Structural changes in the Spanish housing market and their implications for housing policy

Abstract

The paper evaluates the role of fundamentals to explain the evolution of housing prices in the Spanish market. Real and financial components of the housing demand are included in an empirical exercise in order to evaluate their impact on prices. It also check the possibility of current Spanish housing price cycle to be a bubble regarding the market absorption and the households indebtedness, and the macro-effects of the price evolution. Some results suggest that there is not a bubble on Spanish housing prices but a strong revaluation on Spanish wealth.