Real Estate Investment in Europe to Grow by 23% in 2025 – and Spain is the leader

The European real estate market is set for a strong comeback in 2025, with investment expected to grow by 23%. According to a recent report, Spain remains one of the most attractive destinations for investors, ranking among the top five countries in Europe for property investment.

For non-resident property buyers, this forecast signals both opportunity and competition. Whether you're considering purchasing a holiday home, a rental property, or an investment in Spain’s booming real estate market, these findings can help you make informed decisions. 

In this blog, we’ll be looking at what you need to know about Spain’s role in Europe’s property market resurgence and what it means for non-resident investors going forward.

Why Is Real Estate Investment in Europe Growing?

After a period of economic uncertainty, confidence in the property market is returning across Europe, with investors seeking stable and profitable assets. Some key factors driving this growth include:

• Economic recovery and increased investor confidence
• Stabilisation of interest rates and improved lending conditions
• Demand for property as a hedge against inflation
• Rising demand for rental properties

Spain is a Leading Investment Destination

Among the countries set to benefit from this investment surge, Spain ranks as one of the top five most attractive real estate markets in Europe. The UK and France follow in second and third place. 

More than half of investors are planning to increase their investments in Europe and the Middle East. Investors prefer properties priced between €20 million and €60 million, and transactions are expected to rise as financial conditions improve. 

Key reasons Spain remains a top choice for investors

• High demand for rental properties, driven by tourism and digital nomad trends
• Competitive property prices compared to other European markets
• A favourable climate, strong infrastructure, and high quality of life
• A resilient real estate market with stable long-term investment potential

Where Are Investors Looking in Spain?

With investment levels rising, certain areas in Spain are attracting more attention than others. These are:

• The Costa del Sol: A long-time favourite for foreign buyers, with strong rental demand and property appreciation
• Madrid and Barcelona: Urban centres offering lucrative rental yields and business opportunities
• Alicante and Valencia: Affordable coastal cities with growing investment potential
• Balearic and Canary Islands: Popular for both tourism and long-term expat living

These regions continue to see strong interest from European, American, and Middle Eastern investors, as well as UK buyers who remain active despite post-Brexit changes.

What This Means for Non-Resident Property Buyers

With real estate investment expected to grow, non-resident buyers should be aware of both opportunities and challenges, particularly when it comes to investing in property. 

• Increased competition for property in high-demand areas
• Potential property price growth due to higher investment levels
• Rental market opportunities for those looking to generate income from their Spanish property

Understanding tax obligations is just as important as choosing the right location when investing in Spanish property, as they can add up and present significant unexpected costs on top of your purchase. 

Key Considerations for Non-Resident Investors

Before purchasing property in Spain, non-resident investors should be aware of the following ongoing taxes.

Property Taxes for Non-Residents

• Property Transfer Tax (ITP) applies when buying resale properties
• Rental Income Tax must be declared if renting out a property
• Wealth Tax may apply depending on the region and value of assets
• Capital Gains Tax, when selling the property

Tax Compliance

• As a minimum, non-resident property owners must file a Modelo 210 tax return, even if the property remains empty all year
• If a property is rented out, non-residents must file a Modelo 210 tax return to declare the rental income gained
• Missing tax deadlines can lead to penalties, making compliance essential

Whilst the idea of organising the payment of these taxes abroad can be off-putting, IberianTax offers a simple, affordable solution, providing an easy-to-use online service designed specifically for those who own property in Spain but live abroad.

From imputed income tax to rental income tax and capital gains tax, knowing what to file and when can be overwhelming. IberianTax simplifies this process, offering a straightforward platform that allows property owners to complete their tax filings quickly and without unnecessary stress – from as little as €34,95.

With real estate investment in Europe set to grow by 23% in 2025, Spain is once again a key destination for foreign property buyers. Whether you're looking for a holiday home, a rental property, or a long-term investment, now could be a great time to enter the market.

However, with increased demand comes the need for careful planning and financial awareness. Understanding property taxes, legal requirements, and compliance as a non-resident is crucial to making an investment as smooth and profitable as possible.

Need expert tax guidance for your Spanish property investment? Contact IberianTax today to ensure your non-resident tax affairs are handled correctly and hassle-free.