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

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  • Paloma Taltavull de La Paz
  • Michael White

Abstract

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.

Suggested Citation

  • Paloma Taltavull de La Paz & Michael White, 2012. "Fundamental drivers of house price change: the role of money, mortgages, and migration in Spain and the United Kingdom," Journal of Property Research, Taylor & Francis Journals, vol. 29(4), pages 341-367, September.
    • Handle: RePEc:taf:jpropr:v:29:y:2012:i:4:p:341-367
    DOI: 10.1080/09599916.2012.729515
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    References listed on IDEAS

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    1. Setzer, Ralph & van den Noord, Paul & Wolff, Guntram B., 2011. "Heterogeneity in money holdings across euro area countries: The role of housing," European Journal of Political Economy, Elsevier, vol. 27(4), pages 764-780.
    2. Oriol Aspachs-Bracons & Pau Rabanal, 2010. "The drivers of housing cycles in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 1(1), pages 101-130, March.
    3. Karl E Case & John M Quigley & Robert J Shiller, 2003. "Home-buyers, Housing and the Macroeconomy," RBA Annual Conference Volume (Discontinued), in: Anthony Richards & Tim Robinson (ed.),Asset Prices and Monetary Policy, Reserve Bank of Australia.
    4. Elbourne, Adam, 2008. "The UK housing market and the monetary policy transmission mechanism: An SVAR approach," Journal of Housing Economics, Elsevier, vol. 17(1), pages 65-87, March.
    5. Greiber, Claus & Setzer, Ralph, 2007. "Money and housing: evidence for the euro area and the US," Discussion Paper Series 1: Economic Studies 2007,12, Deutsche Bundesbank.
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    Cited by:

    1. Clara Martínez Toledano, 2017. "House Price Cycles, Wealth Inequality and Portfolio Reshuffling," PSE Working Papers halshs-02797549, HAL.
    2. Engerstam, Sviatlana, 2020. "Macroeconomic determinants of apartment prices in Swedish and German cities," Working Paper Series 20/2, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    3. Clara Martínez Toledano, 2017. "House Price Cycles, Wealth Inequality and Portfolio Reshuffling," World Inequality Lab Working Papers halshs-02797549, HAL.
    4. Alla Koblyakova & Michael White, 2017. "Supply driven mortgage choice," Urban Studies, Urban Studies Journal Limited, vol. 54(5), pages 1194-1210, April.
    5. Sariye Belgin Akcay, 2023. "Current Account Imbalances, House Prices, and Institutions," International Real Estate Review, Global Social Science Institute, vol. 26(3), pages 343-392.
    6. Linas Jurksas & Arvydas Paskevicius, 2017. "The Relationship Between Macroeconomy And Asset Prices: Long Run Causality Evidence From Lithuania," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 8(1).
    7. Bismark Aha & David.M Higgins & Timothy Lee, 2018. "UK Political Cycle and the Effect on National House Prices: An Exploratory Study," ERES eres2018_60, European Real Estate Society (ERES).
    8. Paloma Taltavull de La Paz, 2021. "Predicting housing prices. A long term housing price path for Spanish regions," LARES lares-2021-4dra, Latin American Real Estate Society (LARES).
    9. Clara Martínez Toledano, 2017. "House Price Cycles, Wealth Inequality and Portfolio Reshuffling," Working Papers halshs-02797549, HAL.
    10. Salvatore Bimonte & Arsenio Stabile, 2019. "The Effect of Growth and Corruption on Soil Sealing in Italy: A Regional Environmental Kuznets Curve Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(4), pages 1497-1518, December.

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