Demand pressure and housing market expansion under supply restrictions: Madrid housing market Paloma Taltavull de La Paz,Universidad de Alicante Federico de Pablo Martí, Universidad de Alcalá Carlos Manuel Fernández-Otheo, Universidad Complutense Julio Rodríguez, Universidad de Alcalá
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Demand pressure and housing market expansion under supply restrictions: Madrid housing market
Demand pressure and housing market expansion under supply restrictions: Madrid housing market. Paloma Taltavull de La Paz,Universidad de Alicante Federico de Pablo Martí, Universidad de Alcalá Carlos Manuel Fernández-Otheo, Universidad Complutense Julio Rodríguez, Universidad de Alcalá. Index. - PowerPoint PPT Presentation
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Demand pressure and housing market
expansion under supply restrictions: Madrid
housing market Paloma Taltavull de La Paz,Universidad de Alicante
Federico de Pablo Martí, Universidad de AlcaláCarlos Manuel Fernández-Otheo, Universidad Complutense
Julio Rodríguez, Universidad de Alcalá
2
Index
Introduction Description of the demand/supply drivers
in housing market in Madrid Model Results Conclusions
3
Introduction
Between 1997 and 1999, housing prices in Madrid falled in real terms without the existence of any economic crisis. At the same time than a strong rise in other
Spanish areas
4
Introduction EVOLUCIÓN DE LA CAPACIDAD DE COMPRA DE LOS SALARIOS EN MADRID
-15,00
-10,00
-5,00
0,00
5,00
10,00
15,00
20,00
25,00
30,00
35,00
40,00
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
inflación Madrid
salarios REALES
inflación en el precio de las viviendas. Madrid
inflación en precio de las viviendas. España
(En % de crecimiento anual)
Fte. INE y Ministerio de Vivienda
5
Introduction
With positive demand factors: Strong increase on GDP, the lowest interest rates in the Spanish history Enough flow of mortgages Affordability gains
Strong growth on housing prices in other areas Reasons for the less dynamism in Madrid housing prices?
Market factors? Public intervention?
6
Introduction CONCESIONES DE HIPOTECAS PARA FINCAS URBANAS. VIVIENDAS
-
20.000
40.000
60.000
80.000
100.000
120.000
140.000
160.000
180.000
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1.9
88
1.9
90
1.9
92
1.9
94
1.9
96
1.9
98
2.0
00
2.0
02
2.0
04
2.0
06
2.0
08
Madrid
(En número de operaciones)
Fte. INE.
TIPOS DE INTERÉS NOMINALES APLICADOS AL MERCADO HIPOTECARIO Y SU EVOLUCIÓN
PHt Housing prices in the moment t RYt real income POBt Existing population in the Madrid region. FFt Mortgage finance flows Inft Madrid inflation rate rit
Real interest rate.
Ht Housing stock. Xmatrix of exogenous variables 0, 1, i, i parameters to be estimated T time
Identifying the impact of different demographics component:
RELACIÓN DE LARGO PLAZO ENTRE LOS FACTORES DETERMINANTES DE LA DEMANDA
-0,40
-0,30
-0,20
-0,10
0,00
0,10
0,20
0,30
1987
Q1
1987
Q4
1988
Q3
1989
Q2
1990
Q1
1990
Q4
1991
Q3
1992
Q2
1993
Q1
1993
Q4
1994
Q3
1995
Q2
1996
Q1
1996
Q4
1997
Q3
1998
Q2
1999
Q1
1999
Q4
2000
Q3
2001
Q2
2002
Q1
2002
Q4
2003
Q3
2004
Q2
2005
Q1
2005
Q4
2006
Q3
2007
Q2
2008
Q1
2008
Q4
Relación de largo plazo
Efecto de corrección delas variables de cortoplazo
39
Model: fundamental effects in all Spain
EFECTO DE LOS FACTORES FUNDAMENTALES EXPLICATIVOS DE LA VARIACIÓN DE LOS PRECIOS RESIDENCIALES EN ESPAÑA. 1988-2007
-0,5
-0,4
-0,3
-0,2
-0,1
0
0,1
0,2
0,3
0,4
0,5
1988
Q4
1989
Q2
1989
Q4
1990
Q3
1991
Q2
199
1Q4
199
2Q3
1993
Q2
1993
Q4
1994
Q3
199
5Q1
199
5Q3
199
6Q1
1996
Q3
1997
Q1
199
7Q3
1998
Q1
1998
Q3
199
9Q1
199
9Q3
200
0Q1
2000
Q3
2001
Q1
2001
Q3
200
2Q1
200
2Q3
2003
Q1
2003
Q3
2004
Q1
200
4Q3
2005
Q1
2005
Q3
200
6Q1
200
6Q3
200
7Q1
2007
Q3
Serie2
40
Model: demand equation results Long term components explain the price
evolution, in the general model (all population)
Negative impact of income, finance, changes on population and interest rates (increase on prices, reduces the demand) Short run impacts of income (2 lags) and changes on
population, finance and interest rates (3 lags) Positive impact on prices from inflation and available
stock Short run effects for stock (4 lags) and inflation (3 lags)
Strong dynamic relationships
41
Model: demand equation results Migration models:
Higher sensibility to changes on income Migration is positive correlated with changes on prices:
arrivals stress the prices (both cases, total and foreign) Total inmigration is positivelly correlated with interest rates
but not with existing stock, so, household movements could stress construction outside Madrid
Foreign inmigration is positive correlated with finance and interest rates, and negativelly with housing availability. These could suggest that their arrival depends of income but
also of the existent stock available, purchase capacity and the availability to have finance.
From 2000, banks in Spain start to give mortgages masivelly to inmigrans with permanent job....
Positive correlation among stock and prices in presence of foreign movers suggest that there is a lack on supply for this demand
Negative correlation in the case of all movers (most are previous residents, spanish and foreigners) suggest that they could decide move to other market in the case of good condicions. This also suggest that higher prices or other factors
expulse this demand to other housing markets.
43
Model: Supply equation Goodman, 2005, Meen, 2003, Malpezzi y Maclenan, 2000 y Glaeser y Gyourko, 2005
Qts = f(PH,t, Ct ,Ht-1 , Gt
k , H) =
=e1 PH,t Cmt Cst it
pt 6 Ht-1 [k Gt
k ] Het
Where: - PH,t housing prices - Cmt materials costs - Cst cost of salaries .- it