Spain’s Real Estate Market and Cost of Living: What Expats Need to Know for 2025

As the new year unfolds, Spain is poised for significant changes that will impact both the real estate market and the cost of living, particularly for expats.

Real Estate Market Outlook

After navigating several challenging years, Spain’s real estate market is gearing up for a strong comeback in 2025. Industry experts predict a 20% increase in investments, driven by lower interest rates, improved financing options, and a renewed influx of international investors. Enrique Losantos, CEO of JLL Spain, notes that "2025 looks like it could be a great year for the property market," but also emphasizes the need to focus on sustainability and adapt to long-term demographic changes[1].

Urban transformations are a key aspect of this growth. Cities like Madrid are witnessing significant urban renewal projects, such as the transformation of the former Ministry of Finance building into luxury apartments and student residences. This blend of traditional and modern developments is redefining Spain’s real estate landscape. Additionally, high-end tourism continues to attract investors, as seen in the recent acquisition of Ibiza’s Six Senses resort for nearly €200 million[1].

Rising Property Prices and Rent Control

Property prices in Spain are expected to rise by 5% in 2025, continuing a decade-long upward trend. This increase is largely due to a shortage of housing supply in popular areas such as coastal regions, major cities, and the islands. However, a new rent-control index, effective from January 1, 2025, aims to limit rental price increases for housing contracts signed after May 26, 2023. This index, mandated by the Right to Housing Act, will prevent excessive rent hikes by capping increases according to a new formula published by the National Institute of Statistics (INE)[3].

Cost of Living Increases

While the real estate market shows promise, expats should also be aware of several cost of living increases set to take effect in 2025. One of the most significant changes is the return of VAT on electricity to 21%, which could result in an additional €72 per year for a family consuming 250 kWh per month. Basic foodstuffs, such as bread, milk, eggs, and vegetables, will also see a VAT increase from 2% to 4% in January 2025. However, olive oil will remain at a reduced rate of 4% due to its classification as a basic necessity[2].

Other increases include a mandatory waste tax estimated at €165 to €200 per year per household, starting in April 2025, and higher taxes on tobacco and vape liquids. Telecommunications rates are also set to rise, with some packages increasing by up to €6 per month. On the other hand, public transport will continue to benefit from government aid, with free train season tickets for certain routes remaining until June 2025[2].

Expats and Quality of Life

Despite these cost increases, Spain remains a highly attractive destination for expats. An annual survey by InterNations ranked Spain among the top ten countries in the world for ease of settling in, particularly in the categories of Culture and Welcome, and Finding Friends. Expats praise Spain for its welcoming culture, sunny weather, and affordable lifestyle. For example, one expat highlighted the country's over 320 days of sunshine per year, which significantly improves mood and mental health[4][5].

In conclusion, while 2025 brings both opportunities and challenges for expats in Spain, the country's real estate market and overall quality of life continue to make it an appealing choice for those looking to relocate. As always, staying informed about local changes can help expats navigate and make the most of their Spanish experience.