House prices and rents in Spaindoes the discount factor matter?
- Ayuso Huertas, Juan
- Restoy Lozano, Fernando
ISSN: 0213-2710
Año de publicación: 2006
Número: 9
Páginas: 7-36
Tipo: Documento de Trabajo
Otras publicaciones en: Documentos de trabajo - Banco de España
Resumen
We estimate alternative price to rent ratios in the Spanish housing market by considering different stochastic discount factors in present value models similar to those used in the financial literature but where the higher rigidity that characterises this market is taken into account. We identify three robust across model regularities: i) the increase in the price to rent ratio since the late nineties helped at first to restore equilibrium, ii) further increases in house prices raised the ratio between 24% and 32% above equilibrium by 2004, although iii) at that time the ratio was only around 2% above its short term adjustment path towards a (new) long run equilibrium.