Market in Depth

Spain Residential Real Estate Market Analysis 2023

Lalaine C. Delmendo | February 28, 2023

Spain's residential property market remains buoyant, with nationwide house prices rising by 5.03% during 2022 (but fell slightly by 0.64% in real terms), according to figures from the online property information site Idealista.

This is in line with official figures released by the Bank of Spain, which showed that Spanish house prices increased by 4.72% to €1,740 per square metre (sq. m) during the year to Q3 2022, following y-o-y increases of 5.55% in Q2 2022, 6.68% in Q1 2022, 4.43% in Q4 2021 and 2.59% in Q3 2021. However when adjusted for inflation, house prices actually dropped 4.85%.

On a quarterly basis, house prices were almost unchanged in Q3 2022 (fell slightly by 1.21% when adjusted for inflation).

The nationwide Instituto Nacional de Estadistica (INE) house price index is even more optimistic, revealing a y-o-y increase of 7.6% (-2.2% inflation-adjusted) in Q3 2022.

By property type:
  • Existing dwellings: prices rose by 7.8% y-o-y in Q3 2022 (-2% inflation-adjusted), following a 4.3% increase in Q3 2021.
  • New dwellings: prices rose by 6.8% in Q3 2022 from a year earlier (-3% inflation-adjusted), after rising by 4.1% in the previous year.

By autonomous regions, Cantabria saw the biggest y-o-y price growth in Q3 2022, at 9.3%, closely followed by Andalucia (8.3%), Balears (8.3%), Canarias (8.1%), Cataluña (8.1%), La Rioja (8.1%), Ceuta (7.9%), País Vasco (7.8%), Madrid (7.6%) and Murcia (7.1%).

More moderate house price increases were seen in Valencian Community (6.9%), Navarra (6.8%), Castilla y León (6.6%), Castilla – La Mancha (6.6%), Extremadura (6.5%), Asturias (6.4%), Aragón (6.2%), and Galicia (6.1%).

Spain's housing market only returned to growth in 2015, having fallen by 36.3% (-42.9% inflation-adjusted) from Q3 2007 to Q1 2015, with existing home prices falling by as much as 43.1% (-49% inflation-adjusted), based on figures from INE. There were 24 consecutive quarters of y-o-y declines.

Spain houses for sale
From 2015 to 2019, house prices increased by an annual average of 2.5% (1.6% inflation-adjusted). After a slight house price fall of 1.85% (-1.13% inflation-adjusted) in 2020 due to the adverse impact of the Covid-19 pandemic, the Spanish housing market bounced back quickly in the following years, with prices rising by 4.43% in 2021 and 5.03% in 2022. Yet in real terms, house prices are actually down, amidst soaring inflation.

Property demand remains robust. During 2022, home sales in Spain increased by 14.7% y-o-y to 649,494 units, according to Instituto Nacional de Estadistica (INE), following an annual increase of 34.8% in 2021 and y-o-y declines of 16.9% in 2020 and 2.4% in 2019.

Yet residential construction indicators showed mixed results. In the first three quarters of 2022, the total number of housing starts fell by 20.5% y-o-y to 58,650 units while completions rose by 12.3% y-o-y to 70,304 units, based on figures from the Ministry of Development.

Overall, the Spanish economy expanded by a robust 5.5% in 2022 from a year earlier, following a 5.1% growth in 2021 and a huge 10.8% contraction in 2020, primarily buoyed by strong rebound in tourism and healthy private consumption, according to the European Commission. Though the economy is projected to slow considerably this year, with a real GDP growth forecast of just 1.3%, based on figures from Bank of Spain.

Analysis of Spain Residential Property Market »

Rental Yields

Gross rental yields in Spain have returned to normal

Gross rental yields on apartments in Barcelona´s Ciutat Vella - the return earned on the purchase price of a rental property, before taxation, vacancy costs, and other costs - range from 4.00% to 5.15%. Similar yields, or maybe slightly lower, can also be had in Madrid. Not great, though not untypical for cities like Madrid and Barcelona. Yields on the very smallest apartments now offer reasonable returns. But then smaller apartments tend to need more maintenance, so a higher yield is justified.

Prices of apartments. Prices per square metre (sq. m.) of apartments in Barcelona range from around EUR 4,300 to EUR 6,000, or around EUR 225,000-300,000 for a 50 sq. m. apartment. In the heart of Madrid, i.e., Chamartín, Chamberí, Retiro and Salamanca, prices per sq. m. range from around EUR 4,700 to EUR 5,900, or around EUR 265,000 to 290,000 for a 50 sq. m. apartment. There´s very little price-difference between the two cities, and for all practical purposes costs are around the same.

In nearby upscale suburbs of Madrid such as Las Rozas, Majadahonda and Pozuelo de Alarcón, apartments are cheaper, with prices per sq. m. ranging from around EUR 3,100 to EUR 3,800.

Rents of apartments. Rents are similar in the two cities, maybe slightly lower in Madrid, so that 50 sq. m. apartments will cost around 950-1,100 euros per month, while 120 sq. m. apartments will cost around 1,750-2,500 euros a month.

Conclusion: All these yields figures are higher than last year, which was higher than the previous year. Spain is once again beginning to look a possible investment destination.

When buying property, take into consideration that round-trip transaction costs are moderate to high in Spain. See our Property transaction costs analysis in Spain and Residential property transaction costs in Spain, compared to the rest of Europe.

Read Rental Yields »

Taxes and Costs

Taxes are high in Spain

Rental Income: All property owners are subject to a flat tax of 24% on gross rental income.

Property and Wealth: A special annual 3% tax is levied on the cadastral value of real estate owned by nonresidents.

Capital Gains: Capital gains tax realized by nonresidents are subject to flat rate of 19%.

Inheritance: Each beneficiary’s inheritance is taxed at progressive rates, from 7.65% to 34%, after certain tax-free amounts have been deducted.

Residents: Resident individuals are liable to tax on their worldwide income and assets at progressive rates, from 9.50% to 22.50%.

Read Taxes and Costs »

Buying Guide

Total transaction costs are moderate in Spain

Spain luxury houses for saleThe total roundtrip transaction cost is around 9.50% to 15%. This includes the Property Transfer Tax, which varies from 6% to 10% depending on the autonomous region, and the real estate agent’s commission, which is around 2.5% to 3%.

For new properties, Value Added Tax, plus stamp duty, is imposed instead of property transfer tax.

Read Buying Guide »

Landlord and Tenant

Law and slow courts benefit tenants

Spain properties for saleSpain’s rental market is extremely pro-tenant.

Rent Control: The landlord and tenant have the contractual freedom to fix the rent and state the due date of payment. However, rent increases are tied to the Consumer Price Index and limited to once a year.

Tenant Security: The 1994 Urban Tenancy Act aimed to restore balance between the interest of landlords and tenants. It failed. Tenants are guaranteed tenure for five years. Courts are painfully slow in resolving cases of tenant eviction and compensation for rental arrears and damages.

Read Landlord and Tenant »


Strong economic growth in 2022, but outlook is uncertain

In January 23, 2014, Spain was the second euro zone country to exit its international bailout program, after Ireland. The Spanish economy has consistently outperformed much of Europe since. However, it has been a long, hard slog. Recession had been Spain’s normal condition for years, due to the global financial meltdown and the Eurozone debt crisis.

Spain gdp unemployment
The Spanish economy grew by an annual average of 2.8% from 2015 to 2019. Then the Covid-19 pandemic broke out, causing consumer demand and business investment to plunge. The economy contracted by a huge 10.8% in 2020 – one of the hardest hit in the region and the country’s worst performance in recent history. Spain recorded a real GDP growth rate of 5.1% in 2021, but still not enough to fully offset the decline in the preceding year.

Then in 2022, the economy expanded by a robust 5.5% from a year earlier, primarily buoyed by strong rebound in tourism and healthy private consumption, according to the European Commission.

“Spain weathered relatively well the negative shocks unleashed by Russia’s war of aggression against Ukraine in 2022,” said the European Commission. “The resilience of the economy was underpinned by the strong rebound in tourism over the summer season and dynamism of private consumption, also supported by positive labour market developments.”

Spain’s economy is projected to slow considerably this year, with a real GDP growth forecast of just 1.3%, based on figures from Bank of Spain, as consumption will remain subdued due to rising interest rates and as inflationary pressures will further erode purchasing power in 2023.

In January 2023, nationwide inflation stood at 5.9%, up from 5.7% in the previous month but still lower than the previous year’s 6.1%, according to INE. Inflation reached a nearly four decade peak of 10.8% in July 2022. These figures are far from an average of just 1.1% from 2010 to 2020 and well above the ECB’s target of 2%.

Spain gdp inflation
Spain’s budget deficit was estimated at 4.3% of GDP in 2022, according to the Bank of Spain, sharply down from shortfalls of 6.9% in 2021 and 10.3% in 2020. However, it remains above the pre-pandemic deficit of 3.1% of GDP recorded in 2019. The government aims to reduce the deficit to about 3.9% of GDP in 2023.

The country’s gross public debt also declined by more than 5 percentage points in 2022 to 113.1% of GDP, its steepest decline ever, after it gained more than 20 percentage points during the pandemic, according to the Bank of Spain.

The nationwide unemployment was 12.87% in Q4 2022, up from 12.67% in the previous quarter but still down from 13.33% in the previous year, according to INE. Unemployment in Spain averaged about 22% from 2010 to 2017 before falling to an annual average of 14.5% in 2018-22.