Households’ willingness to pay in good and bad economy. The case study of Naples

There is no debate that the 2008/09 economic crisis has severely affected housing market in Italy at national, regional and city level and Naples has been one of the most hit cities of the country. Indeed, data from the Italian Revenue Agency show that between 2006 and 2014 the normalized transactions number of housing units in Naples has extraordinarily decreased, going from over 9000 to less than 6000, and the same has occurred to the average house price that experienced the fiercest fall between 2009 and 2010 (-24%). In this context, the paper aims to measure the impacts of the 2008/09 economic crisis on the housing market of the city of Naples using the hedonic price approach. The application of this method allows estimating the price of significant housing characteristics, whose relationship with housing price can be expressed as follows (Wen et al. 2005): = () The goal is to understand how homebuyers’ preference for specific housing characteristics has changed between 2008 and 2015 in order to identify (1) those features which have maintained their relevance before and after the crisis, (2) those which were considered significant during good economy but not during bad economy, and finally (3) those which become of interest for homebuyers only when the market was declining.Our case study is the city of Naples, whose housing market has suffered great negative consequences due to the economic crisis, as previously described. We have identified a sample of 60 proprieties sold in 2008 and 123 proprieties sold in 2015 distributed over the entire municipal territory, and for each of them we have collected data about nine housing characteristics. Then, we have used a hedonic price method (OLS) to establish which housing characteristics were significant in determining propriety values in 2008 and 2015 (Corsini 2009), and we have compared the two results obtaining two main findings: the Neapolitan residential real estate has substantially changed during the seven years of reference; homebuyers have partially changed their preference for the considered housing characterizes. The paper is structured as follows: paragraph 2 includes the description of the methodological steps followed in this research, from data collection to the application of the hedonic price method (HPM); in paragraph 3 we describe and comment the results obtained using HPV both at 2008 and 2015; in paragraph 4 we provide some concluding remarks and we propose possible further research.