Housing Supply And Prices Equilibrium. A Case Study On The Spanish Housing Market

House building in Spain has been very intensive from last 15 years, showing a strong expansion on housing stock only comparable with the one happened during seventies. The growth has been explained as the results of some demand forces acting together at the same time, having higher impact on Spanish supply comparatively than others countriesí supply at a similar increase on prices. Housing supply determinants are less known. This article evaluates the sensibility of house-building during the period 1987-2004 seeking for its role on the housing prices behaviour. So, this is a focus based on supply side. We use two different econometric techniques to estimate supply elasticities, panel and VEC, for all Spain and the different regions named ëComunidades AutÛnomasí. The average elasticity of supply for Spain is close to one (0.85) during the analyzed period. Our results support other research showing how housing supply elasticity is very variable across time and space, with regions showing higher elasticities instead other areas where the elasticity is not significant. Most cases show how the market signals can explain what has happened in the Spanish housing market during last 15 years, but others show how some regions exist where the housing market is very intervened.