The Costa del Sol Property Market in 2025: Rising Prices, New Challenges, and an Uncertain Future

The Costa del Sol, with its golden beaches, vibrant culture, and year-round sunshine, has long been a haven for property buyers, retirees, and investors seeking lucrative holiday rentals. However, as we move through 2025, the region’s real estate market faces unprecedented challenges that could slow its meteoric price growth. From tightened regulations on short-term rentals to growing anti-tourism sentiment and economic pressures, the market is at a crossroads. In this blog post, we explore the factors driving uncertainty, explain 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 Risen So Much in Spain?

Spain’s property market, particularly in tourist hotspots like the Costa del Sol, has seen dramatic price increases in recent years. Several interconnected factors have fueled this surge:

• High Demand from International Buyers: The Costa del Sol attracts a significant share of foreign buyers, with 50-70% of holiday home purchases coming from the UK, Germany, Nordic countries, and beyond. The region’s lifestyle, climate, and established expat communities make it a top choice for second homes and investment properties.
• Limited Housing Supply: Spain faces a chronic shortage of new homes, with an estimated annual deficit of 40,000 units. In the Costa del Sol, this scarcity is exacerbated by high demand for prime coastal properties, driving up prices in areas like Marbella and Málaga.
• Boom in Short-Term Rentals: The rise of platforms like Airbnb has transformed the Costa del Sol into a global hub for holiday rentals, with a 466% growth in short-term rentals since 2019. High rental yields, especially in tourist-heavy areas, have attracted investors, pushing property prices higher.
• Post-Pandemic Lifestyle Shifts: The COVID-19 pandemic accelerated demand for spacious, sunny properties as remote work and lifestyle changes prompted buyers to seek second homes or relocate permanently. The Costa del Sol’s appeal as a year-round destination intensified this trend.
• Economic Recovery and Low Interest Rates: Spain’s economic rebound after the pandemic, coupled with relatively low interest rates from the European Central Bank in recent years, improved affordability for buyers, further fueling demand.
• Speculative Investment: Investors, including non-EU buyers, have poured capital into luxury properties, particularly in high-end markets like Marbella, anticipating strong returns from both price appreciation and rental income.

However, these drivers of growth are now colliding with new challenges that could reshape the market’s trajectory. Below, we dive into the key issues impacting the Costa del Sol’s property market in 2025.

A Market in Transition: Maria’s Story

Consider Maria, a property owner in Benalmádena, whose charming two-bedroom apartment has been a successful Airbnb rental for years. Her property, like many in the Costa del Sol, has benefited from the region’s tourism boom. But in 2025, Maria’s listing sits unsold. Her community of owners has yet to vote on allowing new short-term rentals, with a decision delayed until their annual meeting in September 2025. The uncertainty, combined with negative media coverage of Spain’s growing anti-tourism sentiment, has made buyers wary. They fear both restrictive regulations and a less welcoming environment for tourism-driven investments. Maria’s story reflects 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?

Property prices on the Costa del Sol have soared in recent years. In 2024, Málaga province saw a 13% year-on-year increase, far outpacing Spain’s national average of 4.4%. The average price per square meter in Málaga province is now €2,412, with premium areas like Marbella reaching €3,700 per square meter for holiday homes. Yet, a confluence of factors threatens to halt this upward trajectory, potentially leading to price stagnation or localized declines. Here are the key pressures:

1. Stricter Regulations on Short-Term Rentals

Spain’s Horizontal Property Law now allows communities of owners to ban short-term rentals unless approved by a three-fifths majority, a rule reinforced by Decree 31/2024, effective April 2025. In Málaga, the City Council has banned new short-term rental registrations in 43 neighborhoods where such rentals exceed 8% of homes, including El Ejido, La Malagueta, and Pedregalejo. An additional 32 neighborhoods, where rentals exceed 4.53% of housing stock, face potential restrictions. These measures aim to prioritize housing for locals but may deter investors, reducing demand and exerting downward pressure on prices.

2. Rising Anti-Tourism Sentiment

Across Spain, 2025 has seen growing protests against mass tourism, including in Málaga. On April 5, 2025, thousands of locals marched in Málaga, demanding affordable housing and fewer tourist rentals. Slogans like “Your holidays, my misery” and creative protests, such as water pistol campaigns, have gained international attention. This negative press risks deterring foreign buyers, who dominate the Costa del Sol’s holiday home market, potentially softening demand and prices in tourist-heavy areas like Torremolinos and Fuengirola.

3. Persistent Housing Shortages

While Spain’s shortage of 40,000 new homes annually has historically propped up prices, falling investor demand due to rental restrictions and negative sentiment could disrupt this balance. In areas like Mijas and Fuengirola, where short-term rentals dominate, reduced demand may not be offset by supply constraints, risking price corrections.

4. Fear of Squatters

The fear of “okupas” (squatters) remains a significant concern for property owners. Spain’s legal system can be slow to evict tenants who stop paying rent, especially if they are deemed “vulnerable” (e.g., families with children). High-profile squatter cases have amplified these fears, discouraging owners from offering long-term leases. For investors, the risk of tenants becoming squatters, combined with rental restrictions, reduces the appeal of buy-to-let properties, potentially increasing the supply of homes for sale and depressing prices.

5. Economic and Policy Pressures

Despite lower interest rates improving affordability, rising construction costs and economic uncertainty may dampen 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 has grown by 466% since 2019, fueled by platforms like Airbnb. However, new regulations and shifting dynamics are reshaping this landscape, with significant implications for property prices:

• Rental Price Pressures: In 2024, Málaga province’s average rental rate reached €14.32 per square meter, up 13.5% year-on-year, with Marbella at €18.8 per square meter. Bans on new short-term rentals in 43 neighborhoods may force owners to switch to long-term leases, which yield lower returns. This could stabilize or reduce rental rates, impacting property values as investor returns diminish.
• Shift to Long-Term Rentals: With community bans and municipal restrictions, owners like Maria may pivot to long-term leases or sell. This could increase the supply of properties for sale in restricted areas, particularly in Málaga’s city center, where short-term rentals account for 65% of tourist accommodations, potentially driving prices down.
• Declining Investment Appeal: The profitability of short-term rentals has been a key driver of the Costa del Sol’s property market. With bans in 43 neighborhoods, potential restrictions in 32 more, and negative press about anti-tourism sentiment, the region’s appeal for buy-to-let investors is waning, which could soften prices in areas like Benalmádena and Torremolinos.
• Worsening Affordability for Locals: While rental restrictions aim to improve housing access for residents, the immediate effect is a constrained supply of long-term rentals, pushing up costs. Negative perceptions of tourism may deter investors, but without significant new housing development, affordability challenges will persist in 2025.

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. Investors and buyers must weigh the risks of rental restrictions, community voting powers, anti-tourism sentiment, and economic pressures against the region’s enduring appeal. For owners like Maria, the decision to sell, rent long-term, or hold properties vacant is fraught with challenges. While prices may soften in tourist-heavy areas, the region’s lifestyle and limited housing supply could cushion any declines, particularly in prime locations like Marbella.

For prospective buyers, 2025 may present opportunities to negotiate in a cooling market, but careful due diligence is essential. Understanding community regulations, local sentiment, and economic trends will be critical to making informed investment decisions in the Costa del Sol’s evolving real estate landscape.