Spain | Model for housing prices. A regional perspective

Summary

In this work, a model has been developed to find out the deviation of housing prices from an estimated equilibrium level, both at regional and provincial level, as well as to forecast its evolution. The results obtained show the high heterogeneity of the Spanish real estate market.

Key points

• Key points:
• Technological advances enable us to use artificial intelligence to define the factors that best predict the behavior of housing prices.
• The methodology identified that the determinants of housing prices would be real GDP and the employment rate, the percentage of the population at an age to require housing, housing stock per capita and the real interest rate.
• The results show that, up until the first quarter of 2020, housing prices were slightly above the equilibrium price in areas where the real estate sector recovered most strongly before the onset of the COVID-19 crisis, in those where immigration levels were highest, and where there is more direct exposure to the tourism sector.
• In other regions where real estate market recovery following the last crisis has been relatively slower than average, prices stand below the estimated equilibrium price.

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