German automotive crisis poses threat to Spanish property market

Volkswagen is considering laying off 100,000 employees and closing four factories in Germany. The entire sector is struggling with weak demand, Chinese competition in electric vehicles, and the painful transition away from internal combustion engines. According to forecasts from German automotive lobby VDA, the industry could lose a further 125,000 jobs by 2035.

Why does this matter for Spain? Germans are one of the largest groups of foreign property buyers in Spain. On the Balearic Islands, they account for more than half of all foreign second-home purchases. On the Canary Islands, Germans also lead. Across Spain, they traditionally rank second after the British, though they have recently slipped to third place, behind the Dutch.

Registration data already show a decline in German purchases of Spanish property for three consecutive quarters. This is not yet a catastrophe—demand remains above pre-pandemic levels. However, the trend is concerning.

Mallorca and the Canaries are at risk. These markets have spent decades building demand around German buyers, from modest apartments to luxury villas. If German consumption falls significantly, the impact will be substantial.

The Spanish market will not collapse because of Germany alone—demand is diversified. But if the industrial crisis develops into a broader economic problem, regions with a high share of German investors face weakened demand, longer sales cycles, and downward pressure on prices.

Source: Spanish Property Insight