The rise in house prices in Spain shows no signs of slowing over the coming years. According to Standard & Poor’s Global Ratings, Spain is expected to be the European country with the strongest house price growth in 2027 and 2028, with increases of 7.4% and 6.2%, respectively.
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In 2026, however, Spain is forecast to rank second in Europe, with house prices expected to rise by 9.1%, behind Portugal, where prices are projected to increase by 10%.
S&P Global Ratings has revised its forecast for Portugal upwards by 3% compared with its February projections. In Spain, meanwhile, the agency has slightly lowered its forecast by 0.2% since February.
Regarding the Spanish market, the agency highlights the impact of the country's strong labour market on housing demand. “Robust job creation and wage growth have increased purchasing power and encouraged immigration, widening the gap between housing supply and demand. At the same time, bureaucratic obstacles in the construction sector have constrained new housing development,” the report concludes.
Upward trend across Europe
S&P expects house prices across Europe to increase by an average of 4% in 2026 and by more than 3% in 2027, outpacing growth in household incomes. According to the agency, this upward trend is likely to continue through to 2029 across all the markets included in its analysis.
The report identifies the shortage of new housing supply as the principal driver behind rising prices. According to S&P, this situation is being sustained by a combination of factors, including a lack of skilled labour, elevated construction costs, complex planning and permitting procedures, and the growth of short-term tourist rentals, all of which reduce the stock of homes available to residents.
Several European governments have responded with initiatives aimed at boosting housing supply, including Germany's Bau-Turbo, France's Relance Logement, Spain's €7 billion State Housing Plan and Italy's Piano Casa. However, S&P warns that the impact of these measures will take time to materialise and notes that some policies focused on stimulating demand could even place additional upward pressure on house prices in the short term.
Alternative scenario
The agency has also outlined a more favourable scenario, in which faster disinflation and interest rate cuts would help bring European house price growth down to 1.4% by 2028. Under this scenario, Germany and the United Kingdom would benefit the most due to their greater sensitivity to changes in interest rates. By contrast, structurally undersupplied markets such as Spain, Portugal and Ireland would see only limited deviations from the agency's baseline forecast.
By 2029, S&P expects the effects of the energy price shock to have largely faded. As a result, the more optimistic scenario mainly represents a shift in timing rather than a significant change in long-term outcomes. In this case, house price growth would occur earlier, during 2027 and 2028, rather than being spread out until 2029.
