Spain’s property market fractures in two

Raymundo Larraín Nesbitt, October, 1. 2026

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By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Abogados
1^st of October 2026

Introduction

The latest figures show how Spain’s real estate market has fractured into two distinct categories. On the one hand, you have cities and regions where property prices have turned the corner and are now steadily falling; by two digits in some areas. Whereas in other regions, prices continue to rise unabated (in some cases, for 12 years in a row).

This dichotomy has splintered the Spanish property market neatly into two camps:

The Spain that falls

Valladolid leads the pack with price drops of 12% year-to-year. These cities have all in common the following points:

Interior cities (as opposed to coastal ones)
Medium-sized
Negligible foreign demand (largely inhabited by Spanish natives)

This is the first sign of a property cycle change.

The Spain that continues to rise

For the 49^th continued quarterly rise, the following cities continue to lead the pack: Madrid, Barcelona, Palma de Mallorca, and almost all coastal areas.

Spain's official house price index rose 12.2% in the year to the second quarter of 2026, according to the National Statistics Institute (INE). This streak stretches back 12 years, making it one of the longest uninterrupted growth cycles in the index's history.

Why do property prices (and rentals) continue to rise in Spain?

The government interventionism, in both the housing and rental markets, are behind the sharp increase of property prices. We have explained in detail the underlying reasons in previous articles: Property prices in Spain reached all-time highs. Can they continue to rise? and Spanish property prices continue their upward trend. Unchecked migration (fostered by the government left, right and centre) is also becoming a major factor behind this continued price rise.

Despite the government’s ongoing narrative that it is fighting property speculators (which in its eyes are evil foreigners and vulture funds) to bring down property and rental prices, the fact is that all its actions are causing exactly the opposite effect, as we’ve been pointing out for years in multiple articles exposing it how it is.

But, as pointed out in another article, the government has its own vested interests in keeping property (and rental) prices artificially high by purposely stifling supply: New Supreme Court ruling paves the way for tenants to pay IBI and basura tax.

The bottom line is that if the government really wanted to cool down property prices, it could do so in a matter of months – it has the legal tools and means at its disposal. It just lacks the will and continues to approve half baked measures such as Casa 47.

Despite its ongoing rhetoric, the fact it is not in the best (political) interests of the ruling administration for property (and rental) prices to drop. And so, the show must go on.

Conclusion

If you ask me, I think property prices are overblown.

This is not good for the property market or for society at large, especially for vulnerable collectives such as elderly people, single parents or struggling youngsters. Housing is a prime need for humans and governments should step in decisively to curb price anomalies. At no time should governments tamper with supply and demand, much less artificially stifle supply for political gain. This only leads to rising house prices and widespread discontent.

Most Spanish people are now priced out of the property market having to resort to family to secure mortgage loans with durations that now span multiple decades – madness. The canary in the coal mine is that now Spanish lenders are increasingly pulling out of the loan market as prices have reached all-time highs, even surpassing those of 2008.

In a conservative move, Spanish lenders are increasingly moving the goals posts by making mortgage loans more onerous or by raising the bar of requirements for struggling borrowers. Buying property in Spain has become a Sisyphean undertaking for natives and the government is largely to blame for this, make no mistake.

Property prices now outpace most Spanish people’s financial capacity by a long shot. It is an untenable situation for large segments of society (particularly the most vulnerable ones that warrant utmost protection from lawmakers), and the government just keeps dragging its feet and fumbling for words, biding its sweet time until the next general election in 2027.

A little less conversation and a little more action, please.

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