We analyse the most relevant information on a possible real estate bubble in 2025.
The evolution of the real estate market in Spain in recent years has been remarkable, with significant variations in house prices and in the dynamics of supply and demand. In 2025, concerns about a possible real estate bubble are once again a recurring theme, especially when observing accelerated increases in certain parts of the country, such as Madrid, Barcelona or the Mediterranean coast. In an economic context marked by global uncertainties and variable monetary policies, analysing whether we are facing a new bubble requires a rigorous examination of current indicators.
In order for you to be able to make your own judgement on the market situation, it is essential to look at specific data: the rate of price rises, the debt capacity of households, the volume of housing under construction and trends in foreign investment. In this way, you will be able to better understand whether the movements you are seeing are the result of a speculative bubble or a natural recovery after years of adjustment.
At Ibercenter, we want to guide you through this analysis so that you can make informed decisions, whether you are looking to buy, sell or invest in real estate this year. In addition, if you are exploring new ways of working or investing in flexible spaces, the rise of coworking in Madrid also reflects a key market transformation: more and more professionals and companies are opting for shared offices as an efficient solution adapted to the new economic context.
The outlook for the Spanish property market in 2025
The Spanish real estate market has shown interesting movements this year. While some metropolitan areas continue to register increases in house prices, other areas have stabilised and even seen slight declines, suggesting a more heterogeneous market than in previous periods. Demand remains active, driven both by local buyers looking for permanent homes and by investors who continue to see opportunities in certain segments, especially in second-hand housing and tourist flats.
Developers and real estate agencies have adapted their strategies to respond to a more demanding public with a tighter financial capacity. The supply has diversified not only in terms of price, but also in terms of typology and location, in response to new trends that have been reinforced by the social and employment changes following the pandemic. In this context, the analysis of current figures is essential to understand whether we are facing sustainable growth or whether there are symptoms that may anticipate a real estate bubble in 2025.
Price and demand trends
Data for the first months of 2025 reveal that the average annual increase in house prices is around 4%, a much more moderate percentage compared to the increases of more than 10% recorded in years prior to 2023. In cities such as Madrid and Barcelona, prices remain high but show clear signs of slowing down. In contrast, inland provinces and some less saturated coastal areas are experiencing a slight recovery in demand, which is levelling the balance somewhat.
Demand has not suffered significantly despite the tightening of mortgage conditions. The gradual rise in interest rates and persistently high inflation are having an impact on affordability, but also on the profile of applicants. More and more people are opting for smaller properties or are looking for long-term financing to gain access to the market without taking on high risks. This reality indicates that, although there is pressure on prices, it is not an uncontrolled or generalised increase.
Economic factors influencing the industry
The economic scenario for 2025 is marked by an estimated Spanish GDP growth of around 1.8%, with an unemployment rate that has fallen to 12%, figures that encourage a certain stability in consumption, including in the real estate sector. However, inflation still has a direct impact on household purchasing power and the cost of construction, issues that condition supply in both new construction and refurbishment.
In addition, the European Central Bank’s policies, focused on containing inflation by raising interest rates, are making access to financing more expensive. This is impacting demand by limiting people’s ability to pay high repayments and forcing developers to adjust prices to keep transactions viable. Also relevant is the role of public administrations, which, although they are working to promote affordable housing, have not yet managed to effectively bridge the gap between supply and demand.
In this context, the combination of macroeconomic factors and regulatory measures is balancing real estate activity, avoiding excessive tensions that could lead to a price collapse or a clear real estate bubble. It is therefore essential that you continue to keep an eye on these economic indicators, as they will be key to anticipating possible changes in the market during the rest of the year.
The current situation of the real estate market in Spain
The Spanish real estate market is showing a particular dynamic in 2025, marked by a certain slowdown in the pace of price growth, although with no clear signs of an imminent collapse. Demand remains strong in metropolitan areas and tourist destinations, but changes are beginning to be seen in the profiles of buyers, who are increasingly looking for smaller homes or properties in less saturated areas. On the other hand, supply is slowly adjusting, with a moderate increase in new developments trying to adapt to these new preferences, although it is still insufficient to cover all the demand in large cities.
Looking ahead to the coming seasons, the uncertainty surrounding macroeconomic factors, such as the evolution of interest rates and inflation, are conditioning both buyers and developers. For this reason, prudence prevails in a market that, although it continues to grow, does so at a much more contained pace and with a greater segmentation according to geographical areas and housing profiles.
Trends in housing demand and supply
You are noticing that the demand for housing is diversifying, especially in large urban areas such as Madrid, Barcelona and Valencia. Young buyers are increasingly interested in smaller flats that offer good transport links and nearby services, while families tend to look for villas or detached houses, mainly in the periphery or in municipalities close to large cities. This change in preferences has a direct impact on supply, which is adjusting to respond to this more specialised demand.
On the supply side, developers are slowing down the launch of new developments after several years of accelerated expansion. This is accompanied by a strategy of higher quality, focused on more sustainable and efficient housing, in line with the stricter environmental regulations affecting the sector. However, a mismatch remains in some areas, where a shortage of available land and administrative delays complicate the capacity for growth.
Price analysis in the main cities
Madrid and Barcelona continue to lead the way in price rises, although with more moderate increases than in the years prior to the pandemic. In these cities, an average-sized flat can cost between 4,000 and 5,000 euros per square metre, high figures that are beginning to put a ceiling on many people’s purchasing power. In contrast, cities such as Seville, Zaragoza or Malaga show more accessible values, with prices around 2,000-3,000 euros per square metre, which explains the growing interest of investors and buyers who prefer to move to these locations.
Finally, coastal areas maintain high demand, especially on the Mediterranean coast and the Canary Islands, where the market is influenced by both domestic and foreign buyers. This results in upward pressure on prices, especially in consolidated tourist locations, although with less pronounced peaks than in large urban centres.
This detailed analysis of prices in key cities shows you a varied and segmented picture, where it is essential to consider both location and type of housing to understand the opportunities or risks present in the 2025 housing market.
Are we facing a bubble?
In your analysis of the market, you will have noticed that in some areas price rises are far outstripping wage and inflation increases. This creates a widening gap between what people can afford and the prices being asked for housing. Moreover, in certain cities, supply is becoming scarce precisely because of this disproportion, fuelling a possible overvaluation of the market.
On the other hand, financing conditions remain flexible, but banks are starting to tighten the requirements for granting mortgages. This could result in many potential buyers being frustrated and a cooling of the market which, combined with high prices, could act as a clear signal of a possible sharp correction.
Analysis of the overvaluation of properties
Focusing on average house prices in cities such as Madrid and Barcelona reveals that some districts have reached values that are up to 30% higher than the historical average adjusted for inflation. This level of prices is not usually sustainable in the long term and points to an overvaluation that is driving regular buyers away from the market.
Also noteworthy is the increase in property developments opting for premium prices without a clear increase in real demand. This is evidence that expectations of quick and high returns are driving many decisions, rather than a genuine balance between supply and demand based on the economic realities of the average buyer.
Investor behaviour and expectations
In this environment, the investor retains a central role. The constant search for quick returns leads them to acquire properties with the expectation of selling them at even higher prices in the short term. This phenomenon, known as “buy to sell”, can accelerate speculation and distort the market away from its economic fundamentals.
Some investors are opting to diversify their real estate portfolios by focusing on holiday rentals and flat sharing, strategies that allow for immediate returns. This, however, can result in sectoral bubbles within the overall market, if not accompanied by solid real demand over the long term.
Investors’ confidence that prices will continue to rise is also reflected in the proliferation of leveraged transactions, with high levels of indebtedness that increase the risk of abrupt adjustments in the event of a downturn, leaving the market particularly vulnerable.
Conclusion
Although the Spanish real estate market in 2025 shows some signs of overvaluation in very specific areas, the current data do not allow us to state categorically that we are facing a generalised real estate bubble. The moderate price rises, the adjustment in supply and a demand that is adapting to new economic conditions reflect a market in transition rather than at imminent risk of collapse.
However, these developments oblige both buyers and investors to exercise caution and judgement. In this context, exploring alternatives such as renting offices in Madrid or renting rooms in Madrid is a flexible and strategic option, especially for those looking to adapt to a changing environment without making long-term commitments.
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