Macro-economic indicators and housing price index in Spain: fresh evidence from FMOLS and DOLS

• Date: 20 September 2023
• Pages: 227-248
• DOI: https://doi.org/10.1108/IJHMA-07-2023-0094
• Published date: 20 September 2023
• Subject Matter: Property management & built environment,Real estate & property,Housing markets
• Author: Ali Raza,Laiba Asif,Turgut Türsoy,Mehdi Seraj,Gül Erkol Bayram

Macro-economic indicators and

housing price index in Spain: fresh

evidence from FMOLS and DOLS

Ali Raza

Department of Banking and Finance, Near East University,

Nicosia, North Cyprus, Turkey

Laiba Asif

Department of Business Administration, University of Sindh, Jamshoro, Pakistan

Turgut Türsoy

Department of Banking and Finance, Near East University, Nicosia,

North Cyprus, Turkey

Mehdi Seraj

Department of Economics, Near East University, Nicosia, North Cyprus, Turkey, and

Gül Erkol Bayram

Department of Tour Guiding, School of Tourism and Hospitality Management,

Sinop Universitesi, Sinop, Turkey

Abstract

Purpose –This study aims to determine how changes in macroeconomic indicators and the housing price s index

(HPI) are related. These factors can cause short-term and long-term changes in the housing market in Spain.

Design/methodology/approach –The study used cointegrating regression, fully modif‌ied ordinary

least squaresand dynamic ordinary least squares methodologies.The models are trained using quarterly time

series data for theseparameters from 2010 to 2022. A comprehensive examinationis conducted to explore the

relationshipbetween macroeconomic issues and f‌luctuationsin the HPI.

Findings –The results indicate statistically signif‌icant short-run effects (p<0.05) of economic growth,

inf‌lation, Spanish stock indices, foreign trade and the interestrate on HPI. The inf‌lation variables , Spain’sstock

indices, interest rate and monetary rate, have statistically signif‌icant long-run effects (p<0.05) on HPI. The

exchange rate, unemploymentand money supply have no substantial impact on HPI in Spain.

Originality/value –The study’sf‌indings signif‌icantly contribute to increased information concerning

the level of investing activity in the Spanishhousing sector. After conducting an in-depth study of both the

Author contribution: AR and LA: Conceptualization, Methodology, Formal analysis, Writing

Original Draft. TT and MS: Data Curation, Writing Original Draft, Writing. GEB: Review and

Editing, Investigation.

Funding: None, no fund received.

Data availability: The sources of data have been duly mentioned in the study.

Declarations of interest: None, no conf‌lictofinterest.

Acknowledgments: None, no fund received.

Ethical approval: This article does not contain any studies with human participants performed

by any of the authors.

Consent for publication: Not applicable.

Consent to publish: Not applicable.

Housing price

index in Spain

227

Received16 July 2023

Revised19 August 2023

Accepted28 August 2023

InternationalJournal of Housing

Marketsand Analysis

Vol.18 No. 1, 2025

pp. 227-248

© Emerald Publishing Limited

1753-8270

DOI 10.1108/IJHMA-07-2023-0094

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1753-8270.htm

long-run and short-run connections with HPI, the study proved to be highly effective in formulating

appropriatepolicies.

Keywords Housing price index, Spain stock indices, Fully modif‌ied least square, Dynamic least square,

Macroeconomic indicators, Housing

Paper type Research paper

Introduction

The world’s living standards have altered, making the house the most prof‌itable

homeowner asset. It has higher rates than other securities they buy. The surge in spending

resulting from increased stock value incentivized individuals to invest in more extensive

and desirable residences,as they aimed to allocate a portion of their newfound stock wealth

into housing expenditures (Wu et al., 2022). People investin real estate today to fulf‌ill their

requirements for a place to live and increase the value of their homes. The market is

expanding worldwide, and as a result, prices have increased. The possibility of a price

decrease was low, and the housing sector in Spainis seeing robust growth (Brambilla et al.,

2022;Batalha et al., 2022;Lamasand Romaniega, 2022). Investors prioritize price forecasting

and concealing reliableand accurate estimates. Spain’s real estate market grows like others’.

One of the industries with the most rapid expansion is the real estate. Therefore, academics

have investigated it, and our study focusedon how macroeconomic characteristics inf‌luence

Spain’s residential sector. Environmental concerns can impact the value of real estate and

potentially reduce market capitalization due to a decrease in demand (Pataki-Bitt

o and

Kapusy, 2021;Alzainet al.,2022).

Regulatory bodies must intervene to address the impact of f‌inancial crises on markets

and other institutions. Moreover, all f‌inancial institutions are responsible for promoting

informed decision-making among investors. Predicting future outcomes is of utmost

importance in several domains, thereby emphasizing the signif‌icant impact of the housing

prices index (HPI) on the level of demand (Taltavullde La Paz, 2003). The HPI is a valuable

tool for decision-makers in making informed business judgments and aids policymakers in

formulating effective real estate market policies. The housing market trend lets them keep

investing and foresee economic stability (Cohen, 2022). Investors are attracted to the real

estate market despite its inherent volatility, driven mainly by HPI’s effect on interest rates.

Due to the complexity of the market, investors and policymakers must be skilled in

analyzing and interpreting macroeconomic data (Shi et al., 2014). Macroeconomic indicators

show real estate and other trends; no mechanism exists to construct HPI, demonstrating

purchasers’desire to buy houses within their budget(Chen et al., 2022). Middle-class people

have struggled to acquire homes due to affordability and other concerns. To what extent

does this new research concentrate on these other factors? Housing has helped economic

expansion (Cheng and Teck Ling, 2023). Investors focused on long-term projections as the

housing bubble burst after the 2008 f‌inancial crisis.HPI helps estimate mortgage payments

and risk and explains f‌luctuationsin advance payments (Alpha Kabine, 2023).

Inf‌lation regulates the housing market, the HPI ref‌lects consumer spending and the

market has been stabilized by inf‌lation.Moreover, it molded f‌inancial-housing relationships

and ongoing studies on HPI sensitivity (Tang et al.,2019;Milunovich, 2020). Most study

shows that the HPI is affected by how much money is available and how much interest is

charged on loans. These things have changed how much people are willing to pay for a

house, and how the economy works affects how much people want to buy a house. These

factors affect the real estate market(Keely and Lyons, 2020). Unemployment slows economic

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