Luxury housing market outlook: will demand continue to rise in 2025?

The Spanish luxury housing market is in robust health and experiencing rapid growth. Increasingly, more deals are being closed each year at higher prices, positioning Spain at the heart of international investment. In fact, 1,200 branded residences are planned for the coming years.

However, as the saying goes, what goes up must come down... or does it? To assess how the luxury housing sector will perform in 2024, the outlook for 2025, and whether demand will continue to rise, idealista/news has spoken with several experts in the field.

Madrid, the second most attractive European capital for investment

“In 2024, Madrid has established itself as the second most attractive European capital for real estate investment, surpassing Paris and moving up from eighth place a decade ago. This growth highlights the city’s appeal to international investors, particularly in the high-end segment,” comments Luis Valdés, Managing Director of Residential Sales Advisory at Colliers.

“Demand for luxury properties has continued to rise, driven by both Spanish and international buyers. Spain offers a stable legal framework and a growing economy, making it an increasingly attractive destination for investors,” adds Valdés.

Which markets have seen the most activity?

"In the first half of 2024, Málaga accounted for 30% of the prime market in Spain, closely followed by Mallorca at 27%. The remaining share was spread across major cities like Madrid and Barcelona, as well as coastal areas such as Alicante and Ibiza. We don’t anticipate any significant changes in this trend," explains Alexander Vaughan, co-founder of Lucas Fox.

Valdés adds, "Madrid and the Costa del Sol have dominated luxury real estate transactions in 2024, and we expect them to remain the main focus for investors and buyers this year. Within Madrid, the Recoletos and Salamanca districts will continue to be the epicentre of these transactions, with Almagro and Justicia becoming more established, and Castellana-María de Molina seeing a resurgence."

The luxury sector will continue to grow in 2025

Alexander Vaughan believes the market will remain strong in 2025, continuing the positive trend seen in 2024 with no signs of slowing down. “Both domestic and international demand will keep growing, as Spain’s economic outlook is positive, with the International Monetary Fund (IMF) forecasting that Spain will remain one of the best-performing economies in 2025. Interest from North American and Latin American markets will continue to rise, alongside local and European demand,” explains the co-founder of Lucas Fox.

Gonzalo López-van Dam, CEO of Promora, shares a similar view, stating that there are no reasons or indications to suggest a change in the market trend, with prices continuing to rise due to increasingly solid demand. “More and more people are interested in living in Spain, particularly in Madrid and the Costa del Sol. There’s still plenty of growth potential,” says the CEO.

“However, there are many external factors that should not be overlooked, which could affect both the general economy and the real estate market. In my opinion, the next crisis will not arise from excess credit or financing (a real estate bubble), but rather from issues like a debt crisis or a global event that directly impacts financial and property markets,” warns López-van Dam.

More demand and higher prices

All the experts interviewed agree that luxury housing prices and demand will continue to rise. Luis Valdés believes that the new type of buyer is increasingly discerning and well-informed about the market, but is willing to pay record prices if the property meets their expectations. “The development of new projects in the coming years is limited due to the shortage of available land and quality properties for renovation, making it difficult to create residential projects that satisfy this new, highly demanding buyer.”

He adds, “In areas like the Salamanca district, this issue is compounded by the prevalence of buildings with poorly lit interior courtyards and the stringent architectural protection regulations, which significantly increase renovation costs.”

“At Lucas Fox, we anticipate that both demand and transaction volumes will continue to grow, driven by increasing local demand and robust overseas interest, particularly from the Americas. Prices will keep rising, mainly due to the growing demand from both international and local buyers and a lack of supply. The insufficient number of new-build homes being constructed to meet this demand will put further pressure on prices,” explains Alexander Vaughan.

How much will luxury housing prices rise in 2025?

“Prices continue to rise, with no signs of slowing down. They are currently at €25,000 per square metre, and it won't be long before they surpass the €30,000 per square metre mark,” estimates Luis Valdés, Managing Director of Residential Sales Advisory at Colliers.

Similarly, Vaughan notes, “House prices in Spain increased by an average of 5% in the first half of the year compared to the same period last year, and by 35% over the past decade (in nominal terms). I believe prices will continue to rise as supply fails to meet demand.”

No fear of the end of the golden visa

The golden visa allowed individuals to acquire Spanish nationality by investing €500,000 in one or more properties. However, Organic Law 1/2025, passed on 2 January, which introduces measures to improve the efficiency of the Public Justice Service, will put an end to this on 3 April 2025. Despite this change, it is expected to have little impact.

“The end of the golden visa will have a minimal effect on the luxury market. In fact, we have already seen a surge in last-minute requests from clients. We’ve even had one client who increased their budget to secure a sale and obtain the visa before the scheme ends,” comments the co-founder of Lucas Fox.

Latin Americans, the most active in the luxury market

The nationalities with the strongest presence in the luxury housing sector are Latin Americans, particularly Mexicans and Venezuelans, who lead demand in markets like Madrid. Following closely are Peruvians, Chileans, Ecuadorians and Costa Ricans, whose numbers are steadily rising. This group represents around 50% of buyers. Additionally, the presence of European buyers with high purchasing power in this market is also on the rise.

More branded residences in 2025

“The branded residential sector will continue to grow and expand across Spain, both in the south (Marbella, Málaga) and in key cities like Madrid and Barcelona. International brands such as SLS and St. Regis are entering the Spanish market, and we can expect to see more new brands joining this dynamic sector,” Vaughan said.

What type of luxury housing is in demand?

It depends. “In central Madrid, the most sought-after properties are located in exclusive areas such as the Salamanca district, Chamberí, Justicia and Recoletos. These flats typically range from 150 to 350 m², with prices varying between €1.5 and €5.5 million, and feature between three and five bedrooms,” explains Gonzalo López-van Dam, CEO of Promora.

“On the other hand, in luxury developments like La Moraleja or Somosaguas/Valdemarín, buyers are more inclined to purchase larger homes, ranging from 650 to 1,000 m², with prices ranging from €3 to €9 million. These properties are known for their expansive gardens, swimming pools and gyms. In recent years, we've seen Venezuelan and Mexican buyers who previously acquired homes in central Madrid now considering these luxury developments as an attractive option, offering more amenities at competitive prices, yet still within a reasonable distance from the city centre,” says the CEO of Promora.

How the historic epicentre of Spanish luxury closed 2024: Marbella and Costa del Sol

"The luxury housing market in Marbella and the Costa del Sol has ended 2024 with strong figures, as these areas remain key hubs for both Spanish and international buyers. In Marbella, prices have seen a moderate increase of 5-7% compared to the previous year, reflecting a stabilisation after the post-pandemic boom," comments Eric Ebbing, CEO of Homerun Brokers.

"However, the main challenge continues to be the imbalance between high demand and the limited supply of exclusive properties. The shortage of new developments, particularly in prime locations, has contributed to this tight market environment," he adds.

Luxury home prices in Marbella and the Costa del Sol will go up by 3 to 5%

"By 2025, we expect demand in the luxury housing sector in Marbella and the Costa del Sol to remain high, although at more normalised levels, similar to those of 2019, compared to the extraordinary peaks seen after the pandemic. This represents a return to a more sustainable market dynamic," says Eric.

"We anticipate that prices will continue to rise slightly, perhaps by around 3-5%, driven by the interest of international buyers and the perception of Marbella as a safe and exclusive destination. However, the lack of inventory will continue to pose a challenge, potentially lengthening the time it takes to close transactions," comments the CEO of Homerun Brokers.

The number of operations will decrease, but not the demand

“We expect the number of luxury property transactions in Marbella and the Costa del Sol to fall short of the record levels seen in previous years, but the market will remain active. High demand and a shortage of properties will drive price increases, albeit at a more moderate rate. These areas will continue to be a European benchmark, thanks to their appealing lifestyle and high quality of living,” concludes Eric.