Is Madrid expensive?
· By Luis Martínez de Carvajal
Madrid has established itself as the second most attractive European city for real estate investment, behind only London, according to the "Emerging Trends in Real Estate Europe 2025" report by PwC and the Urban Land Institute. In just five years, the Spanish capital has climbed from eighth to second place, overtaking Paris.
It is not a bubble, it is supply and demand
According to the CIS survey of December 2025, 40% of the population names housing as the country's main problem. The data explain this concern: since 2015, prices in Madrid have doubled in nominal terms. The gap with the rest of Spain has widened from 75% to 120%. Meanwhile, real wages have barely changed.
The current situation is not comparable to the 2006 bubble. Between 1996 and 2006, prices tripled in just ten years. From 2007 to today, they have risen by 60-80% over almost 20 years. We have grown half as much in twice the time.
The real problem is a lack of supply. In 2006, 850,000 homes were built each year for a population growing by 600,000 people. In 2025, barely 115,000 new-build permits were approved for a population that is still growing by more than half a million. In Madrid the imbalance is even greater: 16,000 homes are built each year for a population growing by 100,000-120,000 people. Demand, measured as people interested per listing, has quadrupled in Madrid since 2019. And no, it is not just international demand: according to Idealista, it accounts for only 5% in Madrid.
Real prices remain 31% below their 2008 peak.
Madrid in international perspective
When we compare Madrid with other world capitals, the picture changes. Madrid shows competitive prices both on average and in prime areas. With a ratio of 0.78 relative to purchasing power and 0.90 relative to the cost of living, Madrid sits below cities such as Lisbon, Paris, London or New York. If we look at how long it would take the top 10% of earners to buy one square metre in a prime area, Madrid is close to the average at around 45 days, far from London (82 days) or New York (72 days).
Why we are optimistic
Households in Spain will grow by 250,000 a year until 2039, with Madrid contributing some 50,000 a year. GDP is growing at ~3% year on year, unemployment is falling and property transactions are at record highs. What is more, real prices remain 31% below their 2008 peak.
Conclusion
Is Madrid expensive? It depends. For the average Spanish citizen, housing has become more expensive faster than wages. By international comparison, Madrid remains competitive. For the investor, it offers returns, legal certainty and potential for capital growth. What is clear is that the problem is not a speculative bubble, but a structural imbalance between supply and demand that will only be resolved by building more homes. Analysis by Sophiq Properties using data from Idealista, INE, Knight Frank and the World Bank.