The latest data from the housing price index prepared by the National Institute of Statistics, referring to the first quarter of 2025, shows a growth rate of 12.2%. The index rebounded strongly in the first quarter of 2025, recording a quarter-on-quarter growth of 3.5% compared to 1.8% in the fourth quarter of 2024. The year-over-year variation increased compared to the previous quarter, rising from 11.3% to 12.2%. The autonomous community with the highest growth rate is Andalusia (14%) and the lowest growth is the Balearic Islands (10%). All regions reach new highs in the index of prices for new housing in this first quarter.
“In real terms, the price of new housing is 7.3% above its historical highs, while the price of used housing remains 30.2% below those levels”
For a long time, we have, for the first time in many years, had two consecutive quarters of double-digit growth rates, something the index — created in 2008 when INE was led by Jaume Garcia Villar — only reflects during the first two data points: the first two quarters of 2007. Moreover, something that had not happened for a long time, the growth rates of new and used housing have equalized. The growth of the price of new housing stabilized in the first quarter of 2025 (12.2% year-on-year, versus 12.3% in the previous quarter), while second-hand housing accelerated (12.3%, versus 11.1%). The scarcity that has long plagued new housing is moving to second-hand housing. In any case, in real terms, the price of new housing stands 7.3% above its historical highs, while the price of used housing remains 30.2% below those levels.
The evolution of housing prices reflects a similar pattern when other unofficial indicators are examined, such as the Registrars’ repeat-sales indicator (which shows an annual rate of 14.9%) or Tecnocasa’s indicator (already above 10% in 2024). This acceleration in housing prices has occurred in a context where demand has shown greater strength than expected. According to INE, in the first quarter of 2025, the number of sales rose by 13.7% year-on-year, reaching 673,000 transactions in the last year. About two-thirds are financed with a mortgage (which have grown in the last year by 18.3%) and one-third in cash. This dynamism responds to demand fundamentals: the growth of disposable gross income supported by job creation and the increase of real wages, the vigor of foreign demand, positive migratory flows, households without significant indebtedness, the reduction of interest rates and the expectation that housing prices will continue to rise.
Many compare 2007 with 2025… another bubble is being created! Far from it, the growth in 2007 was propelled by an excessive loosening of credit standards that caused, for a time, a record supply of new housing (600,000 housing units annually) to coexist with double-digit price growth. Then came the burst of the bubble and the decline in prices. From the second quarter of 2008 to the second quarter of 2014, the housing price index shows continuous reductions in the rate of price growth that rose to more than 15%, with an accumulated growth rate of 36.37%. In fact, despite this recent upward trend, it should be noted that real-term housing prices are 20.1% below their historical maximum. In any case, today credit standards are much stricter, credit tends to be scarce and the supply of new homes has long remained around 110,000 new homes per year.
“Let us ban tourist housing, seasonal rentals to students or foreign professionals, ban purchases of homes by foreigners, or buying a home that will not be a primary residence”
In fact, here lies the problem. This rebound in housing prices is largely due to the persistent imbalance between supply and demand, which is pushing prices upward and is expected to continue exerting upward pressure in the coming quarters according to multiple analysts. One way to quantify the mismatch is the relationship between new housing and household formation. Over the last long decade, a ratio has consolidated that fluctuates between 0.4 and 0.8, far from 1 or more, which would guarantee the balance between people who gain independence or arrive from outside and the housing that enters the market.
According to BBVA Research, between 2008 and 2022 Spain shows an average close to 0.6 new housing units per newly formed household, well below what Finland and France record (both above 1.0), and even below what Sweden or the United Kingdom show. If we want it in absolute numbers, between 2021 and 2024, 845,000 additional households were formed in the country, according to INE data. However, only 433,000 new construction permits were granted in that same period. The Bank of Spain recently calculated the housing deficit in Spain and put it at 700,000. And there are no signs of it being solved. INE estimates indicate that, between January 1, 2024 and January 1, 2028, 1,367,000 additional households will be formed (342,000 new households per year). If the pace of new construction permits continues around 108,000-119,000 annually, as has occurred in the 2021-2024 triennium, only 598,000 new homes would be reached in 2024-2028.
When we talk about the disconnect between policy and reality, we are talking about something with many faces. One example is contrasting the diagnosis we have just made or what sector professionals state with what occupies much of the political discourse on housing. If you speak with a sector professional, they will say there is “no product”. That demand is such that when a new housing unit goes on sale, it sells in hours.
Similar to what has been happening in recent years in the rental market, where it is no longer even important to advertise the flat on major digital platforms; with word-of-mouth or using the waiting list, you rent it. However, a large part of the housing discourse focuses on how to manage the “queue” of scarcity. Let us ban tourist housing, seasonal rentals to students or foreign professionals, ban purchases of homes by foreigners or buying a home that will not be a primary residence (can someone explain how there can be a rental market without owners who rent them?). In other words, let’s manage the “queue.” Something that is not easy, that exacerbates the problem (because some of these policies discourage supply), but in any case it will not solve the problem.
“And if we eliminate the queue? And if we eliminate scarcity? Why not build today, if it was done in the past?”
Because… and what if we eliminated the queue? And what if we eliminated scarcity? Why don’t we build today, if it was done in the past? And caution! This question, even if we manage to solve it, is not without caveats. Because within that new construction one must carefully think where and what type of housing. Obviously, there is a lot of social housing, but not only that, but prioritize the type of housing that meets the demand for primary, habitual housing, of good quality and sustainable, but without luxuries. Take advantage of rehabilitation to increase the supply of housing adapted to new, smaller households. Pair with transportation policies that make living 100 kilometers from the major urban centers not mean living too far from opportunities. Think of a strategy so that, when the demographic boom generation (which is largely homeowners) leaves, we can manage that new reality. In other words, there is a lot of debate and very interesting, but we must move past the scarcity and queue-management screen now. The progressive part of Canada and the United Kingdom are already in that screen; how long do we have to wait to be there ourselves?
