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How the housing crisis in Spain is changing the property market in 2026
Before, Spain was one of the most affordable places to live in Western Europe, known for its sunny climate, sea, great food and relatively cheap housing. Over the past decade, however, rental prices in major cities have risen by 50–70%, while the cost per square metre in Barcelona and Madrid has climbed back to the pre-crisis peaks of 2007. In just two years — from May 2023 to April 2025 — the average rent nationwide increased by 24%, despite the introduction of state rent controls, and, frankly, in many ways because of them. Valencia is no exception: demand continues to grow, supply fails to keep pace, and conditions for both tenants and buyers are becoming increasingly restrictive.
According to Jesús Manuel Martínez Caja, secretary of the Association of Madrid Real Estate Companies (AMADEI), Spain is facing a housing shortfall of around 600,000 homes.
Additional pressure on the market will come because in 2026, rental contracts for 632,000 tenants will expire. In total, this will affect around 1.6 million people, many of whom will face sharp rent increases or be forced to find new housing. At the same time, Spain’s property market is not experiencing a speculative bubble like in 2008, but rather a structural supply crisis: too little is being built, owners are withdrawing properties from the long-term rental market, and administrative barriers are slowing down new construction.
La Cotorra sets out to understand the reasons behind the current housing crisis and spoke with Conchita Fajarnés Longan, managing director of the real estate agency Llave Capital, to understand how the sales and rental markets might evolve in the near future. The short answer: quick improvements are unlikely.
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“This situation really isn’t comparable to what we saw in 2008. Housing prices are rising because of long delays in issuing building permits, population growth, and demand outstripping supply. With a lack of new homes coming onto the market, people are increasingly turning to second-hand properties, and that has already pushed their prices up by 7–8% year on year instead of the usual 1–2%,” says Conchita.
So why, with such high demand, don’t we see tower cranes everywhere building new homes? The explanation is quite banal: the prevalence of many small landowners and lengthy administrative approval processes. As a result, Spain ranks among the slowest countries in Europe when it comes to bringing new developments to market.
“It’s essential to convert as quickly as possible, and as much land as possible, into plots that are ready for development. That would speed up the delivery of new housing and bring prices down. However, in Spain, before a building licence is granted, projects are reviewed for a very long time and face obstacles in the form of excessive requirements for urban infrastructure,” continues the head of Llave Capital.
Spain does not actually lack available land, but turning suitable land into legally buildable plots requires overcoming numerous obstacles. The approval process for a PAI (Integrated Development Project) can take two to three years, just at the negotiation stage between landowners and the local council.
A case from the outskirts of Valencia illustrates the issue: an industrial area in La Eliana took 18 years from the first negotiations to the start of construction. The reasons included disagreements between landowners, municipal demands for green spaces and infrastructure, and disputes over how costs should be shared.
The outcome of this model is rising land prices. Identical flats, built to the same design and with the same materials in neighbouring towns such as La Eliana and La Pobla, can differ significantly in price — €320,000 vs. €240,000 respectively. The gap is explained by the cost of the land and by the complexity of administrative procedures.
“There are two ways to convert land into buildable plots. Either small owners — and there can often be 50 or even 100 of them — all reach an agreement and form an association, which is practically impossible. Or a developer steps in, presents a project and takes it to the authorities. But since every party involved — both private owners and officials — wants to maximise their own benefit, the investor ends up suffering. Timelines stretch out, machinery and workers sit idle, loan interest keeps accruing, and the project’s profitability evaporates.
Let me give an example. The authorities say: fine, we’ll approve the PAI, but out of every 1,000 square metres, the owner effectively loses around 50%, because roads, pavements, schools and other infrastructure have to be built. In a town like La Eliana, with 20,000 residents, if you build 1,500 homes (say, three people per home), that’s 4,500 new residents.”
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They need new schools, new public parks and hospitals. In other words, it’s not just about building flats. It means you also have to build all the supporting infrastructure.
“And if the authorities streamlined their procedures and shortened project approval times, if they actively encouraged more land to be classified and approved for development, we would have better housing, and it would be cheaper,” the Spanish expert explains.
In February 2026, Madrid hosted a meeting of the Consortium of European Building Control (CEBC), a European organisation bringing together building control professionals. Participants compared construction permit timelines across different countries, and the contrasts were stark. In Finland, the process takes between two weeks and three months, thanks to full digitalisation. In Cyprus, it takes 20 to 40 days under a system of external oversight. In Poland, around 45 days. In Germany, three to four months are supported by standardised technical regulations.
In Spain, obtaining a building permit takes between 15 and 24 months. At the same meeting, Alfredo Sanz, president of the General Council of Technical Architects of Spain (CGATE), cited an average timeframe of 15 to 18 months, noting that in large cities and coastal areas the wait can stretch to as long as two years.
The reasons for these delays are structural. First, there is a highly complex regulatory framework: national, regional and municipal legislation overlaps, creating legal uncertainty and forcing municipal technicians to scrutinise every project in extreme detail for fear of legal challenges. Second, there is a lack of digitalisation: communication between urban planning, environmental and fire safety departments often remains paper-based and poorly automated. Third, there is a shortage of staff: workloads in urban planning departments have increased dramatically, while staffing levels have not grown at the same pace, turning local authorities into a bottleneck for the entire sector.
The Spanish Council of Architects’ Associations (CSCAE) estimates that administrative delays increase the final cost of housing by 3–5%, due to the financial burden of holding undeveloped land and rising construction material prices during prolonged waiting periods.
Labour shortage and young people leaving for the public sector
The third problem is a shortage of workers. During the COVID-19 pandemic, many construction workers moved into other sectors and never returned. The younger generation is also reluctant to enter construction, preferring the stability of public-sector jobs.
According to surveys, 68% of working Spaniards would be willing to move from the private sector into public service at the first opportunity. The reasons are clear: average pay in the public sector is 32% higher than in the private sector — €2,800 compared with €1,900, according to Spain’s National Statistics Institute (INE) data for 2021. Public employees also benefit from job security, paid sick leave from day one, and pensions that are three times higher than those of self-employed workers.
This trend has already produced a paradoxical outcome for the country: Spain now has more public-sector employees than self-employed workers — 3.64 million compared with 3.41 million. The gap continues to widen, placing additional strain on sectors such as construction.
The 2023 Housing Act: How the state attempted to solve the problem
However, Spain’s housing problem is not limited to the slow pace of new construction. In recent years, rental prices have surged dramatically, making renting a flat an almost unbearable financial burden for many people across the country.
In 2025, rental prices in Spain rose by 16.67% yearly, reaching €14.21 per square metre per month in December, according to data from the property portal pisos.com. At the same time, figures from Idealista show that between October 2020 and October 2025, rents increased by a total of 34%.
Wages over the same period have risen far more modestly — by just 7–8%.
As a result, Spaniards are spending an ever larger share of their income on rent. In 2024, this figure reached 47% of the average salary for an 80 m² flat — the highest level since 2019. In contrast, financial experts generally recommend spending no more than 30% of one’s income on housing.
In some regions, the situation is critical. In Madrid, residents are forced to spend up to 71% of their salary on rent; in Catalonia, 64%; in the Basque Country, 56%. In the Valencian Community, the figure stands at 47%.
Young Spaniards are in a particularly difficult position and are increasingly forced to rent individual rooms rather than entire flats. For many, renting a whole apartment has become simply unaffordable. Some 44% of room renters moved straight from their parents’ home into shared accommodation. While this scenario was the exception for their parents’ generation, it has become the norm today.
In May 2023, the government passed the Housing Law, protecting tenants and curbing rising rents. The legislation introduced the concept of “high-pressure areas” in cities where housing supply is scarce, setting limits on rent increases and imposing additional requirements on property owners in these zones.
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Inquiokupas — tenants who stop paying rent and effectively take over a property — are now the main reason why the supply of long-term rentals is shrinking. People move in, pay for a while, and then stop, citing financial hardship, and there is virtually nothing the landlord can do about it..
“The law is on their side, and you’re forced to cover their electricity, water and waste collection bills. In that situation, it’s hardly surprising that many owners decide not to rent out their property at all.
As a result, rental conditions have become much stricter. Landlords now often demand rent default insurance, a bank guarantee, or even a full year’s rent paid in advance. These are very high costs and, for many people, a serious barrier to accessing housing,” explains Conchita Fajarnés Longan.
Owners are shifting properties into short-term or seasonal rentals, selling them, or simply leaving them empty. Across Spain, 3.8 million homes are currently vacant — around 14.4% of the total housing stock. Half of owners cite fear of okupación — illegal occupation — as the main reason.
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Responsibility shift
Criticism of the law boils down to one key point: the state has shifted responsibility for social housing policy onto private property owners.
“Who is responsible for guaranteeing decent housing in Spain? The government. But because the government hasn’t built social housing for seven years, what happens? They shift the problem onto the landlord. The law was meant to tackle large investment funds like BlackRock or Cerberus, but instead it has hit small owners — pensioners living on an €800 pension who rent out a flat for €800 just to make ends meet,” the managing director says..
Initially, the law made no distinction between different types of owners, but it was later amended to introduce a split: “large landlords” were defined as those owning more than 10 properties (or more than five in so-called stressed areas — a threshold adopted by Catalonia, the Basque Country and Navarre in 2024–2025).
However, the main restrictions — caps on rent increases, complex eviction procedures and bans on cutting off utilities to non-paying tenants — still apply to all landlords, regardless of the size of their portfolio. As a result, an owner with two or three flats bought as part of a retirement plan faces the same risks as a large investment fund: a tenant stops paying, eviction is virtually impossible, and the landlord remains responsible for utility bills.
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Landlords and the number of flats owned
In some countries, owning two or three properties is associated with wealth, but in Spain, it is more a middle-class norm, largely because of how the pension system is structured.
“When it comes to an employee — whether a civil servant or someone working in the private sector — the bulk of social security contributions is not paid by the worker themselves, but by the employer or the state. In practice, a ‘gross’ salary represents around 70% of the total cost of employing a worker, while an additional 25% to 40% is paid on top by the employer in the form of social contributions. In other words, the company ultimately pays more for the worker than the worker contributes from their own salary.”
At the same time, for the self-employed and individual entrepreneurs, the burden largely falls on their own shoulders, while the contribution base used to calculate their future pension is generally lower..
“When you’re a small entrepreneur — say, the owner of a bicycle shop, a taxi driver, or a freelancer — and you know your pension will be around €1,000, what do you do? You buy one, two or three flats over the course of your life. Then you receive a €1,000 pension plus, say, another €1,000 from rent — €2,000 in total, which allows you to live decently,” the expert explains.
This is precisely why the 2023 housing law triggered such a strong reaction. For many small property owners, renting out a flat is not a business but a substitute for an insufficient state pension. When the law creates the risk that non-paying tenants can occupy a property without the owner being allowed to cut off electricity or water, many landlords choose to sell instead
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What is happening with the market in Madrid, Barcelona and Valencia?
The capital remains the most expensive market in the country. In November 2025, the average price in the Madrid province stood at €4,491 per square metre, rising to €5,758 per square metre within the city itself. The supply of new-build housing is geographically constrained: Madrid is surrounded by densely populated municipalities, and expansion towards the outskirts requires costly infrastructure projects. At the same time, the city authorities pursue a more liberal housing policy than Catalonia, which attracts investors — but soaring prices make home ownership unattainable for most middle-class families.
Catalonia, by contrast, has imposed rent caps in so-called “stressed areas”, leading to an outflow of investors and a further contraction of supply. According to the Ministry of the Interior (Balance de Criminalidad 2024), Catalonia accounts for 38% of all cases of okupación in Spain — 7,009 out of 16,426 incidents recorded in 2024.
Housing affordability in Barcelona has fallen to just 5%, while rental prices continue to rise despite government regulation.
In January 2026, the Valencian Community adopted a new housing development plan that increases the permitted building density from 75 to 140 homes per hectare. The aim is to reduce land costs and make construction more financially viable. At the same time, local authorities decided not to introduce “stressed zones” with rent controls, preserving the region’s attractiveness for investors.
“I think that in the medium term Valencia will be in a much stronger position than Catalonia,” says the managing director of Llave Capital. “There is no political tension here. Support for independence doesn’t even reach 4–5% of the population. The city still has relatively affordable neighbourhoods — El Grau, Patraix and Malilla — where property prices are significantly lower than in the centre. As for price growth, I expect housing values to rise by around 8–10% in 2026, assuming current trends continue and no new regulations are introduced.”
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What opportunities will foreigners have to purchase property in Spain in 2026?
For non-EU citizens, Spanish banks typically offer mortgages covering 60–70% of a property’s value, compared with 80–90% for Spanish nationals. This means a foreign buyer must provide at least 30–40% of the purchase price as a down payment, plus an additional 12–13% to cover taxes and associated costs (notary fees, registration and taxes).
As a result, buying a flat in Valencia — where the average price is around €250,000 — requires roughly €135,000 in upfront capital. Banks also require proof of income for the past two to three years and confirmation that the funds’ origin is legal, in line with anti-money-laundering regulations. For remote workers or autónomos (self-employed), tax returns for at least the past two years are mandatory.
With a budget of €200,000–300,000, the greatest range of options is found in Valencia. As the expert explains, “There is more supply here, and there are neighbourhoods like El Grau, Patraix and Malilla, which are much cheaper than central areas.”
In Barcelona and Madrid, that budget realistically allows only small flats on the outskirts or in less desirable districts. For buyers open to alternatives, the expert recommends looking at Huelva and Almería — “especially because of Cabo de Gata and the surrounding area. These are two provinces developing well, where property can still be bought at good prices and where there is growth potential.”
Among other southern cities, Seville is seen as having the most balanced market, while Málaga and Cádiz have already become significantly more expensive.
What to expect in 2026?
Spain’s property market is expected to continue growing over the next year, although at a slower pace than in 2024–2025. Forecast price growth is estimated at 8–10% for purchases and 7–10% for rentals, depending on the region.
The Euribor rate has stabilised at 2.23%, making mortgage lending relatively affordable. However, as Conchita Fajarnés Longán points out, “buyers’ purchasing power is limited by the need for substantial savings for a down payment and the guarantee of stable employment.”
The government’s social housing programme is most likely to be implemented slowly, with experts estimating nine to ten years to achieve set goals. As a result, developers are placing their main hopes on easing the process of converting land for residential use and speeding up administrative procedures — though such structural changes would require strong political will.
For buyers and tenants, this leads to one clear conclusion: the sooner a decision is made, the better the chances of securing more favourable conditions. Delaying a purchase or rental for a year or two in the hope that prices will fall is a risky strategy. In all likelihood, the same properties will cost 8–10% more a year from now.