No Bubble in Sight…

About 70% of real estate experts in Spain say there is no nationwide housing bubble, according to the latest Observatorio de la Valoración report from the Asociación Española de Análisis de Valor (AEV, Sept 2025). However… most agree that some areas, especially coastal and tourist markets show signs of overheating.

Experts say the situation is different from 2007. Buyers are more solvent, and banks apply stricter lending rules. Still, the effort needed to buy a home is close to pre-crisis levels, and prices keep rising.

Affordability and Price Growth

Home prices rose just over 10% year on year in Q2 2025, AEV reports. Prices for existing homes increased 10.45%, making up most sales. The share of household income needed to pay a mortgage is now near 2006–2007 levels.

Overall mortgage debt remains well below pre-crisis figures. Around 40% of homes are now bought without a mortgage, mostly by foreign or “cash” buyers (many with loans in their home countries).

Why Experts Reject the Bubble Idea

AEV data show 66% of appraisal firms and 75% of external experts believe price growth reflects strong demand and limited supply, not speculation.

Two reasons explain their view:

1. Buyers are financially stronger and less speculative than before 2008.

2. Banks lend more cautiously, lowering the risk of a credit-fuelled crash.

Still, local risks exist. In the Balearic and Canary Islands, where foreign buyers make up more than 30% of transactions, some speculative activity linked to short-term rentals has appeared.

Rental Market Pressures

Rents rose between 9% and 15% in Q2 2025, with a national average of 9%, according to AEV. This rise is no longer limited to big cities. It now affects mid-sized towns and surrounding areas as more people unable to buy turn to renting.

Every expert surveyed expects further rent increases. None predict a drop soon.

Supply and Construction

New housing supply is growing but still insufficient. Housing starts rose 20.3% in the last quarter, while completions increased 13.1%. Developer credit grew 3.5%, but only 23% of experts believe the recovery is solid.

Construction costs remain high. Since 2019, material prices have increased about 40%, and labour shortages persist.

Spain’s banking system is stable, with over 120,000 new mortgages signed each quarter. However, 77% of experts say more credit should go to first-time buyers and small or mid-sized developers.

Outlook

Spain’s housing market does not show signs of a general bubble. But price pressures in tourist regions and worsening affordability are real risks. Expanding supply, maintaining strict lending, and improving public housing would help prevent problems.