House Prices in Local Markets in Italy: Dynamics, Levels and the Role of Urban Agglomerations

Abstract

The national pattern of house price dynamics masks considerable heterogeneity across local areas and markets; disparities are even higher looking at house price levels. In this paper we describe these structural differences across Italy, with particular focus on the role of metropolitan areas over the last 50 years. Our analysis shows that housing cycles differ across geographical areas and urban agglomerations both in depth and length. Cycles reflect metropolises’ price dynamics in all the macro-areas except the South, where the biggest cities and the other towns exhibit similar dynamics. Geographical disparities are even stronger if we turn to price levels: following a period of relative convergence in the second half of the 1990s, the gap between areas widened again. Finally, using data covering the last decade, we analyse house price heterogeneity across areas, including the hinterland of metropolises, taking into account the contribution of a set of relevant socio-economic characteristics, the first one being income, to the distribution of house prices.

Keywords: housing cycles, urban agglomeration, geographical house price gap

JEL Classification: R10, R21, R31