1. Why could a strong growth in real house prices within a few years signal a bubble? In answering this question, you may assume that inflation in Spain averaged approximately 3.2% between 2000 and 2007 and stayed in the range of [2.8%, 3.6%] and that its population grew by an average of about 1.7% during the same period.

House Prices, Annual Change (%) 20 15 10 5 mmm mm mmm _ dmmmmmm and 0 -5 -10 -15 05 10 15 *21 Nominal Real Source: INE, Global Property Guide