Population and home prices in Spain: a close relationship

Population growth has been one of the main factors that has driven the demand for housing in Spain in recent quarters and has played a fundamental role in sustaining home prices in a context of tightening financing conditions. In this article, we analyse the relationship between population growth and the evolution of home prices in the last two years. Population flows have been concentrated in large urban areas and tourist areas, and have caused a wide dispersion in the growth of home prices between the most buoyant areas of the country and those suffering depopulation.

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Spain is once again a net recipient of foreign immigration

The resident population in Spain grew by just over 1 million people in the biennial 2022-2023, reaching 48.45 million people in October 2023 according to the National Statistics Institute’s Continuous Population Survey. This increase is explained by very significant immigration flows (+939,000 foreign nationals), since the Spanish population is practically stagnant (+86,000).

Increase in the resident population in Spain by nationality in 2022-2023

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Increase in foreign employed persons in 2022-2023 by origin

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Migration flows in 2022 and 2023 have been very significant: such high figures had not been recorded since the migration boom of the first decade of the 21st century .

The population that has arrived in Spain is of an age, educational profile and origin that has facilitated their rapid incorporation into the labour market.7 Thus, the number of foreign people in employment increased by 574,000 between Q4 2021 and Q4 2023, representing 54% of the total increase in the number of employed persons in this period.8 These workers come predominantly from Latin America (53%), although the flows from European countries are also significant (20% from the European Union and 15% from the rest of Europe). With regard to the level of education of the immigrant population, it is worth noting that it is higher than people tend to imagine: 62% of the increase in the foreign population in 2022-2023 had secondary education and 23% had higher education. Only 15% had a low level of education (primary education or less), a similar percentage to that of the Spanish population aged 16 years and over.9

  • 7. Foreign nationals have a much higher activity rate than nationals (69.4% compared to 56.6% on average in 2022-2023).
  • 8. The percentage of foreign workers relative to the total number of people in employment has increased by more than 2 pps, from 12.1% in Q4 2021 to 14.2% in Q4 2023, according to the LFS.
  • 9. For further details, see the article «The changing composition of the immigrant population in recent years» in our Monthly Report of July-August 2023.
The Spanish provinces with large capitals and the most touristic areas are the ones that attract the greatest population

Not surprisingly, it is the country’s two major metropolitan areas that have been the epicentre of this population growth. The Community of Madrid, with an influx of 226,000 people, or 22.1% of the total, tops the ranking of recipient regions, both in terms of foreign population (+163,500) and Spanish nationals (+62,700). It is followed by the province of Barcelona, with 16.9% of the total population increase. The flows of foreigners in Barcelona (+163,000) are practically identical to those in the Community of Madrid, but the increase in the population of Spanish nationals is lower (+10,500).

Population growth in the two-year period 2022-2023 is concentrated in the most urban and touristic provinces

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The strong rebound of the tourism sector after the pandemic and the significant job creation in the sector explain the very favourable demographic trends in tourist areas

Next in the ranking of population increase, we find provinces in which tourism plays an important role: Valencia (+94,000), Alicante (+86,000), Malaga (+52,000) and the Balearic Islands (+40,000).10 In percentage terms, Alicante is the province that has experienced the biggest population increase in the biennium 2022-2023 (4.5%), followed by Guadalajara (4.0%) and Castellón (3.9%). In fact, Alicante is the province with the highest foreign population relative to the total (23% of the total population in October 2023, compared to a national average of 13.2%) and it is also the province in which the sale of homes to foreign buyers is most prominent (43.8% of total sales in Q3 2023, compared to 15.4% for Spain as a whole).

  • 10. At the opposite end of the ranking are 10 provinces that have lost population in the biennium 2022-2023, with Jaén (–5,400), Córdoba (–3,660) and León (–2,830) registering the biggest decreases.
What is the pattern of home prices in the provinces and municipalities experiencing population growth?

The increase in population has been very uneven from region to region and this has profound implications for the real estate market. Home prices in Spain have grown more vigorously in the provinces where the population has increased the most, as shown in the chart below. This relationship is not surprising, since demand is the main factor that determines homes prices in a market where supply is rigid in the short term.11 In any case, the strong positive correlation between these two variables confirms that demographic dynamics are a key factor determining home prices in the current real estate cycle12 (see «Spain’s real estate market ends 2023 in better shape than expected» in this same report for a more detailed analysis of the various factors that are determining the evolution of the real estate market).

  • 11. The production of new housing in Spain is currently insufficient to meet the needs of the population, an aspect which we discuss in the article «Advanced-economy real estate markets: home price resilience and supply shortages» in this same Sector Report.
  • 12. This positive correlation is consistent with studies on the impact of immigration on home prices during the migration boom of the first decade of this century; see Rosa Sanchis-Guarner, «Decomposing the impact of immigration on house prices», Regional Science and Urban Economics, 2023.

The chart above also highlights that the rate of growth in home prices is very uneven across the various regional real estate markets. The vast majority of provinces show positive changes in home prices between Q3 2021 and Q3 2023, and only four registered declines: Huesca, Soria, Salamanca and Cáceres. On the other hand, the most touristic provinces are the ones that recorded the highest growth rates in home prices: Balearic Islands (17.0%), Malaga (15.9%) and Santa Cruz de Tenerife (11.7%).

Home prices are growing more rapidly in the provinces (and municipalities) that have experienced greater population growth, with the Balearic Islands, Malaga and Santa Cruz de Tenerife topping the list.

If we carry out a similar analysis by municipality, grouping them according to their population growth between 2021 and 2023 and observing the pattern of home prices in that period,13 we find that Madrid, Barcelona, Valencia, Alicante and L’Hospitalet de Llobregat are the top 5 municipalities that recorded the biggest population increases in absolute terms. There, the population grew by 2.7% on average, while home prices rose by an annual average of 6.4% between Q3 2021 and Q3 2023, as can be seen in the chart on the following page.

The second group of municipalities by population growth comprises 11 areas where the population increased by between 5,000 and 10,000 people. Among them are capitals of major provinces (Malaga, Murcia and Palma de Mallorca), urban centres located within Madrid’s area of influence (Rivas-Vaciamadrid, Boadilla del Monte) and coastal cities (Roquetas de Mar, Marbella, El Ejido, Torrevieja, Benalmádena and Estepona), with an average population in 2023 of around 200,000 people. In these places, the population increased sharply in percentage terms (5.8% on average) and they are also where home prices rose the most: by 7.3% per year on average in 2022-2023.

In a third, considerably more numerous group (47 in total), we find the municipalities that experienced a population increase of between 2,000 and 5,000 people. In these places, which are still sizeable with an average population of 129,000 people, home prices climbed 5.5% on average. Finally, we find the majority of municipalities, which experienced either limited population growth (183 municipalities) or population decline (60 municipalities). The average growth in home prices in these municipalities has been more modest (4.6% and 3.4%, respectively).

  • 13. The population data by municipality come from the census and are only available for 1 January each year. Given that the latest available data corresponds to 1 January 2023, we are unable to analyse the rapid population growth experienced in 2023. Home prices are available for municipalities with over 25,000 inhabitants (306 municipalities that account for 64% of the population of Spain).

Home prices are growing more rapidly in the more expensive and populated municipalities, which continue to attract new people, thus increasing the dispersion of prices between locations. Madrid, Barcelona and Valencia top the list.

Change in home prices by municipality according to the population change between 2021 and 2023

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The recent migration boom has only intensified the wide dispersion that was already found in home prices across Spain’s municipalities, a pattern that has been observed since 2014.14 Home prices have increased more in municipalities with higher home prices, which only widens the price gap between the most buoyant municipalities, in terms of activity and population, and the most deprived areas which continue to suffer depopulation.

  • 14. See «The widening gap between Spain’s house prices» in the CaixaBank Research Real Estate Sector Report S1 2020.