27-10-2025
The Economic Observatory of Francisco de Vitoria University (UFV) has analyzed the state of the housing market, both internationally and, in particular, domestically (—donde, según el informe, la escasez de oferta derivada, en parte, de los límites regulatorios existentes, está ejerciendo presión al alza sobre los precios de la vivienda—). Based on this analysis, the observatory has drawn a series of conclusions and issued a set of recommendations.
From 2009 to 2022, there was an excess of liquidity resulting from a markedly expansionary monetary policy, which led to asset inflation without, at that time, yet having an impact on consumer inflation.
Thus, as mortgage rates fell—especially since 2012—capital shifted toward real estate assets due to the lack of returns on bonds and deposits, leading to the aforementioned rise in asset prices in general, and housing prices in particular. This alternative investment to bonds and deposits is clearly reflected in investment in real estate assets because housing is always a safe-haven asset, and in a globalized market, housing functions as an international financial asset rather than a local investment asset. All of this contributed to an increase in demand.
As a result, real prices have rebounded sharply since 2009 and, above all, since 2012, with Spain being the exception in 2013 due to households selling off their assets to meet their liquidity needs, which stemmed from the high unemployment rate in the Spanish labor market
In addition, there was a shortage of supply due to urban planning and environmental restrictions, as well as underutilized existing housing stock in urban areas, a result of the boom in vacation rentals.
That increase in demand and that shortage of supply persist today, and have even intensified. Thus, there is high structural demand pressure in areas that attract workers (mercados urbanos globalizados), compounded by demographic and migratory effects, such as a decrease in average household size and, especially, population growth due to migratory flows, with a net immigration rate that far exceeds that of emigration.
The slowdown or stagnation in prices that is beginning to be observed—with exceptions in major urban markets—is due to factors such as economic uncertainty, rising interest rates in recent years, and market saturation in some areas.
In this context, no significant decline has yet been observed due to limited supply, because demand still exerts some upward pressure, although potential buyers may begin to lose confidence, and because owners, for the time being, do not need to sell but, moreover, have an incentive to wait, anticipating further price increases. However, in countries like Germany, due to the crisis, a decline in prices in real terms is already evident. At the other end of the spectrum is Spain, with sharp increases in prices.
Source: Compiled by the author based on data from the BIS
Source: Compiled by the author based on data from the BIS
Spain is following a different economic cycle than its neighboring countries, with virtually zero growth in real terms through 2023, after which growth will increase significantly for the following reasons:
There is a shortage of supply. On the one hand, there is a shortage of new construction due to a lack of land, complex bureaucratic procedures, legal uncertainty, and environmental requirements.
On the other hand, there is also a shortage of existing-home inventory, as homeowners are not selling due to various factors:
Thus, demand is rising mainly for two reasons:
Source: Compiled by the author based on data from the ECB and the Bank of Spain
Furthermore, this strong demand is further bolstered by the fact that, since Spain has been in a different economic cycle and has maintained lower prices compared to the rest of the region in the previous period, the Spanish market has now become an attractive investment destination for funds, as noted by CBRE:
As for supply, it is constrained by various regulatory and zoning factors that limit the development of new housing projects:
Source: Compiled by the author based on data from the Bank of Spain
Finally, from the perspective of young people’s access to the housing market, in addition to the rise in prices driven by supply and demand mentioned above, housing is subject to a tax burden that acts as a significant barrier to entry for many buyers.
For example, “if a young person saves up and is able to buy a home for 300,000 euros—assuming they can find one at that price—they have to pay an additional 18,000 to 30,000 euros to the tax authorities in taxes: 10% VAT for new homes and, for resale homes, the property transfer tax (TPO) ranges from 6% to 13%—a rate that can reach in some autonomous communities, with the starting point originally indicated by the AGE being 7%,” according to the UFV Economic Observatory.
“When people are already stretching their budgets to the limit to make a purchase, that additional tax burden can prevent them from buying at that moment. Consequently, if they continue saving to cover the tax portion, by the time they have saved enough, the price will likely have risen even further, making it harder to afford both the home’s price and the tax—since the tax amount will also have increased in absolute terms, given that it is a percentage of the tax base. And on top of that, there is another tax, the Stamp Duty (AJD), which is levied on the deed of sale—although, since the Supreme Court’s change in criteria in 2018, which led to a legislative amendment that year, the mortgage deed is now the lender’s responsibility—and ranges from another half a point to one and a half points (siendo el punto de partida recomendado por la AGE el 1%), “in other words, you have to add another payment of between 1,500 and 4,500 euros,” they add.
%name The Economic Observatory at Francisco de Vitoria University analyzes the housing market and proposes measures to balance supply and demand Study at a Private University in Madrid
According to the Observatory’s analysis, these tax burdens make it harder to afford a home, especially for young people and middle-income families. “All of this makes it impossible for many people to access housing, and they need to understand that it is government intervention and the government’s voracious appetite for revenue that are working against them,” they assert.
In fact, as noted in the report “Housing Taxation in Spain,” published by the Institute of Economic Studies, Spain has one of the highest housing tax burdens in the EU, and it is also above the OECD average: the effective marginal tax rate on owner-occupied housing stands at 30.3% in Spain, compared to 9.7% for the OECD and 6.5% for the EU.
%name The Economic Observatory at Francisco de Vitoria University analyzes the housing market and proposes measures to balance supply and demand Study at a Private University in Madrid
The same is true for taxes on rental income: Spain, with an effective marginal tax rate of 44%, is well above the OECD average (32%) and the EU average (31%) in terms of taxation on rental housing, as noted in the aforementioned IEE report.
As for the aforementioned property transfer tax, Spain has a lower tax rate than only Belgium and the United Kingdom. All of this highlights the heavy tax burden associated with the housing market.
%name The Economic Observatory at Francisco de Vitoria University analyzes the housing market and proposes measures to balance supply and demand Study at a Private University in Madrid
%name The Economic Observatory at Francisco de Vitoria University analyzes the housing market and proposes measures to balance supply and demand Study at a Private University in Madrid
With the aim of addressing the current imbalances in the housing market in the medium and long term, the Economic Observatory of Francisco de Vitoria University offers the following recommendations:
The Francisco de Vitoria University Economic Observatory was established in March 2023. Its members are Pedro Schwartz, Francisco Cabrillo, Jaime García-Legaz, Gregorio Izquierdo, Fernando Merry del Val, Javier Fernández-Lasquetty, Pedro Cortiñas, and José María Rotellar, the observatory’s director.
The observatory meets every three months to analyze economic trends and may issue recommendations on the measures needed to ensure the economy runs smoothly. In the days following each quarterly meeting, a brief report is published summarizing the analysis and recommendations discussed at the observatory meeting, and it conducts analyses of specific measures whenever appropriate.
