Fractional Integration and Structural Breaks in Italian Real House Prices

The primary goal of this paper is to analyse the Italian real house price index (RHPI). Classical approaches typically assume either stationarity or unit-root nonstationarity. Instead, this study adopts a fractional integration framework, where the differencing parameter is allowed to take any real value, including fractional ones. Using updated quarterly OECD data for Italy covering the period 1970Q1–2024Q2, the paper investigates the persistence properties of real house prices under alternative specifications for the short-memory component, including white-noise, Bloomfield, and seasonal autoregressive disturbances. The contribution of the paper lies in combining fractional integration methods, growth-rate dynamics, and structural-break analysis within a unified framework focused on the Italian housing market. The empirical results indicate a high degree of persistence in the series, although the estimated persistence parameter is sensitive to the specification adopted for the disturbance term. In particular, the specification based on Bloomfield disturbances produces weaker evidence of long-memory behaviour than the alternative models considered. To complement the persistence analysis, we also investigate the presence of structural breaks from a macroeconomic and historical perspective. The results suggest the presence of six structural breaks that are broadly consistent with the main cycles of the Italian real estate market identified in the existing literature.