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Real estate is still in a delicate phase

18 October, Wall Street Italia

Many players are questioning the situation of the Italian real estate. To give an objective opinion, here is a synthetic analysis based on the fourth edition of the notary deeds yearly report.

The report dated July 2018, referring to the data gathered up to 31st December 2017, is the first yearly comparative report, making a comparison with the 2016 figures. The report includes very interesting data and, for some aspects, even surprising.

Transactions

The data refer to real estate transactions regardless whether the quota referred in the notary deeds is equal or higher than 50% of the ownership. 862,939 transactions were recorded in 2017, having increased by 6.79% from 2016.

Life estates were over one thousand (1,092 to be precise). Transactions for land were 156,140, 72.87% of which concerned agricultural lands.

Over half of the transactions happened in the north (55.39%). Lombardy is the region with the highest number of transacted properties 9171,382). Milan, whose market is thriving, is undoubtedly the primary driver for the result at macro-regional level.

On the other hand, Abruzzo is the only Italian region reporting a negative result. Here, transactions decreased by -4.56% compared to the previous year. The natural disasters of the past years certainly influenced such performance.

Age brackets

The age bracket reporting the highest number of transactions is the one comprised between 18 and 35 years, which represents the majority of buyers, while the biggest quota of sellers is constituted by people aged between 56 and 65 years.

The only exception is land, which is bought by people aged between 46 and 55 years.

The figures are not surprising, especially if we consider the tax relief request to buy the main dwelling. Of 553.654 transactions completed in 2017, for 310,880 was requested the tax relief. 39.66% of the buyers of the age bracket between 18 and 35 years requested the tax relief to buy the main dwelling.

Mortgages

There was no significant variation from 2016. In 2017, mortgages for amounts up to 150,00 0 euro were the biggest quota. The average values of transactions and the stricter requirements of banks to grant a mortgage (based on the applicant’s income) influenced such result.

People aged between 18-35 and 36-45 years represent the majority of people applying for a mortgage.

Therefore, it’s possible to see the connection between age and the number of transactions funded by mortgage for the purchase of the main dwelling.

Moreover, we must consider another factor: the older the age, the more the restriction to access a mortgage will be. The restrictions may be, for instance, the age limit to obtain a mortgage, the request of a collateral, a death risk insurance policy, etc.

Transaction values

We assisted at a general decrease on the average values of transactions, which have gone from 148,000 to 126,000 euro. This data is not surprising, as many operators talk about a consolidation of the price trend.

The analysts forecast that prices will further decrease in 2018, except for prime locations and the main cities (Milan, Turin, Genoa, Venice and Bologna), where the dynamic market makes possible to reduce the average time to close a deal and to rent profitably, as well as to sell quickly if necessary.

Ownership transfers for developable land valued between 700,000 and 1,000,000 euro increased. This might be the sign of a renewed trust in the construction sector, although this is not a certainty.

Donations

Property donations decreased (-2.25%). They concentrate mainly in the south, and they mostly concern people aged between 18 and 55 years. Donations for life estate are still common and concerning people aged over fifty years.

Companies

Finally, as we know, SMEs are the real driver of the Italian economy. Real estate companies are still at a standstill. Excluding residential properties, the countertrend registered in 2017 concerning instrumental properties is worrying, having reported a fall in the number of transactions equal to -1.44%, while the figure for instrumental buildings sold by companies plummeted by 15.21% from 2016.

The aftermath of the recession and the lack of trust of entrepreneurs in the system is not an incentive to make new long-term investments.

In conclusion, the figures show a general recovery of the property market, considering the variable factors such as the economic, political and social context, although with some exceptions.

2018 confirms that the industry is going through a very delicate phase where the average times to sell a property and the average discounts applied show a very uncertain picture.

Source: Wall Street Italia

Translator: Cristina Ambrosi

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