This paper stresses the differences with respect to the time path of the price of residential capital that may arise according to whether the subsidies to owner-occupied housing are designed as savings incentives or as investment incentives. Whereas savings incentives (as is the case with the tax credit for housing purchase in Spanish personal income tax) can be invoked either for a newly-produced housing unit or for a previously produced one, investment incentives can be designed to allow for a more favourable tax treatment to be given to new residential capital in comparison to existing capital. It is argued that this distinction may generate opposite effects on the time path of the asset price of housing, and that it provides some insights with respect to the causes and the consequences of the so-called "Spanish real-estate boom". Using an asset price model of housing, an analysis is made of the interaction between the provisions in Spanish income tax and an increase in the demand for housing services/stock resulting from the increase in income expectations during the 1985-90 period. If the whole approach is correct, the favourable tax treatment of owner-occupied housing in personal income tax appears as a structural policy that may have contributed to the increase in housing prices during the second half of the 80s.

Keywords: housing policy in Spain, house prices, incentives for saving and investment in housing.