Housing Supply and Price Reactions: A Comparison Approach to Spanish and Italian Markets

Italian and Spanish property markets have experienced a sustained period of growth since the mid-1990s until 2008 when both markets fell into rapid decline due to the worldwide Financial Economic Crisis (FEC). Although the economic impact of the FEC was similar, each country experienced different re...

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Bibliographic Details
Published in:Housing studies 2015-10, Vol.30 (7), p.1036-1063
Main Authors: Taltavull de La Paz, Paloma, Gabrielli, Laura
Format: Article
Language:English
Subjects:
Colonies & territories
Construction planning
Credit
credit crunch
Economic crisis
Economic impact
Elasticity
Housing
Housing needs
Housing prices
Housing supply
Impact analysis
Italy
Markets
Price elasticity
Prices
Pricing
Property
Real estate
Regional development
Regional variations
Regulation
Residential development
Responsiveness
Spain
Spanish and Italian housing market
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Summary:Italian and Spanish property markets have experienced a sustained period of growth since the mid-1990s until 2008 when both markets fell into rapid decline due to the worldwide Financial Economic Crisis (FEC). Although the economic impact of the FEC was similar, each country experienced different reactions in its respective real estate market, changes on house prices, building constructions or planning regulations. This paper presents a new supply equation for Italian and Spanish regional markets. A pool of EGLS/IV Two-Step GLS methods are used to account for cross-sectional heteroskedasticity with fixed effects in order to control space differences. The analysis has been developed at a regional level, and shows the variation in the responsiveness of the new housing supply to prices by region. The results show long-term price supply elasticity by regions, and the negative impact of exogenous shock. They also suggest that house markets follow similar patterns in several regions with elastics responses in most territories and stronger negative impact of credit crunch in Spanish than Italian housing development.
ISSN:0267-3037
1466-1810
DOI:10.1080/02673037.2015.1006183