Extreme Heat Deflates Spain Housing Market

Spain's real estate market continues its historic upward trajectory, recording 42 consecutive quarters of price increases since early 2015. According to recent data, the national market grew by 12.8% in the third quarter of 2025 compared to the same period in the previous year.

Despite this national trend, a cooling effect is being observed in specific regions. The country's hottest provinces are experiencing a reversal in property value momentum. Researchers have successfully quantified this phenomenon for the first time, establishing a clear link between extreme heat and real estate pricing.

The impact is most pronounced in southern regions including Andalucía, Extremadura, and Murcia. In these areas, properties are either losing value or facing dramatically increased insurance premiums. The data indicates that each day with temperatures rising above 35°C results in a measurable decrease in property value, affecting both the sales and rental markets.

Spain's housing market shows no signs of slowing down nationally. Data from the Instituto Nacional de Estadística (INE) confirms that property prices have risen without interruption for over a decade.

The current growth cycle began in the first quarter of 2015. Since then, prices have increased in every single quarter. The third quarter of 2025 represents the 42nd consecutive quarter of growth.

The most recent figures show a significant acceleration. Year-over-year, prices jumped by 12.8%. This sustained growth has created a robust national market, but regional variations are becoming increasingly apparent.

A groundbreaking study has provided the first concrete numbers linking climate change to real estate valuation. The research establishes that extreme heat directly impacts property prices in affected areas.

The correlation is precise and measurable. For every day where maximum temperatures exceed 35°C, the market value of a property decreases.

The specific impacts on pricing are:

• €1.40 per square meter reduction in sale price for each day above the threshold
• €0.0059 per square meter reduction in rental price for each day above the threshold

This data allows analysts to quantify how much value is lost due to heat exposure over time.

The cooling effect of extreme weather is not uniform across Spain. The impact is concentrated in the southern and central-southern parts of the country.

Provinces with the highest temperatures are seeing the most significant effects. Specifically, Andalucía, Extremadura, and Murcia are identified as regions where the housing bubble is deflating.

In these locations, property owners face two potential outcomes. Either the value of their home decreases, or the cost of insuring the property against climate risks increases substantially. This creates a divergence from the national trend, where prices continue to climb.

The Spanish real estate market presents a complex picture. While the national trend remains strongly positive with historic price increases, a new variable has entered the equation: extreme heat.

The ability to quantify the financial impact of climate change on property values marks a significant development. It suggests that future real estate valuations in Spain may depend as much on local weather patterns as on traditional economic factors.

As temperatures continue to rise, the divergence between cooler regions and the hottest provinces is likely to widen, potentially reshaping the Spanish housing map.