As 2025 begins, households across Spain are preparing for a series of price hikes that will affect everyday spending. From food to energy, many essentials are becoming more expensive, but there are also some positive financial shifts to take note of.
One of the most significant changes in 2025 is the end of reduced VAT rates on essential food items. As of January 1, products such as olive oil, bread, milk, eggs, cheese, fruits, vegetables, legumes, and cereals will see their VAT rise from 2% to 4%. Pasta and seed oils will also see an increase, with VAT jumping from 7.5% to 10%. However, there is a silver lining: the VAT on fermented milk products, such as yoghurt, will decrease from 10% to 4%. Additionally, there are signs that the price of olive oil may drop, as early indicators suggest lower prices at the source.
Energy prices
Energy bills are also set to see notable changes in 2025. The VAT on electricity will return to the pre-crisis rate of 21%, after being temporarily reduced. Furthermore, government charges on fixed components of electricity bills will increase by 39%. While the regulated fees for electricity will drop by an average of 4.4%, natural gas tariffs are expected to rise. The individual ‘tarifa de último recurso’ (TUR) for gas will go up by 10% and the community-based TUR will climb between 13.5% and 18.3%. Additionally, the cost of butane gas will increase by nearly 10%.
Telecommunications
Consumers will also face higher costs in the telecommunications sector. Major providers such as Movistar, Vodafone, and Orange have announced price hikes. Movistar will increase its prices by around 5%, while Vodafone and Orange will raise their rates by an average of 3%.
Housing and mortgages
The housing market in Spain is likely to remain challenging in 2025, with property prices continuing to climb driven by a robust demand and limited supply. Analysts forecast nominal growth around 4%, outpacing inflation. This trend is particularly pronounced in major cities and coastal regions, where demand remains strong. However, for those with variable-rate mortgages, there is some relief. The 12-month Euribor has fallen to around 2.4%, its lowest level since September 2022, potentially easing access to financing for property purchases. The European Central Bank is expected to continue reducing interest rates throughout 2025, which could further lower mortgage costs.
Pensions and wages
While pensions are set to rise, salaries are not expected to see significant growth. Pensions will be revalued by 2.8%, providing an additional €600 per year for those on an average retirement pension. Minimum pensions will increase by 6%, while non-contributory pensions and the Minimum Vital Income (IMV) will rise by 9%. On the other hand, the minimum wage (SMI) and public sector salaries are frozen at the start of the year. However, an increase of at least 3% for the SMI and a 0.5% rise for public servants are anticipated later in 2025.
Other price increases
Several other everyday expenses will also see a rise:
- Postal services will see an 8.5% increase in the cost of standard letters, with the price of parcels also rising.
- Toll fees on state highways will go up by 2%.
- Private health insurance premiums are expected to rise.
- New taxes will be introduced for e-cigarettes and vape products.