House prices and rents in Spain: does the discount factor matter?
Abstract
We estimate alternative price to rent ratios in the Spanish housing market by considering different stochastic discount factors in present value models similar to those used in the financial literature but where the higher rigidity that characterises this market is taken into account. We identify three robust across model regularities: i) the increase in the price to rent ratio since the late nineties helped at first to restore equilibrium, ii) further increases in house prices raised the ratio between 24% and 32% above equilibrium by 2004, although iii) at that time the ratio was only around 2% above its short term adjustment path towards a (new) long run equilibrium.Download Info
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Paper provided by Banco de España in its series Banco de España Working Papers with number 0609.Length: 34 pages
Date of creation: Apr 2006
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Handle: RePEc:bde:wpaper:0609
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Related research
Keywords: housing; price-to-rent ratio; overvaluation;Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - Housing Supply and Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-10 (All new papers)
- NEP-EEC-2007-03-10 (European Economics)
- NEP-GEO-2007-03-10 (Economic Geography)
- NEP-URE-2007-03-10 (Urban & Real Estate Economics)
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- José Francisco Bellod Redondo, 2011. "Detección de burbujas inmobiliarias: el caso español," Contribuciones a la Economía, Grupo Eumed.net (Universidad de Málaga), issue 2011-05, May.
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