The Spanish real estate market accelerated in 2024, especially in the second half of the year, largely thanks to the fall in interest rates. This was added to a series of factors that are keeping housing demand very dynamic, including significant migration flows, rapid job creation and strong foreign demand. On the other hand, the supply of new housing is beginning to awaken, but it remains insufficient to address the high demand. This mismatch between strong demand and scarce supply is driving up house prices – a trend that we expect to continue in 2025.

Despite the worsening economic situation there is a marked upward trend in the real estate sector with very strong demand and a notable rise in prices. For its part, the supply of new housing is being affected by the war in Ukraine as this has pushed up construction costs even further and aggravated the material supply problems due to bottlenecks in global value chains. Consequently, the misalignment between the demand and supply of housing has intensified, with the result that house prices are likely to continue rising. However, there are several counteracting factors that should help to curb the growth in demand and prices over the medium term, including the impact of inflation on real household income and the ECB’s interest rate hikes.

The slowdown in exports has been one of the main sources of weakness in the Spanish economy in recent quarters. Manufacturing is particularly dependent on sales abroad and has been the epicentre of the deterioration in exports of goods.

The combination of rapid population growth and the gradual decline in interest rates, coupled with the lack of supply, is driving up home prices, particularly in the new housing market and in the most buoyant regions, as well as in those that are most popular with tourists.