A new BBVA Research report reveals that Spain’s residential real estate market faces persistent hardships from a chronic lack of affordable housing—even as demand remains strong. The ‘Real Estate Observatory’ for October 2025, released Sunday, predicts that while new home sales will decelerate this year and next, average prices are set to continue climbing.
Home Sales Slow as Prices Rise
According to BBVA analysts, the current shortage of affordable housing is expected to limit growth in home sales by 0.5% in 2025 and by another 0.3% in 2026. At the same time, property prices are set to increase by around 10% in 2025 and 7% in 2026, as supply falls well short of demand.
The authors note that, “The rise in prices will continue to show the imbalance between supply and demand.” The price growth has already been substantial, with an almost 10% year-on-year jump during the first six months of 2025. However, in ‘real’ terms, average home prices are still about 30% below their 2007 pre-crisis peak.
Construction on the Rise—But Not Fast Enough
BBVA anticipates new home construction to pick up pace by 10% in 2025 and 12% in 2026. Still, this expected increase may not be enough to close the gap between supply and growing demand, especially in urban areas where housing is most needed.
Rental Market Strains Intensify
The shortage of available homes is also putting pressure on the rental market. According to the BBVA report, rents have surged by 34% between 2019 and Q2 of 2025, outpacing even the 22% rise in house sale prices over the same period.
What’s Holding Back Housing Supply?
BBVA economists point to a complex mix of long-standing and recent obstacles:
- Slow land development: Complicated land-use processes mean that it takes an excessively long time from land acquisition to housing delivery.
- Regulatory uncertainty: Ongoing debates over rent controls, restrictions on large landlords, and recent failed attempts to reform Spain’s Land Law have increased risks for investors.
- Labor shortages: A lack of skilled workers—such as bricklayers, plumbers, and electricians—slows down construction and raises costs.
These factors feed into one another: high costs, low returns, and uncertain regulations together discourage new private investment, particularly among Spain’s many small and medium-sized construction firms.
Short-Term Prospects and Long-Term Solutions
Looking ahead, the BBVA study makes several recommendations to improve the situation:
- Speed up the process for transforming land into buildable lots.
- Simplify and clarify regulations to make the market more attractive for investment.
- Reduce business costs and boost productivity in the construction sector.
- Address the skilled labor shortage through better job training programs.
Economists stress that resolving Spain’s housing crisis will require coordinated action across all levels of government, highlighting that increased resources for the upcoming Housing Plan (2026–2030) are a positive step—but more collaboration is needed to achieve real results.
Bottom Line
Spain’s affordable housing shortage continues to widen the gap between supply and demand, raising both home purchase and rental prices to record levels. While construction activity is expected to increase, overcoming obstacles like slow land development, regulatory risk, and labor shortages will be essential to ensure long-term market stability and improved housing access for all Spaniards.
