· 7 min read
Southern Europe, especially Spain, experienced its second most intense heatwave on record in August 2025, making clear that global warming is no longer a distant threat: it is here, and it is already affecting cities, public health, and even the housing market.
A recent academic study we conducted offers revealing insights into how rising temperatures are reshaping the Spanish real estate market and altering property values.
Extreme heat and property value
Over the past decade and a half, Spain has faced increasingly frequent and intense heatwaves, with 2025 marking one of the hottest years on record. Beyond its effects on health, productivity, and public infrastructure, extreme heat is leaving a clear and measurable mark on the country’s housing market. Through a comprehensive analysis of sale and rental prices published on idealista.com across 47 provincial capitals on the Spanish mainland between 2009 and 2024, we have found compelling evidence that high temperatures have a significant impact on property values.
Our study reveals that for each additional day with maximum temperatures exceeding 35°C (an extreme temperature that has negative consequences for human health and the local economy), there is an average decline of €1.40 per square meter in sale prices and €0.0059 per square meter in rental prices within the same province. While these numbers might appear modest at first glance, their cumulative effect is substantial. For an average home of 120 square meters — and taking into account that roughly 700,000 homes were listed for sale or rent across Spain in 2024 — this temperature effect translates into an annual loss of around €117.6 million in property sales and approximately €500,000 per month in rental income.
These findings demonstrate that extreme heat acts as a silent depreciator of housing value. While the loss may not be immediately visible, over time, it erodes the wealth of property owners and alters the economic balance of local markets. The impact is not uniform across Spain, however. As temperatures continue to rise, the pattern of winners and losers in the real estate landscape is becoming increasingly evident.
Who benefits from the heat?
While southern and inland provinces — where summer temperatures frequently soar beyond 35°C — are seeing declines in property value, the story is very different in neighbouring, cooler regions. Our research indicates that these milder areas benefit indirectly from others’ heat. Specifically, in provinces that border hotter regions, but with milder temperatures, sale prices tend to rise by up to €2.80 per square meter, and rental prices increase by about €0.012 per square meter.
This shift represents a transfer of value worth approximately €235 million per year in additional sales and €1 million per month in rental gains for property owners in cooler provinces. In essence, heatwaves are redistributing housing wealth across the country: while they drain value from overheated markets, they boost demand — and prices — in areas perceived as climatic refuges.
Spanish regions such as Galicia, Asturias, Cantabria, and parts of northern Castilla y León have already begun to experience this trend. These areas, known for their milder summers and greener landscapes, are increasingly attracting both buyers and renters seeking relief from the extreme conditions of Spain’s southern and central regions. The result is a new form of “climate-driven” real estate appreciation, one that could reshape the country’s demographic and economic geography in the years to come.
This dynamic, which we associate with internal climate migration, carries far-reaching implications. It affects not only where people choose to live, but also how urban planners, investors, and policymakers must rethink development strategies. Are we witnessing the emergence of climate gentrification — where certain regions gain value because they remain livable while others lose it due to uninhabitable heat? Our findings suggest that this transformation is already underway.
Housing, climate change, and local economies
The housing market has always reflected broader economic and environmental realities, acting as a sensitive barometer of risk and opportunity. In countries such as the United States and China, property devaluation in areas prone to hurricanes, floods, or wildfires is now well documented. Spain’s situation adds a new dimension to this global pattern: instead of sudden, catastrophic events, it faces a slow, persistent threat — extreme heat — that gradually undermines housing attractiveness and long-term value.
This process reveals a deeper truth: the real estate and financial markets are not insulated from climate risks. On the contrary, they serve as pathways through which those risks translate into tangible economic consequences. When home values fall due to sustained heat, the repercussions extend far beyond individual property owners. Local governments face reduced property tax revenues, public budgets for infrastructure shrink, and social inequalities widen as wealth shifts geographically.
For instance, as property values fall in overheated provinces, residents may find it harder to sell their homes or attract renters, reducing household wealth and local consumption. Meanwhile, municipalities with declining revenues may struggle to maintain public services or invest in climate adaptation measures, creating a vicious cycle of economic decline and vulnerability. Conversely, cooler provinces may enjoy a temporary economic boost, but they also face new challenges: increased demand can drive up housing prices, making it harder for locals to afford homes in their own communities.
This movement of people and capital toward cooler areas reflects what researchers describe as “climate migration.” While the term is typically used to describe international displacement, Spain offers a clear example of how it also occurs within national borders. As summers become increasingly unbearable in southern and central regions, more Spaniards — and even foreign residents — are expected to relocate northward or toward higher-altitude zones where living conditions remain more comfortable.
Our data indicate that this migration is not purely demographic — it is economic as well. Real estate capital follows the same path as people. Investors and developers are already beginning to focus more attention on regions with favourable climatic conditions, anticipating future demand. While this may stimulate local economies, it also raises concerns about equity and sustainability. A sudden influx of demand can lead to price surges, pushing out long-time residents and accelerating the very inequalities that climate change exacerbates.
The future of housing in Spain
Looking ahead, the future of Spain’s housing market will depend on how effectively the country integrates climate considerations into its urban, financial, and social policies. The evidence is clear: extreme heat is not a temporary anomaly — it is a structural factor that will continue to influence housing dynamics for decades. The question, therefore, is not if climate change will affect real estate, but how society chooses to respond.
Adaptive policies will be crucial. This includes investing in climate-resilient housing design, improving energy efficiency, expanding green infrastructure, and developing early-warning systems for extreme heat events. Urban planners must also prioritise cooling strategies such as increased vegetation, shaded public spaces, building cooling centres, and reflective building materials that mitigate heat accumulation. From an economic perspective, integrating climate risk into property valuation models, mortgage assessments, and insurance premiums will help investors and households make informed decisions.
Policymakers should also consider measures to ensure social fairness. As cooler regions become more desirable and prices rise, governments may need to implement mechanisms to protect affordability and prevent displacement. Otherwise, climate change could deepen territorial inequality — creating pockets of privilege in habitable zones and zones of decline where heat becomes unbearable.
Our study ultimately underscores a simple yet powerful truth: climate change is not just an environmental issue — it is an economic and social one. The real estate market, often seen as a stable investment, is now at the forefront of climate risk. How Spain addresses this challenge will shape not only the country’s housing future but also its broader economic resilience. This will also serve as a testing ground for how global warming may reshape housing markets in other regions — particularly in Europe, the fastest-warming continent.
Like its cities, Spain’s housing market stands on the frontline of climate change. The actions taken today — whether through sustainable planning, equitable investment, or adaptive policymaking — will determine the economic, social, and human value of housing tomorrow. In a warming world, resilience is not optional; it is the foundation of future prosperity.
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
Curious how major companies measure up on climate? On illuminem’s Data Hub™, explore verified emissions data, net‑zero targets, and sustainability performance of thousands of firms — from industry leaders to emerging innovators.
