The Spanish real estate market is experiencing a dynamic shift in 2025, with affordable housing taking center stage as the leading target for investors. According to the latest data from consultancy Savills, a remarkable 52% of real estate investment in Spain—about 985 million euros out of a total 1,902 million euros in the “living” segment—has been channeled into affordable housing. This surge, fueled largely by innovative public-private collaboration projects, is reshaping the investment landscape and sparking renewed interest among both domestic and international players.
Madrid Dominates Spain Real Estate Investment
Madrid has emerged as the undisputed hub of Spanish real estate investment, attracting over 70% of the national investment volume. Investors are showing a pronounced preference for assets located in large, economically vibrant cities, though there’s a noticeable uptick in interest in properties in metropolitan peripheries as urban supply tightens.
Affordable housing projects, critical to both economic growth and social stability, are drawing private capital as they offer stable, sustainable, and socially impactful returns. As Savills notes, “the growing weight of affordable housing in residential investment confirms that private funds are identifying strategic opportunities in this type of asset, where stability and social impact are aligned with long-term sustainable returns.”
Multifamily Assets and Public-Private Partnerships Gain Traction
The Spanish multifamily market—particularly built and stabilized assets—has seen a 51% year-on-year increase in investment, accounting for 73% of the total residential investment volume. This focus represents a substantial shift from the prior year, when flexible living assets, such as coliving spaces, held the lion’s share.
Notably, the bulk of affordable housing investments are being advanced through public-private partnership projects, heralding a new era of collaboration designed to meet soaring residential demand and alleviate Spain’s structural housing deficit.
Housing Transaction Volumes Surge to Pre-Crisis Levels
Reflecting Spain’s diverse and robust housing demand, Savills forecasts that housing transactions could reach 775,000 in 2025—a volume not seen since before the global financial crisis. The main buying groups include newly formed households, buyers seeking replacement homes, second-home purchasers (both national and international), investors repositioning assets, individuals allocating family savings into rental homes, and foreign buyers seeking first residences.
Rising House Prices and Construction Activity
House prices continue to climb across Spain, registering a 6.2% increase since the start of the year and a 12.7% year-on-year surge, surpassing the national average of 2,090 euros per square meter. Madrid, Malaga, and Valencia lead the growth, with price hikes exceeding 7% in the first half of the year. Meanwhile, Barcelona and Madrid are feeling the pinch, as the ratio of effort required to purchase a home, at 33%, is beginning to strain even in these urban strongholds.
On the supply side, new building permits surged by 10.8% year-on-year in the second quarter of 2025, exceeding 84,000 approvals—augmented by a 14% growth seen between 2023 and 2024. Despite these positive signals, production is failing to keep pace with demand.
Housing Deficit Threatens Market Stability
Spain is grappling with a structural housing shortfall, estimated at 200,000 to 250,000 units per year. If the pace doesn’t pick up, this deficit could surpass one million within five years, compounding the current tally of 600,000 missing homes reported by the Bank of Spain. The persistent supply-demand gap is fueling further price increases for both buyers and renters.
Rental prices have jumped 9.5% on average so far this year and soared by more than 11% year-on-year. The rental market’s supply has plummeted by 57% over the last five years—74% in Barcelona and 66% in Madrid—posing a major challenge to housing affordability, especially for younger generations.
Outlook: Continued Growth, Lingering Pressure on Prices
Looking ahead, Savills predicts that Spain’s residential real estate market will maintain its robust performance through 2025 and 2026, buoyed by favorable interest rates and sustained demand. However, ongoing shortages in housing supply are expected to exert further upward pressure on property and rental prices, exacerbating accessibility issues in Spain’s most competitive markets.
Key Takeaways for Spain Real Estate Investment in 2025
- Affordable housing now commands 52% of residential investment, mainly via public-private partnerships.
- Madrid is the epicenter, capturing over 70% of investments.
- Multifamily assets see a 51% year-on-year jump in investment, accounting for nearly three-quarters of the total volume.
- Housing transaction volumes could reach 775,000 this year—the highest since before the financial crisis.
- Persistent housing deficits risk driving up prices and squeezing supply, especially for rentals.
Whether you’re an investor, a prospective homebuyer, or a policy stakeholder, Spain’s focus on affordable housing and strong urban demand signal both opportunities and challenges ahead for the Spain real estate market.
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Stay tuned for the latest insights and updates on Spain’s real estate investment landscape.
