Four reasons why Spain's housing prices won't fall

Four reasons why Spain's housing prices won't fall

In February 2026, 45,563 mortgages were signed in Spain, 16.3% more than the previous year, with an average amount of 173,280 euros and an average interest rate of 2.9%. Credit keeps flowing freely, and as long as the tap isn't turned off, demand will keep pushing prices up. But it isn't the only variable: mass immigration, the inflow of foreign capital and the system's resistance to allowing a general devaluation create a scenario in which housing seems doomed never to fall.

Unstoppable demand: immigration and foreign capital

Around 500,000 people enter Spain every year. Not all of them buy, but this constant flow of new demand —real or speculative— puts pressure on the market in the areas where they settle. In Madrid, Latin American capital, from Mexicans to Venezuelans, has been buying up whole swathes of neighbourhoods like Salamanca, where 5,000 euros per square metre seems cheap compared with their home countries. The argument is clear: as long as there is freedom of movement for people and capital, housing in the most sought-after areas won't fall. Foreign buyers with high purchasing power act as a firm floor under prices.

Credit keeps flowing: the engine of demand

Banks have not restricted credit the way they did in 2008. Quite the opposite: in 2025, mortgages exceeded half a million, an increase of nearly 20%. 66% were signed at fixed rates, which gives borrowers stability and keeps demand active. Cheap (or at least affordable) credit is the fuel of the price machine. As a recurring analysis points out, credit expansion tends to turn assets denominated in fiat currency into bubbles. Unless the ECB aggressively raises rates, the upward inertia will continue.

The policies preventing a fall

Governments cannot allow housing to collapse, because it would drag down banks, investment funds and indebted households. When 80% of the population is drowning but real estate assets are the middle class's main savings cushion, a generalised fall would be politically lethal. That's why any measure that would deflate the market is avoided: immigration isn't controlled, foreign purchases aren't limited, and credit isn't touched. In addition, the new European energy efficiency directive will require, from 2030 onwards, that homes have a minimum E rating, which will make supply more expensive and push the least efficient properties out of the market, further reducing available supply.

And if all of this collapses?

Another strand of the analysis holds that the system is unsustainable. The mass arrival of immigrants with low purchasing power —who can neither buy nor rent at market prices— leads to slums and squatting. The mass of new residents does not generate solvent demand; instead it degrades the housing stock and pushes out the national middle class, which emigrates. The result would be a Spanish Detroit: entire neighbourhoods abandoned, homes at zero price. But as long as bank balance sheets and public accounts depend on bricks, no one will let the bubble burst.

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The question nobody answers is: how long can this contradiction be sustained? Credit flows, foreign demand props up prices and the State avoids collapse, but the social fabric is cracking. Perhaps housing won't fall, but the model of a property-owning middle class has already broken.

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