5 Reasons We’re Not in a Property Bubble

And why it will get even more expensive before it gets better 🥳

Madrid | July 16, 2025

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Yeah, we’d like to live there too. Source: Rodrigo Curi on Unsplash

We wish we had better real estate news, but…

By now you’ve heard it in the checkout line, on the terraza, or shouted by someone rage-scrolling Idealista: Spain is in a housing bubble. Prices are too high. Wages haven’t kept up. The market is irrational. It feels like 2008 all over again. We’re all going to die!

Except it isn’t like that (well, we will all die—just as Sen. Joni Ernst). And if you’re holding your breath for the crash, you might want to exhale. Slowly.

This is not a speculative bubble fueled by cheap money and bank-issued opium like the 2007-8 crash, when half of Spain seemed to buy a second house in the España profunda or some beach where no one goes before realizing, as the economy slowed, ”¡Jolín! I don’t have the money!”

Instead, it’s a chronic shortage of housing in the places cities people actually want to live, made worse by surging demand, shrinking supply, and government policy that seems specifically designed to make absolutely everything worse.

What does that mean? Spanish housing prices have risen 77% since 2014, according to Oxford Economics. The price of an already existing home (i.e. not new) rose 14.8% year-over-year in May—the biggest recorded rise ever—according to real estate portal Fotocasa. And so? People who would have bought in the past now rent—in 2024, 20.4% of Spanish households were renting, up from 14.9% in 2014—and those who used to rent? They commute to work from Farawayistan, or live in Chez MamiyPapi.

And prices? They’re going to keep rising.

Let’s break it down—because, honestly, if we don’t, who will?

1. 👶 The population is growing. Fast.

Spain is having a growth spurt—and it has nothing to do with birth rates (though we do like that baby emoji). This is an immigration story. In 2023, Spain’s population jumped by more than 530,000, hitting a record 48.6m. All of that increase came from foreign born people, according to the national INE statistics service.

That’s not a one-off. In just five years, Spain has added over 1.7m residents (we’re now at 49.2m), almost the population of Barcelona—and about 97% of those new residents are foreign born. And where are these newcomers heading? Not Teruel.

The growth is concentrated in job-rich regions like Madrid, Barcelona, Málaga, and Valencia. The kind of places where housing is already tight. The kind of places where you’re competing with other buyers, renters, tourists, foreign investors, and—god forbid—a remote worker from Amsterdam with a relocation bonus and the desperate need to be near a beach.

“​​If 500,000 more people arrive in Spain each year, many of them in very limited locations…this creates the perfect combination for housing prices to continue rising,” says Antonio de la Fuente, director at Colliers. “We estimate that prices will rise several percentage points above inflation.”

This isn’t irrational exuberance. It’s math: more people chasing too few homes.

2. 🏗️ We are not building nearly enough

Yes, Spain is building more than it was during the pandemic. In 2024, the country issued 127,721 permits for new housing—up 17% from the year before, and the highest number since 2008, according to El País.

Sounds impressive—until you consider that Spain faces a 600,000-home deficit, according to the Banco de España, and was permitting 900,000 units a year during the real estate boom (and bubble) of the early 2000s. The result? Between 2022 and 2024, the number of new households exceeded the numbers of new homes by 3-to-1.

Even when homes do get built, delays are long. There’s not enough land zoned for residential. Permitting can take well over a year. And dense urban construction (you know, where people actually live) is the hardest to greenlight. That doesn’t mean cities aren’t trying—a new Madrid law allowing offices to be turned into housing without redoing zoning laws has so far led to licenses for 1,500 new units. But that’s a small number, and even that takes time.

CaixaBank Research and CBRE both see housing permits rising this year—but only to the range of 135,000-140,000. And Madrid and its metropolitan area are at work on large-scale projects like Madrid Nuevo Norte, Valdecarros, Los Berrocales, Los Ahijones, Los Cerros and Valgrande, with over 200,000 homes between them (many with affordability protections). But they are years (if not a decade) from completion.

And you know what makes it worse? The Bank of Spain estimates that the country needs 1.5m more “social” (government subsidized/affordable) housing units. Only 1% of Spanish housing is “social”, putting it at the tail of Europe.

If this is a building boom, it’s the slowest boom in European history.

3. 🏚️ Yes, there are millions of empty homes. No, they’re not where you need them.

Every time someone dares mention housing scarcity, someone else retorts: But there are 4 million empty homes in Spain!

They’re not wrong. But they’re not right, either.

According to the Banco de España, some 4 million homes in Spain are unoccupied. But nearly 40% of those have been empty for over five years, according to Fotocasa.

And guess where they are? Mostly in rural provinces, depopulated towns, or decaying beach developments that last peaked on an episode of Verano Azul (look it up!). In other words, places with no jobs where no one wants to live. Only some 10% are in major cities. Meanwhile, job-seeking renters in Madrid are choosing between €1,300 one-bedrooms (on a good day) or moving back in with their parents.

In the words of Ángel Gavilán, the former head of research at the Bank of Spain, according to SpanishPropertyInsight:

“The problem is, houses can’t be moved.”

So will putting all of Spain’s vacant homes back on the long-term market solve our problems? Nope.

4. 🕺 The damn tourists (and foreigners)

Foreign buyers didn’t cause the problem. But they didn’t help.

In the first six months of 2024, foreigners (both resident and non-resident) bought 14.6% of all homes in Spain, a hair below the 2023 record of 15%. And in beach-heavy places like the Balearics, the Canaries, and the Comunidad Valenciana, the figure was close to or above 30%, according to property registrar data.

And they’re not exactly coming in with tight budgets. Spain’s registar data shows that foreigners bought around 93,000 homes in 2024, but only registered 32,714 mortgages—suggesting most are paying all cash—and set a new record for purchases of €500,000+ homes. Locals are being priced out not just by Spain’s growing population, but by international liquidity.

At the same time, foreigner-aimed Airbnb-style tourist rentals are also gobbling up prime inventory. Tourist rentals in the hotspot that is Marbella account for some 60% of the rental market, while in Málaga the number is over 20%.

So we should be optimistic about recent actions to force those rentals back onto the regular market, no? The national government ordered Airbnb to remove 66,000 listings earlier this year, and Barcelona plans to eliminate short-term tourist rentals by 2028.

The problem is those moves will take time to make their effect felt—Barcelona still has over 12,700 listings on Airbnb—and in desirable cities for workers (we’re looking at you, Madrid and Barcelona), the percentage of rentals being used for tourists drops below 5%. Putting them back on the long-term market won’t radically change the picture.

5. 📃 The government is doing (almost) everything to make it worse

Enter the Ley de Vivienda, the government’s ambitious plan to cap rents, tax vacant homes, and declare “tense” zones too profitable for landlords. This has been most eagerly embraced by Catalonia and its capital Barcelona, which had added another requirement to the mix: that developers set aside 30% of new and refurb projects for affordable housing.

The result? Many property owners have pulled their flats from the rental market altogether or moved them onto the black market, creating an even tighter squeeze on available supply. Institutional investors like Blackstone have begun offloading their residential properties in Barcelona due to what they call “legal uncertainty”. And since 2023, Madrid has attracted four times as much rental real estate investment as Barcelona, according to the latest JLL report on the impact of regulation in the sector.

Antonio de la Fuente, director at Colliers, put it simply:

“Investors no longer invest in areas where the Housing Law applies.…Institutional investors no longer want to even hear about operations in Catalonia or in ‘tense’ areas."

The policy is well-intentioned. But in practice? Fewer homes to rent. Fewer incentives to build. And no signs of improvement. Slow clap. 👏

So, no—this is not a bubble

There are no ninja loans. No speculative flippers. No ghost towers waiting to collapse. There is just painfully real demand colliding with artificially constrained supply.

Prices are rising, yes—but not because of hype. Because the system is broken. Because cities are growing faster than their housing stock. Because not enough people want to sell, rent, or build under the current rules.

This isn’t a housing bubble. It’s a housing crisis.

Now, of course, if war comes to Western Europe, or Trump collapses the world economy, or an asteroid lands in Teruel, or residents get so fed up they elect a government that nationalizes real estate, prices may well indeed collapse.

But if you’re sitting on the sidelines expecting that to happen, we have some bad news: Prices are more likely to go up.

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