The House Price Gradient: Evidence from Italian Cities

Abstract

The paper examines the geographical variability in house prices, focusing on the gradient from the center to peripheral areas. Our results show large price differentials within the main urban areas, even larger than those observed between the Center-North and South of Italy. The higher real estate prices in the centers of urban areas are affected by centripetal pressures from the demand side, to which supply only partially adjusts. We find that better infrastructure and lower commuting times can, however, mitigate the centripetal pressure on the demand side and flatten the gradient. Finally, we also find a center-periphery gradient for incomes ; however the latter is less steep than that of house prices, thus indicating that the ratio between the value of houses and income is higher in the city center and lower in the periphery.