The real estate agent Juan Sanchez, who didn’t want his real name published in this article, pushes open the frosted glass door of an apartment that used to be a shop. Visitors step directly into the kitchen from the streets of Spain’s capital. The ceilings are very high.
“You could easily add a mezzanine here,” Sanchez says, and explains that the two bedrooms advertised are in the basement, and rather tiny. One of them doesn’t even have a window.
However, the space could be “easily rented out to students” for €1,300 ($1,484) if the prospective buyer is willing to ignore what he calls “a small catch.”
“Downstairs is officially listed as a storage space in the property registry, because we couldn’t get a residential permit. But that’s not a problem for renters,” he tells DW.
The 55-square-meter (592 square-feet) space, advertised as an apartment, located in a middle-class neighborhood in central Madrid, is listed to sell for over €300,000.
Unlike a decade ago, when cheap credit boosted the housing prices in Spain, today, the sky-high prices even for mid-range apartments are driven by foreign investors with deep pockets. They’ve invested huge sums in Spain’s lucrative housing sector and booming tourism industry, driving up prices in the entire housing market in the process. According to a report by the Spanish institute BBVA Research, demand is outstripping supply significantly.
Those living in Spain, meanwhile, are struggling to afford skyrocketing rents, a situation compounded by the growing share of homes being rented out to international tourists visiting Spain, and students seeking accommodation.
Spain’s worsening housing crisis has already sparked repeated protests on the Canary Islands, in Barcelona and in Madrid.
Locals contribute to the shortage
These days, internet platforms like habitacion.com sell even small living spaces to investors. The Spanish property startup allows users to purchase — rather than rent — individual rooms in a shared property as an alternative investment and living option.
For the Madrid tenants’ union Sindicato de Inquilinas de Madrid, the practice amounts to “rampant speculation” fueled by tourism and investment funds. The group has estimated that this has resulted in more than 4 million homes and 400,000 vacation rentals currently standing empty — in a country of 47 million people.
But the housing shortage isn’t just due to external demand. Locals are contributing to it, too. According to the Spanish national statistics office INE, over 2.5 million homes in Spain are only used occasionally, with many of them presumed to be second or third residences — often reserved for holidays, and rarely rented to others.
Private investors and hedge funds are less reluctant to rent. In the first quarter of 2025, short-term leases, not counting tourist rentals, accounted for 14% of the rental market, or a 25% increase from the previous year, according to data compiled by the real estate platform Idealista.
The platform reported the largest growth of short-term rental listings in cities like Bilbao (up 36%), Alicante (33%), Barcelona (29%), and Madrid (23%).
In May, the Spanish ministry for consumer rights made headlines when it ordered the short-term rentals platform Airbnb to remove nearly 66,000 unlicensed listings. The Spanish Housing and Urban Planning Minister Isabel Rodriguez is also pushing a bill that would require vacationers to pay 21% VAT on apartment rentals — double the rate applied to hotel stays.
But tenant groups like Sindicatos de Inquilinas say that’s not nearly enough.
Housing boom with social consequences
Similar to the years preceding the 2008 financial crisis, Spain’s real estate market is showing signs of overheating again.
A house that cost an average of €138,000 in 2014 was valued at €178,700 in 2024, according to data from the US-based investment firm MD Capital. In places like the Balearic Islands, prices have more than doubled.
Tim Wirth, a real estate lawyer based in Palma, says that the sharp rise in prices “inevitably leads to protests from local residents.” He told DW that rentals in Spain must be made more attractive again with “legal and tax security for both sides.”
But he also acknowledges the acute social challenge in the fact that average wages have grown by a little over 23% in the past decade, while property prices have shot up by at least 29% in the same time period.
In 2024, the average monthly gross salary in Spain was €2,642, according to the economic and socio-demographic information platform Datosmacro. An ordinary 80-square-meter apartment now costs about €1,100 a month to rent, as data from the real estate portal Fotocasa shows, with rental costs for a similar apartment in major cities like Madrid or Barcelona ranging between €1,400 and €1,500.
Unlike people living in cities such as Paris or London, Spanish residents do not receive a supplement to their salaries to offset higher housing costs.
Too many tourists, too little social housing
Each year, some 90 million international tourists visit Spain. Many remote workers have set up residence in the Canary Islands and Barcelona, while students from across the world flock to the country’s 90 universities and dozens of business schools.
In the 2024/2025 academic year alone, more than 118,000 students came to Spain under the European Union students’ exchange program Erasmus. Spain, however, lacks publicly funded student accommodation, and there is no financial support from the state equivalent to Germany’s BAföG aid program for students from low-income households.
That’s one reason why Spanish citizens typically leave their parents’ home after the age of 30, as official statistics show. In Germany, the average age is 24.
In addition, public housing is scarce, with only about 14,370 state-sponsored housing units built in 2024. Between 2007 and 2021, Spain allocated just €34 per capita to social housing — far below the EU average of €160.
Madrid’s tenant lobby, meanwhile, has threatened to escalate public protests if the government doesn’t take stronger action: “We’ll raise our voices to reclaim what’s vacant or being rented to tourists,” a spokesperson told DW.
This article was originally written in German.
