Does tourism affect house prices? Some evidence from Italy

The purpose of the present paper is to empirically test the relationship between tourism-and tourist related activities- and house prices. Using a System GMM approach for the time span 1996–2007, the authors empirically test whether house prices in Italy are affected by tourism. This relationship is tested in the context of Italy, using a panel dataset at the urban level, with yearly observations for the period 1996-2007. After controlling for characteristics of the local housing markets, amenities, geographical variables and urban size, we test for the effect of tourism by employing a composite index (see Biagi and Faggian, 2004; Biagi, Lambiri and Faggian, 2012), which combines tourism demand and supply variables to capture the intensity of tourism activity of urban areas in Italy. This is the first time the impact of tourism on the housing market is ‘quantified’ and empirically tested at a national context. Our findings are robust and confirm the initial intuition of a significant positive relationship between tourism and house prices. Moreover, we examine whether-and to what extent-the tourism impact identified varies amongst city centre, suburban and peripheral locations; our results are indicative of such differences- albeit not very large. The consistency of our findings in relation to the positive impact of tourism on house prices opens up the possibility for further research into the form of these effects and related policy implications.