Research article

Bucking the trend

With an improving economy, Spain’s property market is seeing an increase in residential sales, steady price growth and more construction activity

The Spanish housing market faced a number of headwinds during the years following the Global Financial Crisis (GFC), but has been moving in a positive direction since mid-2014 and looks set to continue this upward trend.

An economy in recovery

Spain was one of the worst-hit European countries during the GFC. The economy contracted by 8.9% between 2008 and 2013, while the Eurozone’s GDP as a whole fell by just 1.9% over the same period. Meanwhile, unemployment rose to 25.8% in 2012, with youth unemployment (aged 15-24) estimated to have reached a peak of 55% in 2013.

Since 2014, the situation has reversed and Spain is one of the strongest-performing economies in the region, despite economic growth slowing from 3.0% in 2017 to 2.5% in 2018. In 2019, Spain’s economy is expected to expand by 2.3%, slightly less than in 2018, but still significantly higher than growth predictions for France (1.4%), the UK (1.3%) and Germany (1.0%).

The strong economic growth in Spain has been helped by a tourism boom. Spain welcomed close to 83 million international visitors in 2018, a record number, that was a marginal increase from 2017 and up from 75 million in 2016. This places Spain as the second most-visited country in the world behind France. Tourist numbers have remained high in 2019 and the sector is expected to continue strengthening the Spanish economy and creating employment.

The unemployment rate in Spain has fallen by at least 2% annually since 2014, and stood at 14.5% in 2018. Despite this decrease, which has continued in 2019, unemployment remains the second-highest in the European Union behind Greece. There are lower rates of unemployment in the more industrial north of Spain and in Madrid. Unemployment remains higher in the south.

National housing market

Prior to the GFC in 2008, Spain’s housing market boomed and residential construction, transactions and prices all experienced substantial growth. This was followed by six years of price falls until 2014, when prices began to recover, driven by economic growth, low interest rates, low property prices, attractive mortgage packages and an increase in international buyers.

The market is yet to return to the levels seen prior to the downturn, suggesting there is room for growth. The average sale price for a residential property stood at €151,000 for Q1 2019, still 20.7% below the €190,000 reached in the Q4 2007.

In the year to March 2019, house prices across Spain increased by 6.8%, while prices of new properties increased 10.4% over the same period. This indicates that supply and demand is levelling out and confidence is returning to the new build market.

Transaction activity

Transaction numbers have been increasing steadily since 2013, but the number of properties sold in 2018 was still 39.0% below the 2006 peak. However, there has been a significant difference in the performance of the new build versus second-hand market.

In 2008, new properties accounted for nearly 60% of all sales, but numbers declined rapidly and they now make up less than 10% of the market. The second-hand market has been steadier. Although transaction numbers fell following the GFC, the number of sales in 2018 was just 6.8% below the peak in 2005.


Supply of new residential properties has been one of the key hindrances in the market. After the boom in construction prior to the GFC, there has not been enough demand to meet supply, resulting in an oversupplied market, particularly in the south of the country.

Since 2007, however, the dramatic fall in construction activity has resulted in the overhang of stock being steadily sold and the market is becoming more balanced. In mid-2007, new property permits reached 750,000 for the year compared with just 30,000 in 2014.

There are signs that construction of new homes is picking up as developers return to the market. A total of 78,000 new dwellings were granted permits across the country in 2018, an increase of 23.1% from 2017.


Although the Spanish property market has been in recovery for a number of years, much of the progress has been recovering old ground, rather than fresh growth. The market is expected to continue growing, but there are likely to be regional differences, with the larger and second-tier cities seeing higher rises compared with rural and less-populated areas.


How prices vary across Spain

Property in Madrid is the most expensive in Spain, with an average price of €235,000, 56% more expensive than the national average. The capital is closely followed by the Balearic Islands at €230,000, then Gipuzkoa, with its capital Donostia- San Sebastián. Barcelona is in fourth place, with average values 12% lower than Madrid and Biscay, with its capital Bilbao, completing the top five.

On the flip side, Cáceres, Jaén and Ciudad Real all have an average value of around €75,000, a 50% discount compared with the national average.

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