Spanish home prices will keep rising about 5% in 2026, according to economist Gonzalo Bernardos, as a persistent supply-demand gap overrides cooling sales in major cities. The University of Barcelona professor warns the housing market will remain strained until new construction picks up, even as transactions show signs of slowing.
The Big Picture
Housing has become one of the top concerns for Spanish citizens and across Europe. Access to homeownership or rental housing has turned into a recurring struggle for many families, especially in large cities. Bernardos' analysis provides a sobering outlook on where the market is headed.
The economist focused on Madrid, Barcelona, and Valencia, where upper-middle-class demand is balking at the high prices sellers are asking. This is already translating into falling sales: in the second half of 2025, transactions dropped 15.4% year-on-year in Madrid, 10.8% in Barcelona, and 7.2% in Valencia. However, Bernardos cautioned that these three cities should not be seen as a proxy for the entire country, as each local market has its own dynamics.
“"Home prices will keep rising about 5% due to the large gap between demand and supply."”
By the Numbers
- Madrid sales plunge: Home transactions in the capital fell 15.4% year-on-year in the second half of 2025.
- Barcelona decline: Sales dropped 10.8% in the same period.
- Valencia slowdown: The city saw a 7.2% decrease.
- New housing starts: Bernardos estimates that new home starts in 2026 will not reach 200,000, insufficient to meet current demand.
- Historical comparison: In 1991, 205,580 homes were started for a population of just over 39 million, compared to 132,931 starts in 2025 for nearly 49.6 million people.
Why It Matters
The supply-demand imbalance is the primary driver of rising prices. As long as construction remains below needed levels, market pressure will persist. Bernardos argues that despite the drop in sales, prices won't fall broadly because the supply shortage is structural.
First-time buyers and middle-income families are the biggest losers, watching the dream of homeownership slip further away. Meanwhile, current homeowners and real estate investors benefit from steady asset appreciation. However, the slowdown in sales may signal that the market is hitting a ceiling in the most pressured zones.
What This Means For You
If you're considering buying a home, Bernardos' advice is clear: don't expect a broad price drop. The supply shortage and latent demand will keep prices rising, albeit at a more moderate pace than in previous years.
- 1For buyers: Act quickly if you find a good opportunity, especially in mid-sized cities where demand is less strained. Interest rates could fall in coming months, easing mortgage payments.
- 2For investors: The rental market remains attractive due to high demand, but regulation and rent caps in some areas may reduce yields. Evaluate local markets with less intervention.
- 3For sellers: Adjust your price expectations in major capitals, where upper-middle-class demand is pulling back. Patience may not pay off if sales continue to decline.
What To Watch Next
The key near-term catalyst is the war against Iran and its economic fallout. Bernardos warns that housing transactions could fall about 8% in 2026 due to this conflict. Additionally, the European Central Bank's monetary policy will be crucial: a rate cut would stimulate mortgage demand, while a hike would further cool the market.
Also watch new home construction data. If the government pushes measures to speed up permits and boost building, supply could increase in the medium term. Otherwise, the imbalance will persist and prices will keep trending upward.
The Bottom Line
Spain's housing market is at a crossroads: sales are cooling, but prices aren't budging due to supply scarcity. Bernardos forecasts a moderate 5% rise in 2026, contingent on external factors like geopolitical tensions. For buyers, the window of opportunity may close if they don't act soon; for investors, patience and careful local market selection will be key. As the economist put it, "the data killed the narrative": as long as construction stays below 200,000 homes per year, the housing access crisis will continue.
Deep Dive: The Underlying Forces
To understand why prices aren't falling despite lower demand, we need to examine the structural factors propping up the market. First, the supply of new housing has been insufficient for years. The 2008 financial crisis halted construction, and the sector never fully recovered. Building permits in major cities are slow and costly, discouraging developers. Moreover, the growing demand for rental housing, driven by the inability to buy, has pushed up rents and, consequently, the value of properties as investment assets.
Second, demand is not disappearing but transforming. Many potential buyers are exiting the purchase market and moving into rentals, maintaining pressure on rental prices. This, in turn, makes the market attractive to investors, sustaining purchase prices. It's a vicious cycle that would only be broken by a significant increase in supply.
2026 Outlook: Beyond Bernardos' Forecast
While Bernardos anticipates a 5% rise, other analysts point to ranges between 3% and 7%, depending on interest rates and geopolitical developments. The Bank of Spain, in its 2025 financial stability report, noted that the Spanish housing market shows "signs of overvaluation" in some areas, but that the adjustment would be gradual thanks to solid employment and savings accumulated during the pandemic.
The main downside risk is an escalation of the Middle East conflict that spikes inflation and forces the ECB to keep rates high for longer. In that scenario, sales could fall more than expected and prices could stagnate or even dip slightly in the most pressured zones. However, Bernardos considers this scenario unlikely given the strong latent demand.
Implications for Investors and Operators
For institutional investors, the Spanish market still offers opportunities, but with nuances. Rental yields in Madrid and Barcelona have compressed to 3-4% gross, while in mid-sized cities like Málaga, Alicante, or Seville, yields of 5-6% are still achievable. The key is to identify markets with demographic and economic growth but less regulatory pressure.
For operators (developers, builders), the message is clear: build more, but carefully. Construction costs have risen 20% since 2020, and labor is scarce. Innovation in construction methods (industrialization, prefabrication) and public-private collaboration to speed up permits will be crucial to closing the supply gap.
Practical Takeaway
The Spanish housing market in 2026 will not be a bargain market. Prices will keep rising, albeit at a slower pace. The key for buyers and investors lies in geographic selectivity and strategic patience. For policymakers, the challenge is to increase supply without destabilizing the market. As Bernardos aptly puts it, "the data killed the narrative": as long as construction stays below 200,000 homes per year, the housing access crisis will continue.
