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The effect of property taxes on house prices: Evidence from the 1993 and the 2012 reforms in Italy

Author

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  • Melisso Boschi
  • Valeria Bevilacqua
  • Carla Di Falco

Abstract

We quantify the effect of property tax reforms implemented in Italy in 1993 and 2012 on property prices. We focus on the Italian house prices index using the Interrupted Time Series Analysis (ITSA), a statistical approach that proves to be useful when a counterfactual scenario for policy evaluation is difficult to create due to the universality of intervention. The hypothesis under test is that the two reforms caused a statistically significant discontinuity in the house prices index dynamics. We estimate two alternative versions of the ITSA model ─ one including only Italy, and another one including also similar European countries as control terms (France, Germany, Spain, and the UK). Property tax changes effects are reform-specific. As for the 1993 reform effect on real house prices, we estimate a 13-14 percent decrease of the mean level and a 1 percentage points (p.p.) increase of the rate of growth. As for the 2012 reform, depending on the model chosen, we estimate a 3-5 percent decrease, or a 4 percent increase, in level, as well as a 3-4 p.p. decrease, or a 2 p.p. increase, of the rate of growth.

Suggested Citation

  • Melisso Boschi & Valeria Bevilacqua & Carla Di Falco, 2021. "The effect of property taxes on house prices: Evidence from the 1993 and the 2012 reforms in Italy," CAMA Working Papers 2021-82, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2021-82
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2021-09/82_2021_boschi_bevilacqua_falco.pdf
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    More about this item

    Keywords

    Policy effect evaluation; Property tax; House prices; Property tax capitalization; Tax reforms; Interrupted Time Series Analysis;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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