates are rising again. Affordability is being compromised, especially in the most expensive areas where most of the demand is concentrated, which has led to a drop in sales at the beginning of the year. We believe this heralds a smaller increase in prices from now on," reflects Ángel Talavera, Chief European Economist for Oxford Economics, in the recently published analysis 'Housing market gets hotter, but could be turning a corner'.

This is also confirmed by Idealista. The real estate portal detects "a pause in purchases that is causing product to accumulate progressively on the supply side. Although we are still at historically low levels, prices are beginning to react; they are still rising, but not at last year's pace," assures Francisco Iñareta, spokesperson for the company.

Idealista has also been observing that the percentage of sellers willing to lower prices is growing, a reality that is beginning to be felt in real estate agencies. "In advertised prices, both for sales and rentals, price adjustments are clear," says José María Alfaro, president of FAI (Federation of Real Estate Associations). Although what strikes him most is that these adjustments are already starting to affect rental rooms: "For me, this is the most relevant signal and a clear indicator that demand is not meeting the price levels requested. Solvent demand is in crisis," he warns.

And this is, perhaps, the main consequence of the last great brick fever in Spain.

The effects of the 'boom'

On the positive side, Beatriz Toribio, executive director of ULI (Urban Land Institute), highlights that as a result of the recent boom in Spain, the rental market has been developed and professionalized, the importance of making affordable housing for rent has been highlighted, and the need for public-private collaboration and legal certainty has been seen.

On the negative side, the fervor for buying and selling houses in our country has generated an accessibility crisis to housing that not only affects young people and vulnerable families [young people, according to the Youth Council of Spain, now need almost 99% of their salary to live alone], but has also taken a toll on a large part of the middle class. There is a growing number of households with medium incomes that in many parts of the country cannot afford to buy a property or pay a monthly rent because their income is not sufficient. "The problem of housing access has clearly worsened. For the middle or lower-middle class and for people with fewer resources, it is much more complicated," acknowledges Toribio.

The Housing Law, which the government approved in 2023 and which is now three years old, was born with the aim of addressing this problem, but its effects in this regard are, until now, questionable. "The regulation attempted to solve a problem of scarcity by acting mainly on prices and market intervention, but without sufficiently addressing the increase in supply. When measures are introduced that generate uncertainty, legal insecurity, or reduce confidence, many owners react by withdrawing homes from the market, dedicating them to other uses, or simply deciding not to rent. And when supply is reduced in an already strained market, those who suffer most are precisely households with less economic capacity: there are fewer homes available, more competition among tenants, and greater access barriers," acknowledges Helena Beunza, president of the association of rental housing owners ASVAL and general secretary of Housing at the time when José Luis Ábalos was Minister of Transport.

"The law has had a perverse effect because it has benefited those who already had more means to pay in rentals. There has been an elitization of renting," point out other sources from the real estate sector consulted.

What now?

If things do not change much and very soon, everything indicates that the new stage in real estate will continue in this line. The market takes for granted that pressure will be maintained due to the lack of supply, the advance of luxury housing, and the push for rentals due to difficulties in buying.

"Market behavior in the coming months will be largely conditioned by the evolution of interest rates and the Euribor. The international environment also introduces a new focus of uncertainty. Geopolitical tensions could lead to an inflationary rebound with a direct impact on the market. An increase in construction costs would hinder the generation of new supply and, in parallel, a possible tightening of monetary policy by the ECB could make financing more expensive again, affecting demand that is more dependent on credit," points out María Matos, from Fotocasa.

Bankinter forecasts increases of 7% for this year and 4% for the next, while BBVA Research predicts that insufficient growth in new housing will push prices up, with an increase of 10.2% in 2026 and 6.8% for 2027.

Tecnitasa also distinguishes between new construction and second-hand properties, and adds that price variations will depend on the areas. "In cities and markets with high demand such as Madrid, Valencia, Málaga, or certain prime and tourist areas, prices will likely continue to rise due to a structural issue of supply and demand. In contrast, in less demanded markets, some stabilization could occur."

With the 2008 scenario ruled out and the possibility of widespread bargains like then, the question for the average buyer seems inevitable: Is it time to buy or sell now, or is it better to wait to see how the market evolves? "There is no single answer because it depends heavily on the profile of the buyer or seller, as well as their needs and the type of asset or location. In areas with high demand and limited supply, waiting does not necessarily mean finding better prices in the future. In other more stable or secondary markets, there may be more room for negotiation," says José Antonio Muro.