As always, the real estate market is influenced by various economic, social, political, legal, technological and environmental factors. In addition, the influence of interest rates, current inflation and the evolution of supply and demand are other determinants of house prices for next year.

To understand the house price forecast for 2025, we need to consider the impact of these factors. In this article we review our view of what we think will happen to house prices in 2025, with a particular focus on the Costa del Sol, the place par excellence where foreigners choose to invest in second homes. The quality of life, the climate, the gastronomy, the infrastructure and its accessible geographical location make Malaga and its surroundings one of the main European destinations for the purchase of second homes. We will give you all the keys!

Key factors in the 2025 house price forecast 

These are the keys to understanding how house prices will evolve in 2025:

Economic factors

Although economic conditions are not completely stable, the employment rate and the gradual decrease in interest rates as a result of more controlled inflation compared to the beginning of 2024, will influence the demand for housing, which will continue to be high. This would keep house prices stable or rising in 2025.

Political and legal factors

Rental regulations in major Spanish cities can have a direct impact on the supply of housing and therefore its prices, but it is not expected that this model will be adopted in the municipalities that make up the Costa del Sol.

The Territorial Planning Plan (POT) for the Costa del Sol contemplates the need to improve the accessibility of this vast and densely populated area. The POT has three main interconnected axes: the railway, the liberalisation of the toll on the AP-7 motorway to allow the third, which is to transform the A-7 into a long metropolitan avenue, with priority given to public transport. In addition, the document covers the future needs of nine municipalities in the province: Marbella, Estepona, Fuengirola, Mijas, Benahavís, Manilva, Ojén, Istán and Casares, which participated in its preparation.

It is estimated that this and other instruments such as the long-awaited General Municipal Planning Plan (PGOM) of Marbella, will attract much more investment in housing of all types.

Social factors

Rural areas, but especially coastal and suburban areas, are rapidly being revalued due to the strong trend towards teleworking. As a result, house prices in these areas are rising. The upward trend is expected to continue in 2025, albeit at a more moderate pace.

Supply and demand in 2025

In addition to these factors and others such as demographic, technological and environmental, it is worth noting that demand for housing is currently still higher than supply. This has an impact on price stability, even when prices are rising.

House price forecasts for 2025

According to the latest BBVA Research real estate observatory for August, house prices continue to show an increasing trend due to the lack of housing supply in some geographical areas. Among the conditions that could limit the supply of housing are the shortage of building land, regulatory uncertainty and the lack of labour.

On the other hand, demand for housing in Spain is forecast to continue to grow in 2025. This will be accompanied by an improvement in the economy, GDP growth, job creation and migration flows. On the other hand, the fall in interest rates, reflected in market rates, especially the Euribor, is encouraging this demand for housing.

In the BBVA entity's Financial Health podcast, economist Félix Lores tells us about how the real estate context in which we live is favouring the rise in house prices. He adds that we have a strong demand that is expected to remain active until 2025. This, together with the growth of the immigrant population, the recovery of foreign economies, the fall in interest rates and an environment of shortage of new housing supply, is expected to lead to an increase in prices in 2025.

As the economists at BBVA Research point out, forecasts for house prices point to a nominal increase of 4.7% in 2025. In real terms, excluding inflation, the increase will be around 0.7% and 1.6% respectively.

Malaga leads the way in new home sales

Malaga and the Costa del Sol is one of the best places in Spain for investors and developers. Economic and demographic changes, or the mismatch between supply and demand, are the reasons for this trend.

As we mentioned in our article on the reasons to live in Malaga, it is one of the provinces that has generated the most attraction for tourists and investors in recent years. In fact, according to statistics from the INE, more than 40% of sales and purchases in Malaga are done without a mortgage, meaning that the buyer pays the price of the property in cash. This percentage is largely made up of foreigners who choose to invest in the Costa del Sol.

On the other hand, economist Judit Montoriol, in the CaixaBank Research analysis of the property sector, states that prices have risen particularly in the third quarter of this year, especially in new developments. The company affirms that the provinces where the population is growing the most are the ones that are registering the greatest increase in prices. Among them, Malaga, the Balearic Islands, Santa Cruz de Tenerife, Madrid and Valencia stand out, widening the gap between urban and rural, tourist and non-tourist areas.

Conclusions, what will house prices be like in 2025?

In 2025, house prices in Spain will continue their upward trend, favoured by a combination of economic, demographic, social and political factors, as well as the mismatch between supply and demand. Economic growth, job creation, migratory flows, lower interest rates, changes in lifestyles and working methods will drive an increase in demand for housing, especially in tourist areas and peri-urban areas, such as the Costa del Sol, where demand for second homes by foreigners is very relevant and is expected to continue.

In terms of housing supply in 2025, the lack of final plots for direct construction, labour shortages and regulatory uncertainty will limit the production of new homes, widening the gap between supply and demand.

If you are interested in investing in the Costa del Sol, please contact us. At Prime Invest we offer property consultancy services to developers and investors, advising them throughout the entire process of new developments and carrying out exhaustive and competent market studies.