Farnham et al. (2011) argue that house-price changes could affect marital stability through a variety of mechanisms which may differ for renters and owners. The rise in the value of the house is not an actual capital gain until the house is actually sold and they get paid this higher price. But, in terms of expectations, if any of the members of the couple is planning on getting a divorce a higher house price in the market (although they have not sold the house yet) could make for an easier start, and thus facilitating the divorce decision. At the same time increases in house prices mean that both owners and renters experience higher costs of living separately, which could reduce divorce probabilities. House-price gains may reduce financial stress–and therefore divorce probabilities–for owners; gains should have the opposite effect on renters.
In this paper, we examine the link between regional house prices and divorce in Spain. We consider data from 50 Spanish provinces Nomenclature of Territorial Units for Statistics (NUTS III regions) and from local courts in 211 cities with populations greater than 25,000 inhabitants. The data cover the 1998-2016 period. The divorce rate is defined as the annual absolute number of divorces per thousand inhabitants in each region. We use data on Spain, since the Spanish housing market experienced a strong rise in house prices until 2006, when the housing bubble ended and prices dramatically decreased. By using different econometric techniques (panel data model with fixed effects and a dynamic panel model estimated by the generalized method of moments (GMM) estimator (Arellano and Bond, 1991)), our results reveal that there is a significant positive relationship between housing prices and the divorce rate at the regional and local level.