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How will the real estate market behave in 2025? What will be the trends that will shape real estate investment in 2025? This is something that many investors are asking themselves, after 2024 has not seen the correction that many have been predicting.
Real estate investment at the end of the third quarter exceeded 8,300 million euros in Spain, 15% more than in the same period in 2023, as reported by the consultancy firm Savills. This figure reflects investor interest in this type of market, which continues to be led by investment funds in the tertiary sector.
Although the market is growing in general, there are sectors that stand out in particular and are reflecting current investment trends, which could serve as a glimpse of the prevailing themes for the next financial year.
What are the investment trends?
In 2024, the leading real estate investment trend in terms of growth has focused on student residences, with a growth of 268% over the previous year and 68% above the average for the last five years. Specifically, it has received more than 730 million euros in direct investment.
Secondly, retail investment, which is mainly focused on shopping centres, grew by 155% compared to the previous year. This is due to the return of confidence in this sector after the post-pandemic years. In total, just over 1.5 billion euros were spent here.
Closing the podium in terms of the fastest-growing trends is the care homes for the elderly. Specifically, this typology has grown by 145%, although this is partly due to the purchase of a portfolio of 11 DomusVi residences.
Real estate investment trends in 2025
Although the predominant trends in 2024 are the three mentioned above, it is worth looking to the future to see what the sectors and movements in 2025 may be.
Lower interest rates
As a starting point, in 2025 interest rates are expected to start to normalise. In fact, the market consensus expects rates in Europe to fall from 4.5% in June 2024 to 3% in the summer of 2025.
These rate cuts are undoubtedly fundamental in the real estate sector for several reasons. The first is that financing becomes cheaper both when developing projects and when acquiring them. Therefore, there may be a greater demand for mortgages and financing for the development of different projects.
More growth in the sector with tourism as a protagonist
According to Bravos Estate, it is expected that by 2025 there will be a new growth in real estate investment of 15% and points to the Costa Blanca real estate sector in particular as the main opportunity and growth trend, although it is assured that coastal areas in general can continue on the wave of growth.
It should not be forgotten that Spain has signed its best year in the tourism sector in 2024 and growth is expected for 2025 due, in part, to geopolitical tensions in other areas of the Mediterranean.
There is still a lack of supply
If we look at trends by asset type, there is no clear consensus regarding residential real estate. According to the INE, between 2024 and 2028 a figure of 330,000 new homes per year will be reached. However, the number of new building permits for 2024 will remain at around 115,000.
Student residences will continue to grow
Beyond the residential sector, student residences will continue to show a strong attraction, as according to the DBK Sector Observatory, they will reach 125,000 places by the end of 2025 in contrast to 115,000 in 2023. In fact, according to Comprarcasa, there is a shortage of 55,000 university housing units in Spain. Therefore, this may be one of the growth trends that will continue.
As for retirement homes, the trend goes beyond 2025. According to the report of Residencias de mayores y Later Living, our country has a need to develop 1,000 residences for the elderly between now and 2035 due to the ageing of the population.
And also for the elderly
Finally, the development of logistics projects is also one of the winners of the future. After an improved perception of the economy, companies are more favourable to expansion. According to Tritax EuroBox, 53% foresee an increase in contracted floor space in the next three years at European level and 54% point to Spain as an attractive place to develop.
Therefore, by 2025, the sector and the market are expected to grow across the board, with big winners in residential housing in Madrid and the coastal areas, and with areas such as student and senior residences receiving a new boost from a lack of supply. In addition, industrial real estate may also show notable growth in the coming year.
Focus on sustainability
Within real estate, sustainability will continue to be a core issue due to regulations and the demand for funds to make new homes more sustainable in order to meet the emissions targets set by Brussels.
These are the trends that will mark a real estate market that will continue to generate investment opportunities.
