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The evolution and the relationship of house prices and rents in Barcelona, 1970–2002

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  • Mercè Carreras-i-Solanas
  • Oscar Mascarilla-i-Miró
  • Yuri Yegorov

Abstract

The aim of the paper is to analyse the evolution of house prices in Barcelona using a theoretical and empirical framework. Housing is a durable good which involves both consumption and investment components. We develop a model that explains the long-run equilibrium relationship between prices to buy and to rent (time of rent to buy) as well as dynamics of deviations from this equilibrium. Empirical studies of the housing market show significant low-frequency fluctuations over time. We test the model with the data for Barcelona for several periods between 1970 and 2002. The general evolution of both house prices and rental price exhibits the pattern of long wave, but the ratio of these prices is not constant over time. We argue that the periods of relatively high housing prices with respect to rental prices correspond to additional demand for housing coming from investors. The conclusion of the paper includes a detection of complex non-random dynamics of the prices for housing in Barcelona and explanation of this effect with the proposed theoretical models.

Suggested Citation

  • Mercè Carreras-i-Solanas & Oscar Mascarilla-i-Miró & Yuri Yegorov, 2004. "The evolution and the relationship of house prices and rents in Barcelona, 1970–2002," European Journal of Housing Policy, Taylor and Francis Journals, vol. 4(1), pages 19-56.
    • Handle: RePEc:taf:eurjhp:v:4:y:2004:i:1:p:19-56
    DOI: 10.1080/1461671042000215442
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    Cited by:

    1. Arrazola, María & de Hevia, José & Romero, Desiderio & Sanz-Sanz, José Félix, 2014. "Determinants of the Spanish housing market over three decades and three booms: Long run supply and demand elasticities," Working Paper Series 18852, Victoria University of Wellington, Chair in Public Finance.
    2. Yuri Yegorov, 2011. "Migration as Driving Force for the Dynamics of Housing Rent," ERSA conference papers ersa11p49, European Regional Science Association.
    3. Lee, Hung-Wei & Lin, Che-Chun & Tsai, I-Chun, 2023. "Another application of call options: Explaining the divergence between the housing market and the rental market," Finance Research Letters, Elsevier, vol. 53(C).
    4. Eddie Chi-man Hui & Xian Zheng, 2012. "The dynamic correlation and volatility of real estate price and rental: an application of MSV model," Applied Economics, Taylor & Francis Journals, vol. 44(23), pages 2985-2995, August.

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