EY: The residential market has restarted

10 March, Monitor Immobiliare

In 2017 the residential sector in Italy has confirmed its positive trend for the third year in a row. With 550,000 transactions for residential properties concluded over the last year (5% more than 2016), the market registered a total increase of 35% compared to the post-recession years 2013-2014. The values are above the national average, even though they’re far from the peak reported in 2014 with 900,000 transactions. Residential development activities have restarted, with a countertrend between 2016 and 2017 regarding the number of new residential properties.

These are the main points of the EY report “Residential development in Italy. Challenges and opportunities in the market” which analyses the specific characteristics of the Italian residential market and its evolution over the last 60 years, highlighting opportunities and risks.

According to the survey, the residential market in Italy has a strong connection with the macroeconomic indicators, such as the GDP yearly variation (+1.5% for 2017 according to Banca d’Italia), and it’s characterised by regular cycles that repeat through time.

Five cycles have been identified from 1958 till today, each lasting 13 years on average. All the cycles show similar trends and characteristics, in particular for what concerns the relation between the property price index and the trend of transactions.

Among the internal factors, Italy is at the top of the chart in Europe for the percentage of families that live in a house they own, namely the 77.4%. The rental market is one of the smallest in Europe, even though the trend is picking up, determined by a combination of factors: the reduction of the purchasing power in real estate, the geographical disparity that has led to an internal migration towards areas of the country where there are more work opportunities, the change of consumption models that tend to prefer use over possession, and the ongoing demographic dynamics.

Marco Daviddi, EY partner and real estate leader for Italy, comments: “The existing residential stock has characteristics in terms of dimensions, construction, and energy that are far from what the market is demanding today. This explains why prices for old properties have continued to drop also in 2017, while prices for new properties are growing, driven by a demand that is getting stronger, especially in some geographical areas. After several years of general standstill of the residential developments, as shown by the little number of new hoses put on the market, with a reduction of about 80% compared to the maximum registered in 2005, the recovery of transactions has absorbed a great part of the unsold stock and we believe that, arrived at this stage, it’s time to proceed with new developments. However, the comparison between the market trends and the socio-demographic conditions suggest adopting new analysis instruments to plan and market the interventions, with an adequate financial planning that to place the product on the rental market, rather than selling it”.

Rita Neri, EY partner, advisory services marketing and digital communication leader, comments: “The communication approach for residential products must be centred on the client and his/her needs. Therefore, it must start from the initial identification of the target. A multichannel approach allows to monitor all the contact points and to reach who might be really interested in the property, making the investment in marketing and communication effective and measurable. The experience we’ve acquired in the field is aimed at establishing a dialogue with the potential buyers and at accompanying them towards the choice”.

Source: Monitor Immobiliare

Translator: Cristina Ambrosi

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