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Boom of houses sold (+11%). But prices continue to decrease

25 July, Libero

The real estate transactions have recovered in the first part of the year. But prices are still following the trend started in 2010, and they continue to fall. Scenari Immobiliari has reported the performance of the six months of the year, confirming the trend pictured by Eurostat in the past few weeks. Whereas it’s true that the transactions in Italy have recovered (+11.5%), prices are still dropping: -0.2% on the overall. The reduction is more accentuated in the service segment (-0.5% for offices) and a slight recovery of shops (+0.2%). The problem is that the number of transactions in the residential market is still low, almost halved in comparison with the peak years, with 290 thousand deals.

Italy is last in Europe

To be honest, Eurostat in its European chart had already identified the substantial balance shown by the research centre. According to Eurostat, the Italian property market has not recovered. The standstill is even more evident if we compare the numbers with those of other European countries. Nearly all of them are growing. In the Eurozone in the first quarter, “property prices grew by 4.5% on a yearly basis, and by 0.6% compared with the last quarter of 2017”. Italy reported the most significant reduction (along with Sweden): prices have fallen by 0.4%. Latvia (+13.7%), Slovenia (+13.4%), Ireland (+12.3%) and Portugal (+12.2%) are the countries that grew the most, while in the last quarter Latvia (+7.5%), Hungary, Slovenia (+4.4%), and Portugal (+3.7%) reported the most significant growth.

Bad loans

In conclusion, the Italian market is still struggling. One of the reasons is the significant NPL stock still within the banks. According to the latest survey carried out by Unimpresa last spring, almost 43% of the bad loans come from real estate. 54 billion “originate from real estate and the construction sector. Construction represents 27% of the total bad loans, with approximately 35 billion euro, while real estate is 15%, corresponding to 18 billion”.

There are also the defaulting mortgages of those, likely due to the job crisis that accompanied the past few years, lost their jobs or had their wages considerably reduced. The banks that issued these loans prefer to not downgrade them to bad loans (to avoid negative consequences for their financial statements), but they’re still not collecting the credits. Banks are not selling the stock of seized houses causing the standstill of the property market, whereas in other countries (Spain and Portugal) the market collapsed in the span of few years.

Source: Libero

Translator: Cristina Ambrosi