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Predicting Housing Prices for Spanish Regions

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Theory and Applications of Time Series Analysis and Forecasting (ITISE 2021)

Part of the book series: Contributions to Statistics ((CONTRIB.STAT.))

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Abstract

This paper aims to forecast the long-term trend of housing prices in the Spanish cities with more than 25,000 inhabitants, a total of 275 individual municipalities. Based on a causal model explaining housing prices based on six fundamental variables (changes in population, income, number of mortgages, interest rates, vacant and housing prices), a pool VECM technique is used to estimate a housing price model and calculate the ‘stable long-term price’, a central concept defined in the formal valuation process. The model is estimated for the period 1995–2020, and the long term is approached from 2000 to 2026, so the prediction exercise includes backcast and forecast period allowing to extract the long-term cycle housing price have followed during last 20 years and project it further 6 years. The analytical process follows three steps. Firstly, it identifies the cities following a common pattern in their housing market by clustering twice the cities: (1) using house price time series and (2) using a machine learning approach with the six fundamental variables. Results give a comprehensible evolution of the long-term component of housing prices, and the model also permits the understanding of the main drivers of housing prices in each Spanish region. Clustering cities with two statistical tools gives pretty similar results in some cities but is different in others. The challenge of finding the correct grouping is critical to understanding the housing market and forecasting their prices.

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Notes

  1. 1.

    Details of the 275 cities clustered are available upon request.

  2. 2.

    Full results are not presented here due to the limited space. They are available upon request.

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Author information

Authors and Affiliations

  1. University of Alicante, Alicante, Spain

    Paloma Taltavull de La Paz

Authors
  1. Paloma Taltavull de La Paz
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Corresponding author

Correspondence to Paloma Taltavull de La Paz .

Editor information

Editors and Affiliations

  1. Faculty of Sciences, University of Granada, Granada, Spain

    Olga Valenzuela

  2. ETSIIT, CITIC-UGR, University of Granada, Granada, Spain

    Fernando Rojas

  3. ETSIIT, CITIC-UGR, University of Granada, Granada, Spain

    Luis Javier Herrera

  4. ETSIIT, CITIC-UGR, University of Granada, Granada, Spain

    Héctor Pomares

  5. ETSIIT, CITIC-UGR, University of Granada, Granada, Spain

    Ignacio Rojas

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Taltavull de La Paz, P. (2023). Predicting Housing Prices for Spanish Regions. In: Valenzuela, O., Rojas, F., Herrera, L.J., Pomares, H., Rojas, I. (eds) Theory and Applications of Time Series Analysis and Forecasting. ITISE 2021. Contributions to Statistics. Springer, Cham. https://doi.org/10.1007/978-3-031-14197-3_10

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