Paloma Taltavull de La Paz

Determinants of housing prices in Spanish cities

Residential price levels in Spain vary broadly among markets. Real estate theory explains that prices depend on market characteristics such as vacancy level, land availability, construction supply elasticity to respond to high or low speed to changes on the demand, as well as potential for economic growth, industrial and services activities located inside urban areas, etc. An analysis of prices in Spanish main cities shows that tensions appear to exist in some of them where economic activity shows different dynamism and price level appears to be independent of it. This paper tries to find evidence of the existing relationship between residential prices and economic and demographic factors that are demand determinants such as wages, migrations and productive structure, among others, to explain price formation in Spanish cities. It uses panel data and GLS methodology applied to 71 main Spanish province capitals and cities with more than 100,000 inhabitants. The results show evidence of determinants of housing prices and how some relationships appear to exist between price levels and families’ waged income as well as with population and productive structure in Spanish cities.

Implicit House Prices: Variation over Time and Space in Spain

Asking price has a fundamental influence on market behaviour and understanding how attributes affect the perceived price of housing. This paper employs a large database of houses from the Spanish housing market to estimate the role of attributes in asking price formation. STAR methodology and GLM with random effects are used to extract the price of attributes and the spatial and time pattern. Results show that the pricing of attributes varies by geographical region and over time with property size and economic and demographic attributes being the key variables explaining asking price formation.

New housing supply and price reactions: evidence from Spanish markets

Purpose – The paper develops a housing model equation for Spain and selected regions to estimate new supply elasticity. The aim of the paper is to assess the role of housing supply on price evolution and explain the fall in housing starts since the start of the credit crunch. Design/methodology/approach – The paper uses a pooled EGLS specification controlling for the presence of cross-section heteroskedasticity. Fixed effect estimators are calculated to capture regional heterogeneity. The model uses secondary data (quarterly) for 17 Spanish regions over the period 1990-2012. A recursive procedure is applied to estimate model parameters starting with a baseline model (1990-1999) and successively adding one-year time information. Elasticities, as well as explanatory power from models, are reported and jointly analyzed. Elasticity is interpreted as the extent to which market mechanisms drive developer responses. Findings – Elasticities of new supply are shown to be very stable during all periods but characte...

Fundamental drivers of house price change: the role of money, mortgages, and migration in Spain and the United Kingdom

There has been substantial house price inflation, particularly during the last decade, until the onset of the financial crisis. This price inflation has far exceeded growth in disposable incomes and has led to an increase in asset wealth. At the same time, mortgage lending rose, increasing liquidity in the market. In this paper we compare the macroeconomy effects of house prices in Spain and the UK. We examine the interaction between the housing market, the financial sector, and the macroeconomy in both countries drawing comparisons between them. We find that income and mortgage flows have caused house price appreciation in both countries, interacting with migration flows. However there are differences between the countries. Income plays a more significant role in house price determination in the UK than in Spain, whilst migration is more important in the Spanish market. The impact of mortgages and liquidity is found to be stronger in the UK. The study separates out the impact of money supply and mortgage finance identifying the role of each. Importantly by identifying the separate and nationally different influences they have, it proposes a research agenda in which they are explicitly identified in future modelling of housing markets across countries.

Housing Supply and Price Reactions: A Comparison Approach to Spanish and Italian Markets

Italian and Spanish property markets have experienced a sustained period of growth since the mid-1990s until 2008 when both markets fell into rapid decline due to the worldwide Financial Economic Crisis (FEC). Although the economic impact of the FEC was similar, each country experienced different reactions in its respective real estate market, changes on house prices, building constructions or planning regulations. This paper presents a new supply equation for Italian and Spanish regional markets. A pool of EGLS/IV Two-Step GLS methods are used to account for cross-sectional heteroskedasticity with fixed effects in order to control space differences. The analysis has been developed at a regional level, and shows the variation in the responsiveness of the new housing supply to prices by region. The results show long-term price supply elasticity by regions, and the negative impact of exogenous shock. They also suggest that house markets follow similar patterns in several regions with elastics responses in most territories and stronger negative impact of credit crunch in Spanish than Italian housing development.

An analysis of factors influencing accuracy in the valuation of residential properties in Spain

This paper is concerned with assessing how valuations for mortgage purposes reflect market evidence. Differences between the value obtained through the analysis of comparables and the final assigned value are analysed. The study is undertaken for the Spanish housing market at the peak of the house price boom. High levels of accuracy are apparent but with a tendency to over- rather than undervalue properties. Physical housing variables are shown to have a relatively homogeneous effect, whereas factors relating to the environment and location lead to wider differences between valuations. The effect of characteristics is shown to vary substantially between cities. There is no evidence from the analysis that the property bubble in Spain was driven by inaccuracy in valuations.

Measuring the influence of space and time effects on time on the market

This paper is concerned with spatial effects of time on the market for residential property and time varying relationships using a dataset of properties from the Adelaide metropolitan area, Australia, during the period 2002–2011. The analysis firstly considers the spatial dependence in time on the market and secondly extends the analysis to a space-time model using 2SLS regression. The findings demonstrate the complexity in spatial analysis with results indicating a random distribution of time on the market in 86% of observations a pattern that is consistent over time. Spatial autocorrelation is shown to increase time on the market in the subject property while spatial error decreases time on the market in the subject property suggesting a high level of market transparency and improved liquidity. The compensating or nullifying effects of both types of spatial association is shown to contribute to the random distribution observed in time on the market. A strong explanatory capacity of the business cycle suggests that economic drivers are leading time on the market rather than prices.

Ripple effect on housing prices. Evidence from tourist markets in Alicante, Spain

ABSTRACTThis paper analyses the house price diffusion effect in an economic-mixed region where the costal amenities strongly attracts second home and temporal residents while the main region’s city is an administrative centre in alicante province, Spain. The region is called Vega Baja country with 2 well known foreign-Europeans destination areas are located (Orihuela costa and Torrevieja). Using geo-referenced data, the paper explores the ripple effect on house prices between the coastal and inland areas, versus Orihuela capital. To control by heterogeneity and spatial autocorrelation, the model estimates housing prices controlled by quality including 33 house characteristics and spatial autocorrelation applying an SAR-hedonic based model which is estimated yearly for the period 2007–2012. Once controlled by quality, the estimated prices are used to seek 3 evidences of ripple effect: with spatial contiguity (spatial diffusion in the short distance), without special contiguity (long distance) and constant ...

The Sources of House Price Change: Identifying Liquidity Shocks to the Housing Market

In a previous paper (Taltavull and White, 2012) we analysed the role of money supply, migration and mortgage finance in house price evolution. Using a VECM framework we examined these variables together with income, inflation, and interest rates for both Spain and the UK. This followed on from research by other authors including Muellbauer (2007), Meen and Andrew (2003), and Mishkin (1995). The results indicated an important role for income, mortgages and migration in UK house price movements, more so than in Spain. In this paper we build upon our previous work and focus on the channels through which liquidity shocks can affect house prices. Lastrapes (2002) argues that money supply affects real house prices. Greiber and Setzer (2007) find that liquidity is important for new supply and hence house prices identifying money demand, asset price and credit channels. In the money demand channel, three different effects are present, wealth, substitution and transactions effects. This permits us to test of changes in house prices lead to changes in money supply. In the asset price channel we test if changes in money supply cause house price change, and in the credit channel, higher housing collateral can increase loan amounts. In this paper we test different channels to identify which is more or less important and whether this varies across countries thus identifying the impact that the housing market has on the macroeconomy and from which source this is derived.

Assessing Subjectivity in the Valuation of Retail Properties in Spain

The extent to which subjective influences impact on assessed valuations is an under‐researched area. Valuation practice within Spain is seemingly less developed than in the UK and other western European countries and explicitly allows for subjective adjustments in deriving the value of a property. This study, using a three stage modelling approach, seeks to quantify the impact of this effect on the valuation of retail property. The analysis uses data from a major valuation company within Spain and examines evidence from five cities. The results show that subjectivity corrects the model by as much as 12%. The study demonstrates that the variables with the greatest impact are age of property and construction quality rather than economic/market factors. This outcome highlights that valuation in Spain is still a more technical rather than a financial discipline.