A Cross-Section Analysis of the Income Elasticity of Housing Demand in Spain: Is There a Real Estate Bubble?
Much attention has been given to claims that real estate prices in Spain are overvalued in relation to income and how plummeting house prices can jeopardize the economy (The Economist, 2003 and IMF, 2004). The measure of income elasticity on housing expenditure is often of considerable interest to applied researchers and policy makers in real estate economics, but the problem of omitted variables in some estimation techniques can lead to severe biases. In this paper we estimate the income elasticity of the demand for housing in Spain based on the cross-section of prices and income in fifty Spanish provinces from 1996 to 2002. In comparison to long-run equilibrium models fitted with time-series data, our results show a much weaker role of income growth as a vehicle for house price increases in the long run. According to our estimates, the rate of growth of house prices in Spain between 1998 and 2003 points to a real estate bubble with prices above the long-term equilibrium level. Copyright Springer Science + Business Media, LLC 2006
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 32 (2006)
Issue (Month): 4 (June)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/regional+science/journal/11146/PS2|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Juan Ayuso & Fernando Restoy, 2003. "House prices and rents: an equilibrium asset pricing approach," Working Papers 0304, Banco de España;Working Papers Homepage.
- Arcelus, Francisco & Meltzer, Allan H, 1973. "The Markets for Housing and Housing Services," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 5(1), pages 78-99, Part I Fe.
- Arcelus, Francisco & Meltzer, Allan H, 1973. "The Markets for Housing and Housing Services: Reply," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 5(4), pages 973-978, November.
- Lopez, Carmen & Aguayo, Eva & Exposito, Pilar, 1998. "El comportamiento de los precios de la vivienda en las regiones españolas: principales determinantes," Economic Development 34, University of Santiago de Compostela. Faculty of Economics and Business. Econometrics..
- Goodman, Allen C. & Kawai, Masahiro, 1982. "Permanent income, hedonic prices, and demand for housing: New evidence," Journal of Urban Economics, Elsevier, vol. 12(2), pages 214-237, September.
- Wilkinson, R K, 1973. "The Income Elasticity of Demand for Housing," Oxford Economic Papers, Oxford University Press, vol. 25(3), pages 361-377, November.
- Goodman, Allen C. & Kawai, Masahiro, 1986. "Functional form, sample selection, and housing demand," Journal of Urban Economics, Elsevier, vol. 20(2), pages 155-167, September.
- Mayo, Stephen K., 1981. "Theory and estimation in the economics of housing demand," Journal of Urban Economics, Elsevier, vol. 10(1), pages 95-116, July.
- Justo Manrique & Kalu Ojah, 2003. "The demand for housing in Spain: an endogenous switching regression analysis," Applied Economics, Taylor & Francis Journals, vol. 35(3), pages 323-336.
- Hansen, Julia L. & Formby, John P. & Smith, W. James, 1996. "The Income Elasticity of Demand for Housing: Evidence from Concentration Curves," Journal of Urban Economics, Elsevier, vol. 39(2), pages 173-192, March.
- Kim, Kyung-Hwan & Suh, Seoung Hwan, 1993. "Speculation and Price Bubbles in the Korean and Japanese Real Estate Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 6(1), pages 73-87, January.
- Polinsky, A Mitchell, 1977. "The Demand for Housing: A Study in Specification and Grouping," Econometrica, Econometric Society, vol. 45(2), pages 447-461, March.
When requesting a correction, please mention this item's handle: RePEc:kap:jrefec:v:32:y:2006:i:4:p:449-470. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.