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The Dynamics and Contrast of House Prices in Portugal and Spain
Following the accession to the European Union(EU) in the eighties, the housing market hasevolved very differently in Portugal and Spain.This article provides evidence on these differencesand tries to explain the behaviour of houseprices in both cases. For this purpose, we analyzethe evolution of house prices using threedifferent approaches: (1) a comparative analysisof the evolution of the price-to-rent and priceto-income ratios; (2) an assessment of the determinantsof house prices based on a ErrorCorrection Model; and (3) an analysis of the existenceof speculative bubbles in the Portugueseand Spanish housing markets, using an econometricmethodology based on the arbitrage-freemodel. These three approaches allow us to drawsome conclusions regarding the dynamics andcontrast of house prices in Portugal and Spain.