Spain, together with Italy, has the best real estate refinancing outlook in Europe, according to an AEW Research analysis published in late October 2026. The good news comes with a warning: financing is getting more expensive again, which makes buying with debt less appealing, the Costa del Sol included.
Why does Spain have a better refinancing outlook than France or Germany?
The analysis rests on the health of the banking system and the size of the outstanding financing gap. Spanish bank default rates fell from 5.1% to 2.4% between 2019 and the first quarter of 2026, below the European average of 2.9%. Italy has come even further, from 19.4% to 3.2% of non-performing loans. France and Germany, by contrast, still face significant challenges; in Germany the sector's default rate is around 5.3%.
| Indicator (source: AEW Research) | Figure |
|---|---|
| Spanish bank default rate, 2019 | 5.1% |
| Spanish bank default rate, Q1 2026 | 2.4% |
| European average default rate, Q1 2026 | 2.9% |
| Expected European financing gap, 2027-2029 | €45bn |
| Gap estimated in 2023 (2026-2028 cycle) | €90bn |
| Five-year European swap rate | 3.4% |
| Total financing cost in Europe (ex-UK), Q3 2026 | 5.1% |
What is the financing gap and why has it halved?
The financing gap is the volume of real estate debt that cannot be refinanced on today's terms and will require fresh capital, asset sales or restructuring. AEW now puts it at €45 billion for 2027-2029, half of the €90 billion calculated in 2023. The main reason is the refinancing of problem loans granted before 2022, increasingly through back leverage, meaning financing secured on existing loans.
- Outstanding back leverage deals exceed €50 billion, up 40% on 2025 on a like-for-like basis.
- The relative gap has fallen from 12% to 10% of previously originated loans.
- France has the largest relative gap: €12.6 billion, 22% of its historical loan volume, and it is the only country where it has grown.
- The UK is the opposite extreme: €4.3 billion, 3% of its initial loan volume.
What risk remains in the real estate debt market?
AEW's Hans Vrensen warns that the easier solutions may have been used up and that some of the most troubled loans remain unresolved. The benign scenario the industry expected for late 2025 has also become less certain: swap rates have risen by about 100 basis points in a year and central banks are watching inflation again, linked to the Middle East conflict.
How much does it now cost to finance property in Europe?
Total financing costs in Europe, excluding the UK, reach 5.1% in the third quarter of 2026, 10 basis points above the previous peak (5% in the second quarter of 2023). That is in line with average yields on European prime property, so for the first time since the second half of 2023, borrowing no longer boosts investment returns. Loan margins, however, remain stable thanks to fierce competition, including from non-bank lenders.
The leverage level matters too: the median LTV on loans over the last four quarters is 60%, against an average of 50% in 2023-2025. Loans with an LTV below 50% have dropped to 3.7%, while those above 60% stand at 5.3%.
What does it mean for buying or investing on the Costa del Sol?
The study looks at institutional European real estate debt, not residential mortgages, so it should not be mapped one-to-one onto individual buyers. Even so, it offers three useful takeaways for anyone looking at Marbella, Estepona, Malaga or Mijas. First: a healthier Spanish banking system is a solid base for credit to remain available. Second: with financing more expensive, highly leveraged buyers lose room to manoeuvre, and deals with more equity gain weight. Third: the valuation pressure AEW flags as a possible risk is a reason to compare against real local data before deciding.
For reference, according to our October 2026 market report, the Costa del Sol median is €650,000 and €4,738/m² across 8,233 active listings; in Marbella it is €950,000 and €6,096/m², and in Málaga €625,000 and €4,955/m². These are asking prices, not closing prices. You can see them all in our Costa del Sol market report.
To understand how credit demand is shifting, also read our analysis of why mortgage demand is falling in Spain.
Conclusion
Spain enters this cycle with a cleaner banking sector and a shrinking financing gap, but with pricier credit and less room for leverage. At EVS Property Group we help you value each deal in Marbella, Estepona, Málaga and the rest of the Costa del Sol with real figures and work out the purchase structure that suits you best.
Frequently asked questions
Which European country has the best real estate refinancing outlook?
According to AEW Research, Spain and Italy. France and Germany still face significant challenges, and France is the only country where the financing gap has grown as a share of previously originated loans.
What is the Spanish banks' default rate in 2026?
2.4% in the first quarter of 2026, down from 5.1% in 2019 and below the European average of 2.9%, according to AEW's analysis.
What is back leverage?
It is financing secured on existing real estate loans. Outstanding volume exceeds €50 billion in Europe and it has helped refinance troubled loans originated before 2022.
Is it harder to finance a home purchase on the Costa del Sol?
The study does not measure residential mortgages. It does show that financing has become more expensive (5.1% total cost in Europe in Q3 2026), so it pays to compare offers and consider putting in more equity.
What next? The most useful thing after reading is to look at the real market: browse properties by city or tell us on WhatsApp what you are looking for — area, budget, timing — and we will prepare a tailored selection, with no obligation.
You may also find useful: sell your property invest on the Costa del Sol free valuation monthly price report
