Demographic foundations of the last Spanish housing cycle: an unforeseeable anomaly?

Juan A. Módenes, Universitat Autònoma de Barcelona
Brenda Yépez-Martínez, Universidad Central de Venezuela
Julián López-Colás, Centre d’Estudis Demogràfics (CED)

Housing is a result of the population demand. Cheap mortgage interest rates and demographic forces have fuelled levels of residential sales during the last housing boom in Spain. Absence of bank credit and demographic forces explain the current bust. Besides economic and financial variables, demographic forces provide a long-term framework for understanding the housing boom and bust in Spain. But the fact is bubbles are often identified retrospectively, and generally, explanations focus on the market neglecting the influence from population dynamics. In this regard, this paper analyzes the implications of demographic change on the Spanish housing cycle. Furthermore, it explores if it had been possible to identify the past housing boom and bust using existing projections. Hence, the dual aim of this submission. On the one hand, to analyze if past official and international projections could anticipate the evolution of population and housing demand which later took place during the years of housing and economic boom in Spain. Second, although we can not measure their accuracy beforehand, we will offer different dynamic scenarios over the next 10-15 years mainly in function of different rates of household headship by age, using the current official projections of the Spanish population. Data comes from official and international projections (Spanish statistics office, Eurostat, UN) and headship rates estimations from Spanish Labor Force Survey. The results confirm that Spanish housing demand is in part characterized by a strong demographic cyclical component. On the one hand, the past economic boom greatly increased housing demand via immigration, even well above larger countries in Europe. On the other, the current crisis may lead to negative net housing demand for the first time in many decades.