The last few years have seen the stock of Spanish property available to buy or rent reduce dramatically and as a result prices have risen equally dramatically. Today we are going to look at why there are so few properties available in Spain concentrating just on sales. Rentals will be for another day. This is true not only in the most in demand areas but also in small towns and villages throughout the country even in the places known as "La España Vacia" (Empty Spain). Our post today examines the many reasons why breaking up is hard to do and why there is so little supply in the Spanish property market.
Demand
As we have said before demand is high and continues to grow. Therefore there are more buyers ready to snap up anything that comes onto the market. As a buyer you have to make a decision quickly otherwise the property is likely to be sold from underneath you (See our earlier post Blink and It's Gone). So demand plays a large part in the situation because without demand the number of properties on the market would grow of course. However, it is not the only factor in play.
Supply Issues
The opposite of demand is supply of course and the supply has been drying up for years, especially since Covid. There is not just a single reason for this though, obviously an excess of demand means supply diminishes but the supply side problems come from many other factors not just "things sell!" Let's look at the main reasons why the supply is falling.
Building Regulations and Bureaucracy
Just like in many other countries Spain is not building enough for a growing population and one of the main reasons for this is the speed and cost of getting licences for new builds and conversions of commercial space into residential for example.
Recently, I read that in La Rioja up to 35% of the cost of a build property can be attributed to licences, taxes and assorted paperwork and at the same time this can take over a year to sort before you can even put a spade in the ground. La Rioja is Spain's smallest mainland province population wise and it is not an isolated example unfortunately.
A typical build of an apartment block may take a year and a half from start to finish and when we consider that between granting the licence and starting work may also be a year while the builder gets funding, whether that's through bank loans and deposits from potential buyers, then the whole process from identifying a potential plot to getting licences through building to completion may take well over 3 years. That's far too long for smaller builders and puts them at risk of default due to so many factors including future changes of direction politically, interest rate shocks, world events and more. It's no surprise that most developments are carried out by larger building companies as they have a hedge in place through their other projects that are at different stages of development.
Interest Rates
Here is a reason why more second hand properties don't come onto the market and it's a result of the 2008 financial crisis. Spain was hit hard by the financial crisis in so many ways but the people of Spain were hit harder because property owners in general were on variable rate mortgages. This means that prior to 2008 their mortgage repayment would vary year on year. As rates rose then they struggled to pay the mortgage and banks were quick on the repossession button.
Once people started buying property after the financial crisis, and it took around 5-6 years, banks were willing and encouraged to give fixed rate mortgages and the reference point for those mortgages was the Euribor, the European Base Rate. As Euribor dropped and even went into negative territory from 2016-2022, as you can see below on the graph, mortgages became cheaper, even for those people with a variable rate mortgage, and borrowing became really cheap. Post-2016 lending spiralled because banks usually lend at Euribor plus 1% there or thereabouts! When you were able to get a fixed rate mortgage at 1.5% for twenty years then why wouldn't you buy?
However, this creates a knock-on effect. As you can see from the graph from mid-2022 onwards Euribor went up considerably before dropping back this year. It currently stands around 2%. When people look to sell their property even now their mortgage offer is likely to be around 3%, Euribor plus 1%. Now this sounds great to people from the United States struggling with rates from 6-12% for mortgage renewals or the UK at 6-8%, but to someone currently paying a 1.5% fixed rate that's doubling their mortgage repayments. Equally, if they want to buy a higher value property, which they will have to do as prices have risen so much, then they think twice before moving. As an example somebody who bought an apartment at 100k in 2016 with an 80% mortgage at 1.5% fixed rate over 20 years might be paying just 380-390 Euros per month.
The same property is now 200k but a bigger better property might be 250k, to get that extra bedroom or to be in a "better" area. Let's assume they sell their property for 200k making a nice capital gain (They don't pay a capital gains tax because it's their primary home, they are reinvesting and they have been there for over 3 years). They won't require an 80% mortgage but the total cost of their 250k property purchase might be 275-280k of which they have around 140k to put down meaning a mortgage around 50%. This would mean borrowing 140k at 3%* over 20 years. The new repayment is around 770-780 Euros per month. By moving they have doubled their mortgage repayments despite only borrowing 60k more due to the higher interest rate and of course increased their indebtedness and people are still loathe to do this as they remember the consequences of the post financial crash world.
*Most people don't look into this but the interest repayments on the first scenario are just 12,700 Euros over the lifetime of the mortgage, an average of around 610 Euros per year or just 50 Euros per month) whereas with the 3% rate the interest payments are north of 46,000 Euros, or 2300 Euros per year, almost 200 Euros per month.
Even if Spanish banks started giving 100% mortgages (or close)and for younger people they are, then there would be no great rush of property onto the market. What would happen is that people would keep their current property and rent it out, which at current rental rates would more than cover the costs of the mortgage on the second property. It's a bit of a vicious circle but very useful for current property owners with equity in their property.
Is it any surprise that people choose to stick with what they have if there is no great inconvenience to staying where they are?
Taxes
If you sell and it's your primary residence and you reinvest then you don't pay capital gains tax. So far so good. However, when you buy in Spain you do pay ITP (Property transmission tax) and currently in Valencia that stands at 10%. The same 10% applies to newe build properties where VAT is the tax all over Spain. In our example above the buyer of a 250k property pays 25k in tax on buying their new place. Again this makes them think twice before moving. They will only move if they are really uncomfortable due to an increase in family size, their work moving or one of the four Ds (Can you remember what they are?... Answer at the end of the conclusion below** )
Family Feuds
How can there be so few properties for sale when there are so many empty properties? A question often asked, especially in La España Vacia, but hardly ever adequately answered because there are so many factors. However, one of the main ones is the existence of families and the associated inheritances and feuds. An inheritance in Spain goes equally to the surviving partner (if applicable) and then the rest is shared equally among the kids.
There used to be a lot of kids in families in Spain, Catholic country and all that, and on inheriting there were lots of family arguments. "I looked after dad so should get a higher percentage", "You left home and didn't ever contact" etc. Sometimes these arguments mean a property is owned by various people and they just cannot or will not agree on whether they should sell it, how much they should sell it for and how much each of them will get from the sale. Equally, those properties often fall into disrepair as the family can't agree on who pays for repairs, upkeep and even local taxes.
Funnily enough though when properties do come up for sale in La España Vacia they don't sell quickly and this is because of where the demand is. If there is no work in the area then there is little demand. Younger people move to places with greater job opportunities further squeezing the in-demand areas. However those selling up need a higher price than they can command in the Pueblos as they need money to buy in and around the cities so they don't bother putting places up for sale, they often rent them out to the odd tourist looking for a place away from the grind and 9-5 for a week on platforms such as Airbnb. Licences are easier to get in small towns and villages.
Online Disinformation
"The government is going to tax you at 100% of your capital gain", "As soon as you put it online you'll be broken into", "Don't put it on the internet because Okupas will move in the day after" (See below). The internet has a lot to answer for... or rather social media has a lot to answer for. Disinformation about anything to do with real estate is all over the place from tax rates, to dodgy agents, to buyers paying with fake money to well, anything really. The disinformation makes people wary of anything they read and scared of putting their information and by extension their houses online. They also fear that the information they put out will be stolen and used by agencies (See our article last week about that)
Fear of Okupas
The big fear is identifying where a property is and getting squatters in. Squatters (Okupas) are the big bogeymen of the Spanish property market. They move into your house if you leave to buy something in the shops and you can't get them out if they have ordered a pizza to that address... apparently. Disinformation is rife. This disinformation leads to people not advertising properties online. They fear calls from squatters who might ask to view the property then move in. I know, I know, it's a mad fear but it exists. People don't want to leave a property empty and then advertise that it is empty so they don't tell anyone it's for sale.
Hoarding
In a rising market "Why sell?" is a common idea. You can see from the example above but apply that to a second home or investment property. If the price doubles in 8 years as it has then why sell. What are you going to do with the money? It's not going to give you the same returns elsewhere as it does in the property market. Banks pay negligible interest, stocks and shares are viewed as risky investments in Spain, crypto is for mugs... etc etc...
People in Spain put their money into property and keep it there and the price rises plus income from rentals, or even without that income as we will investigate in our article about the scarcity of rentals in a few weeks, will mean your "investment" is worth it. Remember that in Spain the cost of owning a property is really low once you have one, council tax and property taxes are low and utility bills can be minimised when a property is empty and are paid by the tenant when rented. If we then add in a third, fourth and fifth property into the mix, then people are making much more money than they would with their money elsewhere and at less perceived risk. Therefore people hoard properties in a rising market.
Also we get calls from people wanting to sell their property but they don't want it advertised everywhere as they haven't told their neighbours that they are going to sell. Yes really! Off market sales are often great ones. Click on the image to read more about that.
Immigration
This is a biggie in Spain as the population continues to grow despite the low birthrate. The population has risen by 2.5 million people in the last two and a half years and is forecast to rise by another 2 million in the next five years. That's an almost 10% rise in under ten years. As the average household in Spain has 2.5 people that's a requirement of 1.8 million new homes!!! How many homes does Spain build each year? Last year was a good year and there were just over 100,000. Over ten years that's a deficit of 800,000 properties if nothing is done about licences and bureaucracy.
Immigration though is a requirement in Spain. People are needed to work in agriculture, building, hospitality, healthcare, technology and tourism among others. The digital nomad visa means people come to live here even though they are working elsewhere. They pay taxes here. The non lucrative visa means more people retire to Spain. The government is in the process of legalising immigrants so they can work on the books as they all add into the tax base and fund the health service and pensions. However, this exacerbates the housing issue if construction doesn't speed up, especially construction of property at affordable prices to both buy and rent. Without this availability of places to live then demand increases and supply drops.
Equally, from the perspective of prices, more immigration and a bigger population would suggest higher prices for a reduced supply of property so again, there's no incentive to sell an "asset" that is going up in value.
Airbnb (Because Of Course It Is)
Airbnb of course is a big culprit for the lack of supply. People can earn a lot by renting out their property for tourists and Spain's tourism industry is huge. The numbers will probably tick over 100m visitors this year. Hotels are still the number one destination but properties rented out on Airbnb, Booking and other platforms are a huge part of the Spanish tourism mix. The huge majority of those properties have been taken out of the residential market for sale or rent and as long as they continue to make money and are legal as holiday rentals then they will not return to the market.
Future Perspectives
There are fixes to this but there are no quick fixes, no way of suddenly making the lack of supply free up. Government action takes time, private investment the same, speeding up bureaucracy the same, new builds coming onto the market the same. Unless the state takes on Airbnb there will be no major glut of properties coming onto the market and even if they did there is no guarantee that the properties would come onto the market when that market is still rising, though this action could put a hold on price rises.
It is interesting however to see the government start an enterprise zone in Valencia for the development and construction of industrial housing, in other words pre built "flat pack" housing that can be deployed quickly all around the country. My fear on this that it may take time and then getting the licences at a regional level to build new types of property of this type will mean delays to any significant numbers of places being built.
Translation of the Linked Story Above
"Spanish Prime Minister Pedro Sánchez announced that Valencia’s Port Logistics Zone (ZAL) will host a new "City of Construction Industrialization" on land owned by the public land agency SEPES. The project is part of the Perte for Industrialized Construction, a €1.3 billion public investment over 10 years aimed at boosting prefabricated housing production to 15,000–20,000 units annually. Sánchez emphasized Spain’s need to modernize construction through industrialization, digitalization, and sustainability to build faster, cheaper, and with lower emissions.
Currently, Spain lags behind Europe in industrialized construction (under 5% of projects vs. 20% in Germany). The initiative aims to close this gap, cut construction times by 20–60%, and improve labor conditions for 1.4 million workers. Sánchez also stressed the urgency of unblocking stalled housing and land laws to improve affordability, calling for political consensus. Valencia was chosen to drive economic recovery after severe flooding in October 2024.
Meanwhile, the trade union CCOO welcomed the investment but deemed it insufficient, urging housing policy funding to rise from 0.15% to 1–1.5% of GDP. They also highlighted legal barriers, such as outdated appraisal rules and mortgage laws, that hinder industrialized construction.
Housing Minister Isabel Rodríguez framed the plan as a win for speed, quality, jobs, and sustainability, particularly for women (only 11.4% of construction workers) and young entrants. Sánchez concluded: "It’s not about less cement and more computers—it’s about sustainable cement and new technologies to build more and better homes."
Conclusion
The market is caught in an imperfect storm of soaring demand and dwindling supply—a situation with no easy fixes in sight. From bureaucratic bottlenecks and sky-high interest rates to generational feuds and the attraction of short-term rentals, the barriers to increasing housing stock are deeply entrenched. Meanwhile, immigration continues to fuel demand, while existing homeowners cling to properties as appreciating assets rather than selling.
The result? A market where buyers must act fast or miss out, where sellers hesitate to move unless forced to by external factors, and where new construction struggles to keep pace with population growth. Until systematic issues like licensing delays, tax disincentives, and the dominance of platforms like Airbnb are addressed, supply will remain tight, and prices will stay high.
For now, the only certainty is that Valencia and Spain’s property crunch isn’t going away anytime soon—whether you’re buying, selling, or just watching from the sidelines, patience (and deeper pockets) will be essential. Stay tuned for our next deep dive into the rental market, where the stakes are just as high—and the solutions even more elusive.
** What are the 4Ds? Death, Disease, Debt and Divorce of course
The New Substack Newsletter
Last week, I posted on substack for the first time and we will be posting newsletters there every Wednesday from now on. If you are into substack then can I ask you to subscribe there because you will be getting some shorter form posts on there and maybe some different things from those we usually post here. And equally you are currently unaware of how much Jamón I bought in my first week in Spain. If you go and read our first post there you can find out for yourself.
Property of the Week
We don't normally venture down to Barxeta but needs must as the availability of great properties at good prices on the market continues to diminish and the range of our search moves outwards. And we will only do it for pretty special properties and this one screamed out to us because of its "his and her" recumbent exercise bikes and rowing machine wearing a mariachi hat. What more could you ask for?
This is a wonderful villa, located within a tranquil and beautiful area but not too far away from civilization. The villa is impeccable and could be moved into straight away with nothing to do beforehand. It has been superbly reformed by the current owners, who now have a dream home but they are selling up and giving someone else a chance to live there (Health issues before you ask).
The villa benefits from having two houses. The main house consists of three bedrooms (the main bedroom with en-suite), a very large lounge and lovely conservatory with wonderful views (Main picture). The kitchen is large, fully fitted and a gift for any keen cook or indeed a YouTuber wanting a nice background for their videos.
The secondary accommodation (with a separate entrance) comprises a reception area (currently a gym), a fitted kitchen and utility room, a bedroom and bathroom so you can keep the in laws, friends and family out of your hair while offering them a place to stay.
The villa is notable for having a spectacular garden. This has, within it, a larger than normal swimming pool (that is heated, very unusual) and a very extensive sun terrace (320m2!).
Nearby Barxeta has bars and restaurants and shops and, being only a few minutes drive away, is great for providing all the amenities you’ll need for your day to day existence. 15 minutes drive away is wonderful, historic Xativa (one of the most beautiful towns in Valencia Province). Here there is everything that you could possibly need from supermarkets to banks, bars, endless shops and restaurants and a huge shopping mall. There is also a train station from which you can easily and quickly access Valencia City. Valencia’s international airport is only some 45 minutes drive from the villa.
This is a must-see property – if you are looking for somewhere really special and don't mind being a bit further away from the city of Valencia itself!
Stepping Stones Rental of the Week
As you will know if you read here enough we have a specialist medium term rental company called Stepping Stone Rentals and we are growing our offer of available properties there at the moment. Three months, all inclusive, no stress rentals through a reliable company without the scams. You can take a look at everything we have available here but here's one of our latest, newly available now.
Newly Available.
- Excellent location in El Botanic, just a few minutes away from Ciutat Vella and all central landmarks;
- One double bedroom and one single one (used more for a wardrobe and storage room as it has no window, still it has one comfortable bed, if needed);
- Big living room with American style open kitchen with all necessary amenities - fridge, oven, microwave, dishwasher, washing machine;
- Very nice balcony that is like a little oasis :-)
- Air conditioning in the living room; designer fans in all rooms;
- Recently renovated with designer furniture - kitchen with a lot of storage space, wooden floor, noise-isolated walls.
If You Liked This...
Then you need to read more of our stuff. Make sure to click through to those linked above and then also have a click on the links below, some of them ours, others posted by people worth following on Bluesky and Substack.
Why Spain is growing and Germanys economic boost could end up as a short flash in the pan. And on a more general note: With the meagre and often distorted coverage of all things European in Britain, (especially when it comes to economy and finance), this is a Substack well worth your time. 👇
— Annette Dittert (@annettedittert.bsky.social) June 12, 2025 at 8:56 AM
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