House Price Cycles, Wealth Inequality and Portfolio Reshuffling

This paper combines different sources (tax records, national accounts, wealth surveys) and the capitalization method in order to deliver consistent, unified wealth distribution series for Spain over the 1984-2013 period, with detailed breakdowns by age over the 1999-2013 sub- period. Wealth concentration has been quite stable over this period for the middle 40% and bottom 50%, with shares ranging between 5-10% and 30-40%. Since the end of the nineties Spain has experienced a moderate rise in wealth inequality, with significant fluctuations due to asset price movements. Housing concentration rose during the years prior to the burst of the bubble, due to the larger increase in secondary dwelling acquisitions (quantity effect) by upper wealth groups, and decreased afterwards. The housing bubble had, however, a neu- tral impact on wealth inequality. Rich individuals substituted financial for housing assets during the boom, and compensated for the decrease in real estate prices during the bust by selling some of their dwellings and accumulating more financial assets. Even though housing reduces the levels of wealth inequality over the period, the bulk in secondary residence, to- gether with offshore assets, large capital gains and different rates of return and savings rates across groups have contributed to keeping the same high levels of wealth concentration of the 1980s in the late 2000s.