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Everything you need to know is included in our Spain Property Pack
Are you thinking of investing in property in the land of Flamenco? Are you wondering whether you should make a purchase now or in the future?
People have different understandings of market timing. The Spanish real estate agent you know might advise you that now is the opportune time to buy property, while your childhood friend from Madrid may suggest exercising more patience before making a decision.
At Investropa, when we create articles or update our pack of documents related to the real estate market in Spain, we facts and data that are backed by evidence, not just opinions or rumors.
We have gone through official reports and government website statistics in great detail. As a result, we have created a reliable database filled with valuable information. Here's what we found, which can help you decide whether it's the right time to buy real estate in Spain.
We hope you find this helpful!
How is the property market in Spain currently?
Spain offers, today, a lot of stability to investors
Positive
If you want to invest in real estate, prioritize stability as it promotes property ownership, rental demand, and sustainable growth. It is an information you need as a foreigner looking to buy a property in Spain.
You probably know it already, Spain is very stable. The last Fragile State Index reported for this country is 44, which is an outstanding number.
Spain offers stability to investors due to its robust economic recovery post-pandemic, characterized by strong GDP growth and a declining unemployment rate, which have been bolstered by substantial EU recovery funds aimed at enhancing infrastructure and digital transformation. Additionally, Spain's political landscape has stabilized with a pro-European government committed to fiscal responsibility and structural reforms, further enhancing investor confidence.
Next, let's assess the economic projections.
Spain is positioned for growth in the coming years
Positive
Before investing in Real Estate, look at the performance of the country's economy.
According to the IMF, Spain will end 2024 with a growth rate of 1.9%, which is promising. For 2025, the figure we're looking at is 2.1%.
This steady growth might keep going since Spain's economy is expected to increase by 8.7% during the next 5 years, resulting in an average GDP growth rate of 1.7%.
A moderate growth rate in Spain suggests a stable and steady increase in property values, which can provide a reliable return on investment over time. Additionally, it indicates a balanced market with less risk of sudden downturns, making it a safer choice for property investors.
That being said, there are other indicators to monitor.
Spanish business owners have a more favorable view of the economy
Positive
Although the GDP forecast provides insights, it may not fully capture the local Spanish sentiment as it relies on external projections. Luckily, in Spain there is an established metric that is routinely disclosed. We're lucky because this isn't true for every country.
The Business Consumer Index (BCI) is a metric that quantifies the confidence of business leaders in the economic conditions of the present and future. It's determined through surveys and assessments.
According to the Ministerio de Industria, Energia Y Turismo's data, the latest Business Confidence Index value is 7 for Spain. This is a neutral score
That's really encouraging and the trend is upward: the BCI score, 12 months ago, was at 1.
Business Confidence in Spain is currently at a moderate level. This doesn't necessarily imply that the property market is headed for a downturn. A moderate score often reflects a period of uncertainty or caution within the business sector, which is a normal aspect of economic cycles.Therefore, it's crucial to evaluate additional metrics before determining if it's the right time to invest in property in Spain. Let's explore these factors now.
Spanish house prices on a steady growth path
Positive
Spain's home prices have increased by 14.2% in 5 years according to Ministerio de Fomento.
It means that if you had bought a villa in Marbella for $750,000 five years ago, then it would now be worth around $856,000.
Recently, Spanish house prices have been growing slowly but surely
It's a positive signal and promising sign for those seeking a secure investment environment.
You can find a more detailed analysis of the real estate prices in our property pack for Spain.
Everything you need to know is included in our Spain Property Pack
Spain's population is growing but getting poorer
Negative
When you're looking to buy real estate, population growth and GDP per capita deserve careful consideration because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In Spain, the average GDP per capita has changed by -1.1% over the last 5 years. It's a bit concerning. However, the Spanish population is growing (+2% in 5 years).
Rental yields are average in Spain
Neutral
We will now consider the rental yields in detail.
It's the annual rental income of a property divided by its price. For example, if a Spanish property is purchased for €300,000 and generates €15,000 in annual rental income, the rental yield would be 5%.
According to Numbeo, rental properties in Spain offer gross rental yields ranging from 3.4% and 6.1%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Spain.
It means that your income potential is relatively moderate.
Everything you need to know is included in our Spain Property Pack
In Spain, inflation is projected to remain minimal
Neutral
To simplify, inflation is when prices rise, and things become more expensive.
It's when your favorite plate of paella in Barcelona costs 18 euros instead of 15 euros a couple of years ago.
If you're contemplating investing in a property, high inflation can bring you several benefits:
- Property values tend to increase over time, leading to potential capital appreciation.
- Inflation can result in higher rental rates, thereby boosting cash flow from the property.
- Inflation reduces the real value of debt, making mortgage payments more affordable.
- Real estate can act as a hedge against inflation, preserving the value of the investment.
- Diversifying into real estate provides stability during inflationary periods.
- Tax advantages, such as depreciation deductions, can help offset the impact of inflation.
In accordance with IMF projections, over the next 5 years, Spain will have an inflation rate of 1.0%, which gives us an average yearly increase of 0.2%.
It means that Spain is expected to have near-zero inflation then. Unfortunately, buying a property now may not lead to significant price increases or high profits in the future.
Is it a good time to buy real estate in Spain then?
Let's wrap things up!
Spain is currently a beacon of stability for investors, which makes it an attractive option for those looking to buy property. The country's economy is on a steady growth path, with an expected increase of 8.7% over the next five years. This translates to an average GDP growth rate of 1.7%, suggesting that Spain is not only stable but also poised for continued economic expansion. For property investors, this means a reliable environment where investments are less likely to be affected by sudden economic downturns.
One of the key reasons why 2025 could be a great time to invest in Spanish property is the moderate growth rate of the economy. This steady pace suggests that property values will likely increase gradually, providing a dependable return on investment over time. A balanced market like this is less prone to the volatility that can lead to sudden drops in property values, making it a safer bet for those looking to invest in real estate.
Moreover, Spanish house prices are on a steady growth path, which is encouraging for potential buyers. While the population is growing, it is also getting poorer, which might seem like a downside. However, this demographic shift could lead to increased demand for rental properties, as more people may opt to rent rather than buy. According to Numbeo, rental properties in Spain offer gross rental yields ranging from 3.4% to 6.1%, providing a solid income stream for property investors.
Inflation in Spain is projected to remain minimal, which is another positive factor for property investment. Low inflation means that the purchasing power of your investment is less likely to be eroded over time, ensuring that the value of your property remains stable. This economic environment, combined with the steady growth in property values and rental yields, makes 2025 an opportune time to consider buying property in Spain.
We genuinely hope this article was useful!. If you need to know more, you can check our our pack of documents related to the real estate market in Spain.
-Will real estate prices go up in Spain?
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.