Spain's housing market recorded a sharp rise in prices in 2025, surpassing previous peaks seen in the mid-2000s. This upward trend has been the result of strong buyer activity and the growing imbalance between supply and demand. According to experts and analysts, price growth will continue into 2026, bringing opportunities to investors and some challenges to first-time buyers. In this article, we'll look deeper into the Spanish property market's recent performance, what 2026 holds, and where the best opportunities lie.
Spain’s Real Estate Market in 2025: A Year Surpassing Expectations
2025 was a strong year for the property market in Spain, breaking quarterly and annual records. Home sales in the first half of last year reached about 379,484, marking the highest H1 figure since 2007. Second-hand sales have dominated the Spanish market, accounting for 91.3%, while new builds with fewer options available represented just 8.7%. 2025 was also a significant year for foreign investment, with overseas buyers occupying a substantial portion, especially in popular regions.
Spain’s Real Estate Prices Hit 18-Year Highs
According to recent data from the INE Housing Price Index, the prices of ready homes rose 12.8% year-on-year in the third quarter of 2025, marking the sharpest rise recorded in 18 years. Among this price rise, new homes increased by around 9.7%, and second-hand homes by approximately 13.4%.
By Q3 2025, the national housing price reached an average of €2,153/m², exceeding the 2008 record of €2,101/m². This represents almost double the 7.05% growth recorded in 2024. Nearly all regions have experienced double-digit increases, while cities like Madrid, Málaga, and Alicante have seen the highest surges with local and foreign demand.
Foreign Buyers Drive Record Property Sales in Spain
According to Spanish housing market news from El País, home purchases in 2025 through eleven months have surpassed those in 2024, totaling 662,114 sales. The data for this year confirms continued year-on-year growth, reinforcing that the Spanish market is resilient.
Of these purchases, by the middle of last year, there had been 71,155 homes bought by foreigners, surpassing 2024's first-half total. Among all buyers, the British remain the leading nationality.
What 2026 Holds for Real Estate Investments in Spain
Many analysts agree that the market dynamism will persist into the year. According to leading financial institutions, 2026 real estate prices in Spain will continue to rise, though this increase will be at a slower pace than that in 2024 and 2025. This year is not expected to see double-digit rates like last year.
BBVA Research predicts an increase of about 5.3%, while CaixaBank Research estimates 6.3% growth this year. Overall, while prices increase, demand is expected to stay strong, driven by economic growth and foreign interest, as many buyers see Spain as a safe investment destination.
Rising prices coupled with limited supply continue to challenge the market, especially with a shortage of affordable homes. This situation can affect first-time buyers with limited capital the most, though finding financing in 2026 can be much easier.
Financing Your Investment: Mortgage Rates in Spain for 2026
Market expectations indicate that the European Central Bank will continue its monetary easing policy, leading to further reductions in financing interest rates. The Euribor (12-month), the primary benchmark for Spain's mortgage rates, has already fallen to 2.236% as of January 20 this year, and is expected to decline further to approximately 2.00%. This reduction from previously high rates will significantly improve the purchasing power and affordability for mortgage buyers.
Mortgage rates are calculated with reference to the Euribor, plus a fixed margin set by banks. This can mean a possible 3% or 4% rate for variable mortgages, offering affordable financing even for non-residents who typically pay 0.5-1% more than residents.
Key Investment Opportunities in the Spanish Property Market for 2026
Local demand for housing and foreign interest remain strong, which continues to support housing demand in Spain. Tourism remains robust even out of the high summer season, and for 2026, Meliá, the largest hotel chain in Spain, expects nearly 100 million visitors. Whether it is tourism appeal, lifestyle advantages, or strong rental potential, property investment in Spain continues to attract both domestic and international buyers.
Best Places to Invest in Real Estate in Spain
Andalucía’s Costa del Sol remains a strong option for foreigners buying investment property in Spain. Last year's data also shows solid demand in Málaga, with the foreign market share reaching 42.9%, which was higher than that in the Balearics. Málaga province and its coastal towns remain a primary hotspot continuing into 2026, with price growth exceeding the national average.
Costa Blanca is another region expected to see high price growth throughout the upcoming year. According to recent data, this region has experienced roughly 14% higher prices, outpacing Spain's average. While Alicante saw significant gains, towns like Javea and Torrevieja recorded over 20% price jumps. This price growth trend appears to continue into the year, since demand here remains strong.
Madrid has also shown substantial price increases in the last year. As the region remains a key economic hub, this growth will continue in the upcoming 12 months, though possibly more moderate than in coastal and luxury markets.
Other areas that are experiencing high price increases are Valencia and Barcelona, where international demand continues to drive the market.
Rental Yields Across Spain in 2026
According to Investropa's January research this year, Spain's gross rental yield averages around 6.3% for now, but prime areas and working-class neighborhoods have a gap of around 4%, with the latter offering significantly higher returns.
One of the highest yields among major cities in Spain is Murcia, with a gross rental yield of 7.4%. As it is one of the best areas for a cost-effective investment in Spain and has a strong rental demand, yields here remain attractive. Valencia also performs well, often with 6% or more gross yield. Madrid's outer neighborhoods can exceed 7%, while prime areas yield around 3-4%. Barcelona usually holds above-average yields, especially in working-class and non-prime districts, where returns can approach 6% to 7.5% gross yields.
Property Types Attracting Investors in Spain
Residential buy-to-let with medium to long-term tenancies offers stable income and consistent returns. On the other hand, in coastal and luxury markets, holiday rentals perform strongly, with higher management requirements. Build-to-let has also been gaining traction, especially in prime areas like Barcelona and Málaga.
Beyond residential, office spaces and logistics are attracting attention due to higher return profiles among commercials, especially in cities like Seville. Renovating properties for high energy efficiency standards is also on the rise with regulatory incentives and demand.
Challenges in the Spanish Housing Market
The housing crisis remains a key concern for the Spanish government, with recent policies targeting tourist licenses. However, the shortage of housing supply is more structural than driven by foreign demand. Spain is currently completing around 100,000 units per year, which is about 40% below what is needed. This low supply of homes also creates a shortage of affordable housing. Addressing these supply constraints will likely require expanded public housing construction and incentives for long-term rental properties.
Is Investing in Spanish Real Estate a Good Opportunity in 2026?
While prices are increasing, with both financing accessibility and investment potential, Spain remains an attractive market. Especially if you buy in the right place at the right price, Spanish homes remain relatively affordable, offering potential for significant capital growth in the medium term and strong rental yields.
At Spain Homes ®, our expert team guides you through every step of the process, with everything from local market analysis to legal support to help you make informed decisions. For personalized guidance, contact us today.
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