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NOMISMA OVERVIEW OF ITALIAN REAL ESTATE MARKET

MACROECONOMIC SCENARIO

The progressive deterioration of the macroeconomic scenario has inevitably weakened the buoyant trend that had characterised the Italian real estate market for more than a year and a half. On the one hand, soaring prices have reduced the spending and investment capacities of households and businesses and, on the other hand, unleashed a drastic response by the European Central Bank in an attempt to douse an inflationary flare-up that at the continental level is almost entirely exogenous in nature.
The desire for self-gratification after a period of unprecedented duress has not only sustained overall economic growth, with GDP in Italy increasing at a higher rate than that of its European competitors and even similar that of the Chinese behemoth, but also has helped inflate the desire of many households for improved housing conditions. The pro-cyclical orientation, which is prevalent among the more mature segment of the population, will inexorably tend to diminish, allowing negative signals to prevail on the horizon which are mercilessly reflected in the views on the future confidence climate.

 

INTENTIONS TO PURCHASE A HOME AND TAKE OFF A MORTGAGE IN THE NEXT 12 MONTHS

In the second half of the year 2022 the growth trend has been decidedly less intense and far from generalised. Underlying the slowdown are the changes in the context that have taken place in recent months, with access to the market suddenly becoming more problematic and with caution resurfacing among stakeholders, be they households or businesses. Thus, a transitional phase has started in which the amount of currently available economic resources only partly reflects the decline in intentions, already evident on the credit side.
The certain intentions of households to take out a mortgage also decrease. The increased cost of debt, coupled with the changing orientation of the banking system that is concerned about a new wave of defaults, drastically reduces the availability of the credit channel, which had become an inevitable path for a significant share of real estate demand.

 

TREND OF RESIDENTIAL PRICES AND SALES

The real estate market will become less accessible than it was up to a few months ago, also due to increases in sales and rental prices that occurred in the meantime. The lower intensity of the effectively demonstrated demand (seen in the sharp decline of the certainty in intentions to purchase) will lead to a reduction in sales activity after the extraordinary achievement of the last year and a half. The reaction of prices to the changed conditions is once again be marked by rigidity, with a slowing of growth, which is already taking place, but with no risk of imminent downsizing.

 

REAL ESTATE CORPORATE INVESTMENTS

On the corporate side the recovery was vigorous up to the entire third quarter 2022, driven by the improved attractiveness of alternative sectors (logistics and hotels), as well as the return of interest in the office segment.
As for the typological and territorial asset allocation, the offices and Milan are once again the preferred combination by investors. More generally, the office and logistics segments continue to drive the market, while the recovery of the hotel sector is confirmed. Rome could express a more dynamic market but struggles to overcome product and context gaps. It is hoped that the investments of Recovery Plan or those linked to the 2025 Jubilee will have an effect.

 

ITALIAN REAL ESTATE FUNDS

During the first half of 2022, the real estate fund industry recorded a reduction in the number of active funds (from 714 to 708 funds) and a substantial stabilization of the value of managed assets (+0.4%). The geographical asset allocation continues to be concentrated mainly in Lombardy and Lazio, first of all in Milan and Rome, while in the rest of the country investments in logistics and
hotels prevail, due to the recovery of tourist flows. The national asset allocation is in line with the market of European vehicles. The trend seems to favor office core buildings with high energy performance or logistic and hotel assets. The residential segment (multifamily) is not yet developed in Italy compared to the European context, except in Milan limited to some city areas affected by significant interventions on which the interest of investors is concentrated.

 

For further information: Nomisma Overview of Italian Real Estate Market – MIPIM 2023

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