Asset Pricing and the Spanish Housing Market

Authors:
Laura G. Garcia, Christos I. Giannikos, and Hany Guirguis

Start Page: 83
End Page: 96
Volume: 16
Issue Number: 2
Year: 2007
Publication: Journal of Housing Research

Abstract:
This paper studies the rise in real house prices in Spain between 1993 and 2004. Whether the increase can be attributed to economic fundamentals or a bubble has attracted a lot of attention given the fact that Spain has been the record breaker in house price appreciation in Europe. The study assesses the contributions of market fundamentals and momentum bubbles to recent real house price fluctuations. The analysis presents evidence that the observed high growth rates of house prices cannot be fully attributed to fundamentals and that momentum bubbles have a significant impact on real house prices in the Spanish market. Further, the findings suggest that real house prices were overvalued by 18% at the end of the sample period.