Spain’s housing shortage set to push prices higher through 2027

Spain’s next housing cycle: why prices will climb until 2027

The Bankinter real estate report is a clear wake-up call for anyone watching the real estate Spain market: house prices are expected to rise by 7% this year and a further 4% by 2027. That forecast is driven less by credit conditions and more by a chronic shortfall of homes. For buyers, investors and expats who follow housing prices Spain, this is a market where supply constraints matter more than temporary demand swings.

Bankinter’s numbers are stark. The bank says Spain needs about two million homes over the next decade, while the current shortfall is around 700,000 properties and could grow by more than 150,000 homes a year. With annual demand at roughly 250,000 homes—200,000 from new-builds plus 50,000 from foreign buyers—the gap between what people want and what is available will be a defining feature of the market for years.

Why supply will fail to catch up with demand

Bankinter emphasizes the inertia built into residential development: planning, land allocation, permitting and construction all take time. Their blunt assessment is that completed homes will not meet half the estimated demand over the next three years unless public authorities release land and accelerate urban development and changes of use.

From our analysis, the supply squeeze is the result of several intersecting factors:

• Regulatory delays at municipal and regional levels that slow approvals and limit the release of developable land.
• A limited pipeline of shovel-ready projects: developers need more zoned plots with permissions in place.
• Cost pressures on builders, including labour and materials, which stretch delivery timetables and margins.
• A shift of existing housing stock into short-term tourist rentals, which removes long-term rental supply.

What this means in practice is that supply-side fixes will not be instantaneous. Even if Spain cuts red tape and auctions municipal land more quickly, new housing completions will still take years to appear. The result is a sustained period in which housing prices Spain face upward pressure.

Where price growth will be strongest

Bankinter expects the largest price increases in major cities, along the Mediterranean coast and on the islands. The bank’s data on foreign demand helps explain that regional pattern.

• Foreign buyers account for about 20% of all housing transactions in Spain.
• In provinces such as Alicante, Tenerife, Málaga and the Balearic Islands, foreign purchasers reach or exceed 40% of transactions.
• Bankinter estimates foreign buyers have about 80% higher purchasing power than domestic buyers and will keep buying at least 50,000 properties a year.

That concentration of well-funded foreign buyers inflates prices in coastal and island markets, where demand is strongest. For domestic buyers—often with lower incomes—the result is an affordability squeeze in precisely the places foreigners prefer.

We think buyers looking for value will have to accept trade-offs: either compete in high-demand coastal markets, where capital appreciation may be higher but affordability lower, or look inland at provinces where foreign demand is weaker and price growth may be more muted.

Renting has ceased to be a realistic option for many households

Bankinter is blunt about the rental market: it “has ceased to be a viable option for natural demand,” because affordability ratios for renting exceed 50% of income, while a typical threshold for buying is around 35%. The bank links this deterioration to a falling supply of long-term rental properties as landlords switch units into the tourist market and to legal uncertainty that discourages longer-term leasing.

The implications are serious:

• Households priced out of buying are also squeezed on rent, which pushes more people into precarious housing situations.
• Pressure on rents tends to push up headline inflation for housing-related costs and raises living-cost debates in regional governments.
• Policymakers may introduce tighter controls on tourist lets or incentives for long-term rentals, which could change investor economics but will take time to take effect.

From an investor standpoint, the rental stress means two opposing forces. On one hand, reduced long-term rental supply supports rental levels and short-term yields for buy-to-let assets. On the other hand, regulatory risk is higher in regions where local governments feel public pressure to limit tourist rentals or increase tenant protections.

Where investors should look beyond residential

Bankinter draws attention to other real estate asset classes that could benefit from the current macro mix: moderate economic growth, inflation near 2%, stable European interest rates and lower US rates. The bank sees opportunity in offices, shopping centres, logistics and hotels.

Key points from the report and our interpretation:

• Offices and shopping centres have lagged in recent years and therefore could have greater revaluation potential as demand recovers and vacancy levels fall.
• Logistics demand remains resilient, though rental growth may be more concentrated in prime assets than during the last boom cycle.
• The hotel sector has already seen substantial recovery, with valuations up nearly 40% since 2019, and is likely to remain a magnet for investors who target tourism-exposed assets.

Bankinter recommends a positive stance on listed real estate for 2026 and names several European REITs it prefers: Vonovia, Inmobiliaria Colonial and Merlin Properties. It also highlights developers such as Neinor Homes, which after acquiring Aedas will control land for more than 43,000 homes, positioning it to benefit from the constrained supply environment.

For international investors, listed vehicles and developers offer a way to gain exposure without the day-to-day management headaches of buy-to-let, while reducing single-property risk.

Practical advice for buyers, expats and investors

We translate the report’s implications into actionable guidance.