Spain's 2025 Economic Paradox: Middle-Class Struggles Amid Robust Real Estate Investment

As 2025 comes to a close, Spain faces a striking economic paradox. While macroeconomic indicators such as GDP growth suggest progress, many Spanish families, particularly the middle class, experience a worsening economic reality. According to forecasts, Spain's GDP is expected to grow between 2.9% and 3% this year, driven by an expanding foreign-born population and internal consumption. However, unemployment remains stubbornly high at 10.6%, and economic growth is projected to slow down in the coming years.

Key challenges include a significant trade deficit of -45.8 billion euros, where exports increased only 0.8% year-on-year compared to a 4.9% surge in imports, underscoring Spain's reliance on domestic consumption and raising concerns about competitiveness. Inflation remains a persistent strain, with general inflation at 3% and core inflation at 2.6% as of November, notably affecting essentials like food and services. These pressures have compounded a rising tax burden expected to reach 37.9% of GDP, further squeezing the middle class and dampening their purchasing power. Approximately 4.3 million Spaniards endure severe material deprivation, and the risk of poverty among children is notable.

Contrastingly, Spain's real estate market is experiencing considerable growth and investor interest. The sector is poised to reach nearly 15 billion euros in transactions, a 30% increase from 2024 and the third highest volume recorded since 2019. The hotel sector led investments with 3.5 billion euros, including a landmark 430 million euro acquisition of a resort in Tenerife. Residential real estate, covering student accommodations and senior living facilities, surged by 62%, accounting for 32% of total investments. The office real estate sector also rebounded strongly, achieving its highest investment since 2008 with 2.9 billion euros, while the logistics market increased by 12%, reaching 1.5 billion euros.

This stark contrast highlights an economy where high-value real estate investments flourish amid persistent middle-class economic difficulties such as stagnant disposable income, rising living costs, and declining investment in productivity. Despite European funds aimed at modernization, transformational impact remains limited, and the government faces growing challenges in meeting EU commitments.

Juan Manuel Pardo, director of capital markets at JLL, noted Spain's priority status for investors thanks to operational market consolidation and the robust economic fundamentals underpinning real estate resilience. Yet, experts underscore the urgent need for reforms to boost productivity, investment, and recovery for the middle class to mitigate these structural contradictions.