Long-run Supply and Demand Elasticities in the Spanish Housing Market

This paper analyses housing supply and demand in Spain. Using data for 1975 to 2009, reduced form and structural models are estimated. The results show that faced with situations of disequilibrium prices adjust more rapidly than stock. Similarly, they demonstrate that demand shows low sensitivity to variations in prices and real interest rates. By contrast, itA¢â‚¬â„¢s highly sensitive to demographic changes and the evolution of the labor market. The evidence confirms that permanent income has greater weight than prices as a determinant of demand. On the contrary, supply is highly sensitive to variations in prices and interest rates.