Abstract

In this paper we examine the dynamics of house prices and residential land prices from 1927 to 2012. We find that real house prices increased more than threefold in that period, and more than fivefold in large cities. This was considerably more than real construction costs, which only doubled. Over two thirds of the increase in house prices between 1950 and 2012 was due to higher residential land prices. The increase in the wealth-to-GDP ratio observed in Italy since the middle of last century is largely due to the rise in real house prices. Although higher prices make purchasing a home more difficult for first-time buyers, our findings lessen concerns about the potential distributive tensions arising from the growth of the wealth-to-GDP ratio.