The impact ofeconomic globalization on the Spanish housing market

Abstract

Construction industry has a multiplier effect on the economy of each country. Within the construction industry, residential building is the most important: e.g., in Spain, there were 687,000 new residential units built in 2004, which represent 33% of production in construction industry; these figures correspond to 6% of the Gross National Product. The reasons for this boom are: low interest rates, increase of family incomes, demand from immigrants, changes in family structure, perception of housing as an attractive investment alternative, and demand for tourist housing. In Spain, housing prices increased more than in any other country of the European Union during last years. Our work analyzed statistically this evolution and its causes. Thirty three variables were used and a correlation matrix was obtained. It was found that the main explanatory variables were: population growth, income levels, interest rates, and the progressive involvement of the country in the European Union. Spain belongs to the Euro zone, which implies a tendency to standardize the economy of the eleven countries that embrace it; the average income per capita of the Euro zone is higher than that of Spain, thus a smooth leveling is unavoidable, even in the housing market. This economic globalization influences the housing prices evolution through financial markets, migratory and tourist movements, and urban growth.