Bank of Spain dismisses systemic threat from surging property prices

The 2025 annual report highlights a paradox: the market is thriving, yet affordability has plummeted. Inflation-adjusted prices surged by 9.7% over the last year, keeping the market 12.2% below the historic 2007 peak. Despite property sales hitting 750,000 units—a figure rivaling 2008 levels—the central bank notes that the impact is tempered by recent population growth driven by immigration.

Behind the headline numbers, the crisis lies in a structural deficit of 750,000 homes. This supply gap continues to lock younger generations out of the market, forcing them to remain in parental homes longer. While 52% of purchases were mortgage-financed in 2025, the central bank is now evaluating potential credit limits to curb the 27.5% spike in new loan volume. With interest rates down 150 basis points since late 2023, the regulator is urging a unified response from national and local governments to accelerate construction and ease the pressure on rental and ownership affordability.