Spain | Housing price performance in an international context

Summary

This document aims to show the main causes behind the lower growth of housing prices in Spain, and most of its autonomous communities, compared to what has been observed in other developed economies that have faced the same macroeconomic scenario.

Key points

• Key points:
• The results indicate that the factors explaining the house price gap have changed over the years. Before 2007, most of the house price overvaluation could be explained by economic activity, bank credit and real interest rates.
• Between 2008 and 2013, GDP and interest rates lose relevance, credit is maintained and the weight of the high-skilled population begins to gain importance, a variable that can be related to economic growth and higher productivity. Between 2014 and 2019, the population of the age to demand housing becomes the determinant that manages to explain a greater part of the housing price imbalance.
• Since 2020, three factors explain most of the overvaluation in some developed countries. The growth of the population of housing demand age (25-44 years). The change in the weight of the urban population. And, the proportion of jobs that could be performed through teleworking. The demand for housing improvement, due to the change in household preferences, have been the main demand factors after COVID-19.
• All this in a favorable financial context. Interest rates, which have been at relatively low levels in these years, would also be explaining part of the overvaluation of housing prices between 2020 and 2022.
• The high growth in house prices in some countries before, during and after the pandemic has generated significant overvaluations. This is the case in countries such as Luxembourg, Sweden, Iceland and Norway, and also in other non-European countries. In Spain, house prices have behaved in line with the evolution of their fundamentals in recent years, although imbalances have been detected in some regions.

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