Determinants of the Spanish housing market over three decades and three booms: Long run supply and demand elasticities

María Arrazola, Jose de Hevia, Desiderio Romero and José Félix Sanz-Sanz

No 18852, Working Paper Series from Victoria University of Wellington, Chair in Public Finance

Abstract: This paper offers a quantitative analysis of housing supply and demand in Spain. To this end, it formulates a model in line with the traditional models of the literature. Using Spanish data for the period 1975 to 2009, reduced form and structural models are estimated. The results obtained show that faced with situations of disequilibrium prices adjust more rapidly than stock. Similarly, they demonstrate that demand shows low sensitivity to variations in prices and real interest rates. By contrast, it is highly sensitive to demographic changes and the evolution of the labor market. The evidence confirms that permanent income has greater weight than prices as a determinant of demand. Moreover, supply is very sensitive to variations in prices and interest rates.

Keywords: Housing booms; Demand; Supply; Elasticities; Spain (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:vuw:vuwcpf:18852

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