Spain’s so-called supercycle of economic growth is predicted to slow next year as a much-needed housing boom remains elusive, a new study shows.
Spanish researchers predict this year economic growth will likely be 2.9 per cent, a figure higher than the European Union average.
But according to a new report by Spanish economic think-tank Funcas, 2026 will see growth of only 1.9 per cent, slowing to 1.7 per cent in 2027.
Funcas attributes that to changes in the factors that fuelled Spain’s exceptional economic cycle, namely a boost in tourism, immigration and investment stimulated by the EU’s covid recovery programme, the EU Next Generation fund.
Today though, a lack of housing, particularly affordable housing, looms as a major obstacle to growth.
Spain rebounded well from the Covid pandemic. Tourism, a principal industry for the country, has never been higher and was one of the greatest beneficiaries of the Next Generation funds.
At the same time, it has seen a mini population boom, thanks to increased immigration.
Spain reached a new record high in population this year with 49,442,844 residents. From 2022 to 2024, the country took in 1,2 million foreigners while the population of Spaniards increased by 232,000.
“The incorporation of a new foreign workforce is the factor that explains 65 per cent of the employment that has been created in Spain in the last three years,” Funcas notes.
Yet while the population boom meant more people working and spending, it also meant a growing need for housing in a country where it is already tight. That is principally due to a heavy drop-off in building in the years since the financial crisis of 2008.
Spain’s central bank estimates that the country needs 700, 000 additional housing units.
A study on housing released by the European Commission in October also showed that the “financialisation” of housing has helped drive up housing prices.
Financialisation is the practice of, for example, investment groups buying property and then sitting on it until market conditions allow for a greater return on investment.
Also exacerbating the situation in certain areas has been the expansion of short-term rents such as tourist apartments. That impacts the availability and price of rental housing.
These are problems Spaniards have complained about for nearly a decade, but now the crunch is more intense.
“I knew the housing situation was bad here in Barcelona but it’s SO MUCH WORSE than I even prepared for,” a participant in an ex-pat group posted on Facebook.
The poster said she had recently moved to Barcelona with her boyfriend, who worked with a Spanish company. She recounted how landlords were requiring as much the equivalent of four months rent as a security deposit and how multiple people were bidding on the same flats.
In a reply, another group member lamented that the situation was creating resentment towards ex-pats among Barcelona’s resident locals.
According to Funcas: “The housing shortage will constrain labor mobility and medium-term growth, in addition to seriously affecting social balances.”
Regarding investment, the foundation observes that private investing since the pandemic has been “disappointing”.
Funcas predicts that private investment will remain below pre-pandemic levels in the near future and not sufficient to make up for the loss of public money.
With this in mind, its report observes that a new construction boom is increasingly important.
Funcas notes, though, that while a new building bonanza could be on the horizon, it may not be as vigorous as needed.
