Long-term regional house prices cycles. A city-based index for Italy

• Published in: Journal of European real estate research Vol. 10; no. 3; pp. 303 - 330
• Main Authors: Gabrielli, Laura, Taltavull de La Paz, Paloma, Ortuño Padilla, Armando
• Format: Journal Article
• Language: English
• Published: Bingley Emerald Publishing Limited 01.01.2017; Emerald Group Publishing Limited
• Subjects: Business cycles; Cities; Demography; Economic models; Economics; Eurozone; Growth rate; Housing; Housing prices; Interest rates; International finance; Monetary policy; Regions; Securities markets; Time series; Italy; Convergence and synchronization; Cycles; Cointegration; Italian cities; Unobservable time series component; Housing prices
• ISSN: 1753-9269; 1753-9277
• DOI: 10.1108/JERER-05-2017-0019

Purpose This paper aims to present the dynamics of housing prices in Italian cities based on unpublished data with regional details from the late 1960s, half-yearly base, for all main Italian cities measuring the average prices for three city dimensions: city centre, sub-centres and outskirts or suburbs. It estimates the Italian long-term house price index, city based in real terms, and shows a combination of methods to deal with large time-series data. Design/methodology/approach This paper builds long-term cycles based on the city (real) data by estimating the common components of cointegrated time series and extracting the unobservable signals to build real house price index for sub-regions in Italy. Three different econometric methodologies are used: Johansen cointegration test and VAR models to identify the long-term pattern of prices at the estimated aggregate level; principal components to obtain the common (permanent and transitory) components; and signal extraction in ARIMA time series–model-based approach method to extract the unobserved time signals. Findings Results show three long-term cycle-trends during the period and identify several one-direction causal non-permanent relationships among house prices from different Italian areas. There is no evidence of convergence among regional’s house prices suggesting that the Italian housing prices converge inside the local market with only short diffusion effects at larger regional level. Research limitations/implications Data are measured as the average price in squared meters, and the resulting index is not quality controlled. Practical implications The long-term trends on housing prices serve to implement further research and know deeply the evolution of Italian housing prices. Originality/value This paper contains new and unknown information about the evolution of housing prices in Italian regions and cities.