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The Role Of Finance In The Housing Price Evolution

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  • Paloma Taltavull de La Paz

Abstract

Housing prices have experienced an intense increase during early XXI century in Spain as in other countries. Some of the explanations for this evolution tend to focus the responsibility of the process on the intense changes on fundamentals while others point out the role of speculation. Finance is one of the fundamentals. We maintain here that changes on the international liquidity situation could have played an important role to stress the market mechanism and, then, increase the prices at the same time that building in the case of Spanish housing market. Using VAR framework, we isolate the role of each component of fundamentals in the long term relationship equation in order to observe the different periods when each of them are leader of the housing prices. We find that during 2002-2006, the role of fundamentals change giving to finance factors higher relevance to lead prices, changing to the common model after 2006.

Suggested Citation

  • Paloma Taltavull de La Paz, 2008. "The Role Of Finance In The Housing Price Evolution," ERES eres2008_267, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2008_267
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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