The Costa del Sol, with its golden beaches, vibrant culture, and year-round sunshine, has long been a magnet for property buyers, retirees, and investors chasing lucrative holiday rental opportunities. But as we navigate 2025, the region’s real estate market is facing headwinds that could slow its meteoric rise. From stricter short-term rental regulations to growing anti-tourism sentiment and economic uncertainties, the market stands at a pivotal crossroads.

In this post, we’ll unpack the factors driving uncertainty, explore why property prices have surged in Spain, and assess whether the Costa del Sol’s booming market is at risk of cooling.

Why Have Property Prices Skyrocketed in Spain?

Spain’s property market, particularly in tourist hotspots like the Costa del Sol, has experienced dramatic price growth in recent years. Here’s what’s been fueling the surge:

1. High Demand from International Buyers

The Costa del Sol is a global favorite, with 50-70% of holiday home purchases coming from international buyers, especially from the UK, Germany, and Nordic countries. Its sunny climate, relaxed lifestyle, and established expat communities make it a top choice for second homes and investment properties.

2. Chronic Housing Shortages

Spain faces a housing deficit of 40,000 units annually, and in the Costa del Sol, this scarcity is even more pronounced due to high demand for prime coastal properties. Areas like Marbella and Málaga have seen prices soar as supply struggles to keep up.

3. The Airbnb Effect

Platforms like Airbnb have transformed the Costa del Sol into a global hub for short-term rentals, with a staggering 466% growth in listings since 2019. High rental yields in tourist-heavy areas have attracted investors, further driving up property prices.

4. Post-Pandemic Lifestyle Shifts

The COVID-19 pandemic reshaped buyer priorities, with many seeking spacious, sunny properties for remote work or permanent relocation. The Costa del Sol’s year-round appeal made it a prime beneficiary of this trend.

5. Economic Recovery and Low Interest Rates

Spain’s post-pandemic economic rebound, coupled with historically low interest rates, improved affordability for buyers and fueled demand.

6. Speculative Investment

Luxury properties in high-end markets like Marbella have attracted speculative investors, including non-EU buyers, who anticipate strong returns from both price appreciation and rental income.

However, these growth drivers are now clashing with new challenges that could reshape the market’s trajectory.

A Market in Transition: Maria’s Story

Meet Maria, a property owner in Benalmádena. For years, her charming two-bedroom apartment thrived as an Airbnb rental, benefiting from the Costa del Sol’s tourism boom. But in 2025, Maria’s listing sits unsold. Her community of owners has delayed voting on whether to allow new short-term rentals, leaving her in limbo. Negative media coverage of Spain’s growing anti-tourism sentiment has made buyers cautious, fearing restrictive regulations and a less welcoming environment for tourism-driven investments.

Maria’s story is emblematic of the broader challenges facing the Costa del Sol’s property market, where regulatory shifts, community decisions, and shifting perceptions are creating uncertainty.

Are Property Prices at Risk of Cooling?

While property prices on the Costa del Sol have soared—Málaga province saw a 13% year-on-year increase in 2024—several factors could halt this upward trend. Here’s what’s putting the brakes on:

1. Stricter Short-Term Rental Regulations

New rules are reshaping the rental landscape. Spain’s Horizontal Property Law now allows communities to ban short-term rentals unless approved by a three-fifths majority. In Málaga, the City Council has banned new short-term rental registrations in 43 neighborhoods where such rentals exceed 8% of homes. These measures aim to prioritize housing for locals but may deter investors, reducing demand and potentially softening prices.

2. Rising Anti-Tourism Sentiment

Protests against mass tourism are gaining momentum. In April 2025, thousands marched in Málaga, demanding affordable housing and fewer tourist rentals. Slogans like “Your holidays, my misery” have made headlines, potentially deterring foreign buyers who dominate the holiday home market.

3. Persistent Housing Shortages

While housing shortages have historically propped up prices, falling investor demand due to rental restrictions and anti-tourism sentiment could disrupt this balance, particularly in areas like Mijas and Fuengirola.

4. Fear of Squatters

The risk of “okupas” (squatters) remains a significant concern for property owners. Spain’s slow eviction process, especially for vulnerable tenants, discourages long-term leases and reduces the appeal of buy-to-let investments.

5. Economic and Policy Pressures

Rising construction costs and economic uncertainty are dampening buyer confidence. A proposed 100% tax on luxury property transfers for non-EU buyers could further reduce speculative investments in high-end markets like Marbella.

The Changing Rental Market and Its Impact

The Costa del Sol’s short-term rental market, once a key driver of property prices, is undergoing a transformation:

  • Rental Price Pressures: In 2024, Málaga province’s average rental rate hit €14.32 per square meter, up 13.5% year-on-year. However, bans on new short-term rentals could force owners to switch to long-term leases, which yield lower returns, potentially stabilizing or reducing rental rates.
  • Shift to Long-Term Rentals: With community bans and municipal restrictions, many owners may pivot to long-term leases or sell, increasing the supply of properties for sale and exerting downward pressure on prices.
  • Declining Investment Appeal: The profitability of short-term rentals has been a major draw for investors. With new restrictions and negative press, the region’s appeal for buy-to-let investors is waning.

Looking Ahead: Navigating the Costa del Sol’s Property Market

The Costa del Sol remains a desirable destination, but its property market is entering a period of uncertainty. For investors and buyers, 2025 presents both risks and opportunities:

  • For Investors: Rental restrictions and anti-tourism sentiment may soften prices in tourist-heavy areas, creating opportunities to negotiate. However, due diligence is critical—understand community regulations, local sentiment, and economic trends before making a move.
  • For Sellers: Owners like Maria face tough decisions. Selling in a cooling market, pivoting to long-term rentals, or holding properties vacant all come with trade-offs.
  • For Buyers: A cooling market could offer better deals, but prime locations like Marbella may remain resilient due to limited supply and enduring appeal.

While the Costa del Sol’s property market may face headwinds, its lifestyle, climate, and charm ensure it will remain a sought-after destination. The key to navigating this evolving landscape is staying informed and adaptable.

About the Author Move To Spain Guide

Move To Spain Guide is a leading authority on the Spanish Digital Nomad Visa, with a proven track record of 1,000 successful applications. Our English-speaking team will guide you through every step of the process, ensuring a smooth transition to your new life in Spain.

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}