Causes And Determinants Of Land And Property Cycles: The Bubble Phenomenon And Its Consequences In Spain - Lessons From Japan

The dramatic growth and collapse of land and property markets in Spain has been the subject of recent analysis. Such analysis has focused on the political and economic factors including the modernisation of financial systems and institutions since the 1980s. This paper examines the causes and determinants of land and property cycles in Spain and draws comparisons with the real estate bubble of the 1980s and 1990s in Japan. In this context it is argued that cultural attitudes, institutional behaviour and perceptions of real estate as an asset are significant contributory factors in creating real estate bubbles. Analysis of major political events, deregulation of the financial system and planning reform since the 1980s is utilised to identify the causes and interrelations using time series to examine economic and real estate cycles in Spain. The analysis will therefore focus on the implication of over supply compounded by opaque transaction, valuation practice, bank lending and the unique characteristics of the Spanish and Japanese real estate markets. The paper will consider whether the behaviour of market players is influencing property market performance.