House prices and rents in Spain: does the discount factor matter?

Juan Ayuso () and Fernando Restoy ()
Additional contact information
Juan Ayuso: Banco de España
Fernando Restoy: Banco de España

No 609, Working Papers from Banco de España

Abstract: We estimate alternative price to rent ratios in the Spanish housing market by considering different stochastic discount factors in present value models similar to those used in the financial literature but where the higher rigidity that characterises this market is taken into account. We identify three robust across model regularities: i) the increase in the price to rent ratio since the late nineties helped at first to restore equilibrium, ii) further increases in house prices raised the ratio between 24% and 32% above equilibrium by 2004, although iii) at that time the ratio was only around 2% above its short term adjustment path towards a (new) long run equilibrium.

Keywords: housing; price-to-rent ratio; overvaluation (search for similar items in EconPapers)
JEL-codes: G12 R21 R31 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2006-04
New Economics Papers: this item is included in nep-eec, nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... o/06/Fic/dt0609e.pdf First version, April 2006 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0609

Access Statistics for this paper

More papers in Working Papers from Banco de España Contact information at EDIRC.
Bibliographic data for series maintained by Ángel Rodríguez. Electronic Dissemination of Information Unit. Research Department. Banco de España ().