SPAIN’s housing market has become harder to afford, but the Bank of Spain has addressed the issue as a lack of housing rather than signs of another financial crash.
Banco de Espana admits there is a housing crisis across the country.
However, experts with the national bank assure that it is not the same kind of housing bubble that caused the 2008 crash.
In its 2025 Annual Report, the Bank of Spain head Jose Luis Escriva tried to ease worries of another financial collapse in the country.
“The risks to financial stability associated with the real estate market are contained,” the regulator explained.
However, that doesn’t mean buyers can exactly relax as housing prices across Spain have been on the rise for several years.
Recent data indicates that increased demand and supply constraints accelerated the growth for the last 12 years.
Now housing prices have recovered to the levels they were at in 2005.
READ MORE: Spain stands ready to build up to 2.4 million new homes to ease housing crisis, government claims
More good news: Spain’s financial system is said to be maintenaning itself with high risk loans remaining low.
The 2025 Annual Report showed that only 13% of mortgages for primary residences granted in 2025 had a loan-to-value ratio that exceeded 80%.
Additionally, only 11% of people had a mortgage burden higher than 35% of their income.
Escriva highlighted that Spain is currently experiencing a ‘historically low level’ of financial vulnerability in households across the country.
It is due to this lack of over-indebtedness that the Bank of Spain claims there is no new financial real estate bubble.
Despite the new data’s reassurance, the organisation did acknowledge the expanding decline of affordable housing, specifically for low-income housing and young people.
At the Competitiveness for Growth conference held in Madrid on June 19, Escriva gave a speech explaining that the real estate market situation requires ‘monitoring, granular analysis’ and a balanced financial system stability.
“The risk associated with the real estate sector is contained by several factors: the still moderate weight of real estate and construction in the economy, low household debt and credit standards that remain prudent,” Escriva said last Friday.
Rather than trying to reduce demand, the bank suggests governments should increase supply by building more homes.
This would include making more land available, speeding up planning approvals, and reducing bureaucracy to create more housing opportunities.
Back in March, Spain’s Secretary of State for Housing and Urban Agenda, David Lucas, announced a plan for more than two million homes and identified 1,069 urban areas for development.
Lucas also emphasised initiatives from the Ministry to encourage the construction of affordable housing including the approval of the State Housing Plan 2026-2030, the new sovereign wealth fund España Crece, and loans to developers.
These moves haven’t stopped criticism towards Spain for entering what is being referred to as a ‘devastating new era of rental capitalism’.
CSIC researcher Javier Gil explained that the housing crisis has seriously impacted the Spanish expat hotspots like the Costa del Sol and Costa Blanca.
The older generations who bought villas two decades ago are sitting on unprecedented equity.
Meanwhile, the new wave of younger residents are being structurally priced out, routinely facing rents of over €1,500 a month for basic apartments in coastal hubs like Malaga and Palma.
Gil claimed that building more low-cost housing would not necessarily solve the essential problem as the government cannot afford for house prices to decrease.
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