Making predictions about the real estate market is not easy, because it is influenced by a wide variety of social, economic, and political factors. However, despite this, it is possible to analyze its current situation to identify patterns and trends that can help in making a short-term forecast.

That is why, today at CULMIA, we want to discuss the current landscape and provide a forecast for the real estate market in 2025. The future continues to look complex and challenging for anyone looking to acquire a home—whether to buy or rent—at an affordable price.

Real Estate Market Context at the End of 2024

To begin with, let’s take a brief look at all the factors that are currently having a direct impact on the real estate market forecast for 2025.

Current Economic Situation

The current economic climate is shaped by the recent COVID-19 pandemic and by geopolitical circumstances, such as the war in Ukraine. Rising prices for raw materials and energy resources, such as natural gas and oil, caused inflation to skyrocket, prompting the European Central Bank (ECB) to respond by raising interest rates.

Naturally, this decision had a negative impact on mortgages and home prices, since the Euribor went from negative levels to over 4% by the end of 2023. This caused, for example, the cost of variable-rate loans to increase by an average of 3,000 euros per year in Spain.

However, the good news is that inflation began to ease in 2024, prompting a positive response from the ECB. After many months of consecutive rate hikes, in June of that year the ECB cut interest rates by 25 basis points to 4.25%, thereby ushering in a new era marked by restraint. In fact, the ECB then signaled its intention to keep interest rates at restrictive levels until inflation reached the 2% target.

Supply and Demand

Faced with a loss of purchasing power due to the recent crisis and inflation, Spanish families chose to save their money. Not surprisingly, their savings rate rose in 2023 to 11.7% of gross disposable income, a figure well above the historical average (8.2%) between 2000 and 2019.

As a result, now that the worst is beginning to fade into the past, many of them are choosing to invest these savings in real estate. This partly explains why 6 out of every 10 real estate transactions are currently closed without a mortgage. Although this isn’t the only reason—there’s another, even more significant factor: the high number of foreign buyers with high purchasing power who are also choosing to invest in the Spanish real estate market.

These two factors, combined with the trend of population growth in major cities, keep demand at very high levels: in the summer of 2024, 23% of the Spanish population over the age of 18 was active in the housing market, either buying or renting.

A situation that has further exacerbated the problem of low available supply—a problem that was already present due to other factors, such as: the lack of residential land for construction, the lack of legal certainty, and the shortage of skilled labor, the high costs of financing projects, and the slow bureaucratic processes involved in getting them off the ground.

Rental Rates

Rental properties are the third factor that will shape the real estate market outlook for 2025. Indeed, at a time marked by high demand and limited supply, they remain a profitable investment option for property owners in major cities.

However, the government’s approach to regulating housing prices by designating high-demand areas—through the new Housing Act— and setting a cap based on the CPI is gradually leading to a decline in the supply of rental housing. The data confirms this trend: as of early 2024, only 7.6% of homes were subject to this system, compared to 92.6% that were for sale.

The result has been a clear and gradual shift from the rental market to the home-purchase market, given that 21.11% of the homes available for purchase in the first few months of 2024 were previously rented.

Real Estate Market Forecast for 2025

In short, there is currently a significant imbalance between high demand and low supply, which inevitably leads us to a real estate market forecast for 2025 that calls for even higher prices and an increase in the number of transactions.

In fact, all signs point to demand remaining strong over the next year, driven by:

• The cyclical recovery of the economy, which will likely end up boosting demand for housing among foreigners.
• Forecasts indicate that GDP growth in 2025 could reach 2.1%, which will help create jobs and boost household income.
• The new trend of falling interest rates, which will allow buyers to access better variable-rate mortgage deals when purchasing a home.
• The high pent-up demand currently existing in Spain, as the economic crisis and the pandemic have forced many young people to postpone moving out on their own.

This is a scenario in which the real estate market will have little room to maneuver, given that it is already hampered by the structural problems mentioned earlier. On the positive side, however, the total floor area approved for new construction and renovation will continue to grow in 2025, continuing the trend set in 2024—a year that, in its first half alone, already delivered the best figures of the past five years.

How much will housing prices rise by 2025?

Taking all of this into account, there are no signs of a price drop in the short term. Instead, expert forecasts point to growth in 2025 that could range between 2% and 3%, driven by:

• the steady rise in construction costs,
• the pressure that high demand places on the real estate market itself,
• and the challenges involved in increasing the housing supply, which are particularly evident in major provincial capitals such as Madrid, Barcelona, and San Sebastián, as well as in tourist cities such as Málaga, Bilbao, and Granada.

What’s more, the real estate market forecast for 2025 is particularly optimistic regarding the number of sales transactions that will take place. Despite the predicted rise in prices, the year could end up being the best in this regard since the 2008 bubble, even surpassing 800,000 homes sold. This is a very interesting figure when compared to the nearly 583,000 homes sold in 2023.

So the prospect of rising prices doesn’t seem to worry potential buyers, who are well aware of the current value of real estate as an investment. That’s why at CULMIA we’re here to help you—if you’d like—find the ideal home you’re looking for as soon as possible at the best price.Contact us and see for yourself!

We recommend:

• Early Mortgage Payoff: A Strategy to Make Financing Your New Home Easier
• Guide to Buying a Home Without a Mortgage: Alternative Financing Strategies