Economic Relationships Between Selling and Rental Prices in the Italian Housing Market

Abstract

In this paper the relationship between price and rent dynamics in the Italian housing market is studied. The aim is reached through the implementation of a multivariate autoregressive model (VAR), that makes it possible to explain the interdependencies of multiple time series. The analysis considers a series of macroeconomic variables in the model that in the deductive interpretation of the phenomenon and on the basis of other experiences in current literature, were evaluated as potential keys to understanding the relationship between prices and rents. The variables selected, along with residential realestate prices and real residential rents, were: the real short term interest rate, the time series of the annual differences between the actual and the expected Gross Domestic Product, real investments in housing. The data series cover the period from 1980 to 2008. The results obtained show some peculiarities of the Italian real estate market.