House prices in Spain could continue rising for the rest of the decade due to a persistent lack of supply.
This is the main conclusion of a new real estate report by Bankinter analysts, which updates their forecasts and predicts price growth of 7% this year and 4% by 2027, in line with the quarterly investment report published at the end of last year. The strongest increases are expected in major cities, along the Mediterranean coast and on the islands.
According to the bank, the imbalance between supply and demand will intensify, with as many as two million homes needed over the next decade. The current shortfall of 700,000 properties could be compounded by an additional deficit of more than 150,000 homes each year. This reflects a persistent supply problem, as “the real estate market has significant inertia due to development and construction timelines”, while annual demand stands at around 250,000 homes – 200,000 new-build properties plus 50,000 purchased by foreign buyers.
“We can now say with certainty that completed homes will not even meet half of the estimated demand over the next three years. To increase supply in the future, public authorities must release land and speed up urban development and changes of use,” Bankinter states. It also warns that “the current high-price environment is sustainable for at least the next three to five years.”
"Renting is not a viable option"
The bank’s study also examines the rental market, arguing that it “has ceased to be a viable option for natural demand”, as affordability ratios exceed 50% of income, compared with around 35% required to buy. As a result, this year will see affordability levels well above historical averages.
Bankinter maintains that “the lack of supply is becoming more acute in the rental market” and notes that the decline in available rental stock “is a consequence of the rise in tourist lets and legal uncertainty”.
Despite these upward pressures, the analysts argue that current overvaluation “is moderate and sustainable” as long as the supply shortage persists. They stress that the situation remains far removed from 2007, when affordability ratios reached 55%, and that house prices in real terms are still around 10% below the peak of the property boom.
Foreigners have greater purchasing power
The Bankinter real estate report also highlights the disruptive role of foreign buyers, whose purchasing power is estimated to be 80% higher than that of domestic buyers.
Across Spain, foreign purchasers account for around 20% of all housing transactions. However, in provinces such as Alicante, Tenerife, Málaga and the Balearic Islands, this figure reaches – and in some cases exceeds – 40%. Looking ahead, the bank expects at least 50,000 home purchases per year in the domestic market by foreign buyers.
Favourable environment for other real estate assets
Regarding other real estate assets, Bankinter notes that the current environment remains favourable, supported by moderate economic growth, inflation of around 2%, stable interest rates in Europe and lower rates in the US.
The bank’s experts see greater potential for revaluation in traditional segments such as offices and shopping centres, whose valuations have suffered more in recent years. Limited investment and a shortage of new supply have pushed occupancy levels higher and driven rents above inflation.
In the logistics sector, although demand is expected to remain strong, Bankinter anticipates “a more moderate pace of rental growth than in previous years, concentrated in prime assets”.
Meanwhile, the hotel sector is set to continue attracting a significant share of real estate investment. Valuations still have room to grow, having risen by nearly 40% since 2019.
Tailwinds for listed real estate
Regarding the listed real estate sector, Bankinter analysts maintain their "buy" recommendation for 2026, which they expect to be favourable thanks to moderate but positive economic growth, inflation above 2%, stable interest rates in Europe and declining rates in the US. The sector could also benefit from a rotation out of businesses penalised by artificial intelligence and into real estate.
The bank’s strategy focuses on traditional assets such as offices, shopping centres and residential property, where demand should be supported by economic growth and valuations have been hardest hit in recent years. Among its preferred European Real Estate Investment Trusts (REITs) are Vonovia, Inmobiliaria Colonial and Merlin Properties.
It is also investing in developers, which it believes will continue to benefit from limited supply and rising house prices, particularly Neinor Homes. Following its acquisition of Aedas, Neinor is set to become Spain’s leading developer, with land to build more than 43,000 homes.
