Inflation climbs to 3.5% in July: what it means if you are buying property on the Costa del Sol

Spanish inflation ended July 2026 at 3.5% year on year, three tenths above June and the highest reading since May 2024, according to the INE flash estimate. For anyone buying property on the Costa del Sol the impact is not on the price tag itself, but on three concrete things: the cost of financing it, the cost of running it, and the real return it delivers if you rent it out.

Why did inflation rise in July?

The rebound comes from energy. Fuel and electricity have risen more than they did in the same month last year, and that pulls the headline index up with them. Core inflation, which strips out energy and fresh food and is a better guide to the underlying trend, moved up more gently to 3.0%.

It is worth reading the figures carefully, because they do not all say the same thing:

The relevant nuance is that inflation has now spent five months above 3%, well clear of the 2% the European Central Bank targets. This is a flash estimate: the INE will confirm it in mid-August.

Do property prices rise when inflation rises?

Not automatically, and not immediately. Historically bricks and mortar behave as a reasonable store of value during inflationary periods: while cash in an account loses purchasing power every month, a well-located physical asset tends to hold on to it. That is why coastal property often attracts capital exactly when general prices accelerate.

That said, on the Costa del Sol prices are driven far more by the shortage of well-served, well-located stock than by the monthly inflation print. These are the real medians across our own portfolio today, a useful starting point for any calculation:

These figures are refreshed every month in our Costa del Sol market report, where you can filter by area and property type.

How does inflation affect my mortgage?

This is the most direct channel. The European Central Bank sets rates with eurozone inflation in mind, and Euribor moves in anticipation of those decisions. The longer inflation stays above target, the less room the ECB has to ease, and the less likely it is that a variable-rate mortgage gets cheaper any time soon.

For a buyer using finance, the practical reading is simple: if a fixed-rate offer fits your budget today, uncertainty argues for locking it in. If you go variable, run the numbers with rates a full point above where they stand now and check the payment is still comfortable.

What if I am buying to let?

Two things need separating here. Rent on a primary-residence tenancy can no longer be indexed freely to inflation: since the housing law reform a specific reference index published by the INE applies, designed precisely so that rent increases do not track inflation spikes. Holiday lets are different, with pricing set by demand season by season, and coastal demand has absorbed recent increases well.

The point people tend to forget is real return. If a property yields 5% gross while inflation runs at 3.5%, the real gain before costs is around 1.5%. That does not invalidate the investment, but it changes the conversation: in this environment location, occupancy and cost control matter more than hoped-for capital growth.

The cost of running the property is rising too

When the spike comes from electricity, it lands on the owner's bill: air conditioning, the communal pool, lifts, estate lighting. In complexes with extensive shared areas, that slice of the annual budget weighs more than it appears at signing.

• Ask for the actual community fee from the past year, not the seller's estimate.
• Check for approved or planned special levies, particularly for energy efficiency work.
• Review the energy certificate: on the coast the gap between ratings shows up in the cooling bill.
• In new-build, treat heat pumps and insulation as a recurring saving, not a cosmetic extra.

So, is this a good time to buy?

A single monthly inflation print is not reason enough to rush a purchase or to postpone one. What it does argue for is sharper numbers: financing stress-tested against rate scenarios, community fees and utilities verified, and a return expectation calculated in real rather than nominal terms. A buyer clear on those three points arrives at the negotiating table in a better position than one looking only at the asking price.

At EVS PROPERTY GROUP we run those numbers with every client before viewing anything: which area fits the budget, what the property really costs to run, and what it returns once everything is accounted for. If you are weighing a purchase in Marbella, Estepona, Benalmádena or Mijas, let us talk figures before photographs.

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