El Clasico of Housing: Bubbles in Madrid and Barcelona’s Real Estate Markets

Adrian Fernández-Pérez (), Marta Gómez-Puig () and Simon Sosvilla-Rivero
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Adrian Fernández-Pérez: Department of Banking and Finance, Michael Smurfit Graduate Business School, University of College Dublin, Ireland.
Marta Gómez-Puig: bDepartment of Economics and Riskcenter, Universitat de Barcelona. 08034 Barcelona, Spain.
Authors registered in the RePEc Author Service: Marta Gómez-Puig ()

No 2025-03, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

Abstract: This paper contributes to the housing bubble literature by analysing rental and sales price dynamics in Spain’s two largest urban centres—Madrid and Barcelona—between May 2007 and December 2024. Using monthly data from Idealista.com, Spain’s leading real estate platform, we detect the presence of price bubbles in both markets, assess their key determinants, and explore contagion effects across cities and segments. Our results show that while only a few bubbles emerged, they were of substantial duration. We also find evidence of contagion, with rental bubbles consistently preceding sales bubbles, underscoring the pivotal role of rental markets in driving price surges. Among the key determinants, higher hotel stays are associated with a reduced probability of housing bubbles, suggesting that more hotel-based tourists may help stabilise real estate markets in both urban centres. Rising interest rates and the availability of housing certificates are also linked to lower bubble risk. Conversely, increasing resident numbers significantly raise the likelihood of positive bubbles, whereas higher unemployment dampens it. These findings offer critical insights for housing policy in major urban areas.

Keywords: Bubbles; Local Projections; Contagion; Real Estate Markets. (search for similar items in EconPapers)
JEL-codes: E44 G12 R31 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2025
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Note: Funding: This paper is based on work supported by the Spanish Ministry of Science and Innovation [grants PID2019-105986GB-C21 and TED2021-129891B-I00], the Spanish State Investigation Agency [grant AEI/10.13039/501100011033] and Generalitat de Catalunya [grant 2023CLIMA00012]. Acknowledgements: The authors wish to thank Idealista.com for kindly providing us with the data set.
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