Our Take

---

The water is simmering, the steam is starting to rise, and the press is starting to notice. Journalist Maite Gutiérrez, an economics specialist at La Vanguardia, looked at what has been a staggering 40% increase in home sales in Spain to try to identify the causes. To put it into perspective, these are levels last seen before the early-2000s housing bubble. Among the main causes she identified are improved access to mortgage credit — thanks to interest rate cuts by the European Central Bank — the rise in new households due to population growth and more people living alone, and the rental crisis, which has led many to opt for buying due to high prices and limited supply. 

Gutiérrez also points out that despite strong demand, buying a home in cities like Barcelona or Madrid requires an average of €70,000 in savings upfront, making it very difficult for most young people and families to enter the market. Furthermore, the lack of new construction is exacerbating price increases. This is due to rising demand and developers struggling to expand supply because of labor shortages and high costs. 

She emphasizes that despite the sharp rise in sales and prices, the current situation is different from what happened in 2007. This is because banks are still enforcing strict mortgage lending requirements, therefore avoiding a credit bubble. 

The upshot, prices are likely to keep rising in the short term, maybe a better time to sell. However, there is still a high level of uncertainty in the market due to both events inside and outside of Spain.

Madrid is about to launch new restrictions on short term rentals  

Madrid is about to implement the previously voted on changes to short term rental regulations. "Plan Reside" is a set of new regulations aimed at curbing the spread of short stay apartments in the historic center while encouraging affordable housing. Passed with only the support of the Popular Party's (PP), and with opposition from Más Madrid and the Socialist Party (who think the plan doesn't go far enough) the plan is set to launch in August.

The initiative addresses the depopulation of the city center caused by the tourist boom. It bans short term rentals in residential buildings (even on the ground floor or with a separate entrance) and restricts commercial space conversions into rentals. However, it allows the use of 210 protected, obsolete historic buildings to be converted into temporary tourist or coliving spaces for up to 15 years, after which they must return to residential use.

Outside of the city center, tourist apartments remain legal under current rules, but with new restrictions—they will only be allowed on the ground or first floor, and they must have independent access. The plan also targets the loss of local commerce by prohibiting conversions of storefronts to short term housing on commercial streets. From 2015 to 2024, 3,306 commercial premises were turned into housing.

To enforce the new rules, Madrid froze licenses for new short term rentals in many areas and toughened penalties. Illegal rentals face cumulative fines of up to €190,000, with enhanced inspections and a public registry of legal units. In 2024, 293 apartments were returned to residential use, and the number of inspectors rose from 65 to 75.

According to the city, 92.7% of tourist lodgings are short term, yet only 7.45% are legal, prompting what officials call a necessary shift toward controlled, sustainable tourism that protects residents’ rights and neighborhood life.

For questions, please feel free to reach out to me at: josh@mansonadvisoryservices.com  

________________________________________________________________________

Spanish Housing Market - Sharp Growth in 2025 Amid Supply Constraints

Spain's real estate market is continuing to boom, with home prices forecast to increase by 9% in 2025. Unfortunately for locals, this 9% significantly outpaces household income growth. Caixabank Research revised previous projections upward due to this stronger-than-expected housing demand and a 13.7% year-on-year rise in property transactions during Q1. With over 673,000 home sales in the past year, the Spanish property market has now exceeded post-pandemic highs.

Looking ahead, housing price growth in Spain is expected to cool slightly to 5.7% in 2026, as the economy slows and tailwinds such as low interest rates, declining inflation, and foreign investment begin to ease. However, the primary issue continues to be the housing supply shortage. While new construction permits are on the rise, they still fall way short of meeting demand. This continued demand is driven by increased purchasing power, ECB rate cuts, and significant interest from foreign real estate investors.

Housing affordability in Spain is worsening, especially for young buyers and low-income families. Despite one-third of purchases being paid in cash and conservative mortgage lending practices, affordability metrics continue to worsen. Economists, however, do not anticipate a housing bubble like 2007, citing tighter credit standards. Experts argue that the top priority is increasing affordable housing stock in high-demand areas such as Madrid, Barcelona, and Valencia.

Boom in Second-Hand Housing Drives Prices and Competition

The Spanish real estate sector is being partly driven by a boom in second-hand housing. One reason for this is its greater availability, and since mid-2024, its price growth has surpassed new-builds. In Q1 2025 alone, resale home prices jumped 8.1% year-over-year, significantly outpacing Spain’s inflation rate.

In markets like Madrid and the Canary Islands, second-hand homes have become more expensive than new construction, with average prices exceeding €2,000 per square meter—a milestone last seen before the 2008 financial crisis. 

Although building permits increased (36,000 in Q1), the supply remains way short of housing demand. This supply-demand imbalance is pushing more buyers toward existing homes, intensifying competition. A significant share of buyers are buying in cash.

There is also a huge imbalance in the market driving prices up: 81% of participants are buyers, while only 12% are looking to sell. Many transactions involve high-net-worth individuals and real estate investors, rather than families seeking primary residences. While the situation has echoes of the early-2000s Spanish housing bubble, analysts note that tighter lending regulations and other government measures reduce the risk of a systemic crisis.

ECB Cuts Interest Rates Again but Signals the End of the Cycle is Near

The European Central Bank (ECB) cut rates for the eighth consecutive time dating back the summer of 2024. In the latest move they reduced rates by 25 basis points. The deposit rate now stands at 2%, the main refinancing rate at 2.15%, and the marginal lending facility at 2.4%. This move was expected, given sluggish EU economic growth, easing inflation pressures, and trade tensions—especially with the United States. Lower rates usually translates into greater demand for mortgages, which may further fuel the Spanish real estate market.

Although the ECB downgraded its inflation forecasts—projecting eurozone inflation at 2% in 2025, 1.6% in 2026, and 2% in 2027—it signaled that the rate-cutting cycle is nearing completion. In response the euro rose to $1.14.                                                            

-------------------------------------------------------------------------------

NO MORE SEASONAL LOOPHOLES FOR LANDLORDS

The government of Catalunya has closed the circle on rent regulation, passing sweeping restrictions on medium-term home rentals. Medium-term rentals are those of more than 30 days, but less than 12 months. Previous regulations have already capped prices on long-term rentals and prohibited new short-term (Airbnb, VRBO, etc.) licenses. The government believes these measures will slow the growth of rents in Barcelona and the surrounding area. I have my doubts, but I will get into that later.The DetailsSince rent controls went into effect on long-term rental contracts (five to seven years), landlords have shifted their focus towards unregulated medium-term rentals. According to Incasol, the organization that tracks rental statistics and holds rental deposits, there was a 45% increase in medium-term rental contracts in 2024. Clearly, there was a loophole in the system.The new laws divide medium-term rentals into different categories. The first are tourist and holiday rentals. This category will continue at free market prices (landlords can charge what they want). In contrast, the new regulated category will include people moving permanently to Catalunya, those coming for medical treatment, and those coming for educational purposes. Unlike the free market rentals, these rentals will be subject to the same conditions, restrictions, and rent controls as the long-term units. Documentation will be required on the part of renters to determine the proper category. This process may be intrusive and cumbersome,  but it is intended to protect renters.The Catalan government is phasing out short-term rentals. This is in addition to regulating the long and medium-term rental space. They have bought buildings to prevent them from passing to free market rents. All of this is in addition to the end of the Golden Visa program in Spain and other proposed taxes on foreign property buyers. The results of all of this regulation remain unclear. If history is a lesson, we will see less construction (because there are no profits to be had) and continued rising demand. There will also be a shift towards illegal rentals that aren’t registered, therefore depriving the government of revenue. There has already been a drop in registered contracts overall. Less maintenance will be done, because there isn’t as much revenue to do it. It seems a more balanced approach that protects the lower end of the market and leverages the top end to incentivize developers to build more affordable housing might be more effective. The government controls an asset, the real estate market, it can use that asset for the benefit of the people of Catalunya. They have chosen to shut the door completely. We will see if their plan works. In Other NewsRelief may be on the way in Madrid. The city has, according to the Global Property Handbook released by the real estate firm Barnes, become the most attractive luxury market in the world. Price increases have reflected this demand. However, new construction, centered around projects in the southeast of the city, are in line to bring 278,000 new units to market in the coming years. Given the 87,000 unit deficit Madrid has accumulated in the last four years, this will be a welcome relief.Elsewhere, the European central bank has continued to drop interest rates at the steepest pace since 2018. This is in response to global economic uncertainty. Rates closed the first quarter at 2.5%. This drop has fueled demand for mortgages. Further cuts are expected.Also, Catalunya has announced that it will double the tourist tax to a maximum of 16 euros per night. A quarter of that revenue will be earmarked for affordable housing. For further questions, please feel free to reach out to me at: josh@mansonadvisoryservices.com