EconPapers    
Economics at your fingertips  
 

Are house prices overvalued in Spain? A regional approach

Laura Álvarez-Román and Miguel García-Posada

Economic Modelling, 2021, vol. 99, issue C

Abstract: The collapse of the Spanish housing market during the global financial crisis highlighted the dire consequences of house price overvaluation on the real economy and the banking sector. In this paper we evaluate whether real house prices in Spain are justified by their long-run fundamentals, such as per capita real income, unemployment rate and population density. We account for heterogeneous provincial developments by using a regional dataset with an extended time span. We show that house prices were overvalued in most Spanish provinces in 2007, at the peak of the housing sector expansion, but there was substantial regional heterogeneity. By contrast, we find evidence that real house prices have been undervalued in most provinces in recent years. As overvaluation is mostly explained by high household leverage and the business cycle, it should be addressed with macro- and micro-prudential regulation of the banking system to prevent excessive credit growth.

Keywords: House prices; Overvaluation; Regional analysis; Fundamentals; Cointegration (search for similar items in EconPapers)
JEL-codes: R30 R31 R32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999321000882
Full text for ScienceDirect subscribers only

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:eee:ecmode:v:99:y:2021:i:c:s0264999321000882

DOI: 10.1016/j.econmod.2021.105499

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2021-06-30
Handle: RePEc:eee:ecmode:v:99:y:2021:i:c:s0264999321000882