28 December, Idealista
The end of the year is time for reviews, also for real estate. Over the last ten years, real estate has gone through deep transformations due to a crisis that concerned all the aspects: credit, prices, sales. Let’s see what happened, year after year, in the last decade, according to the analysis by Tecnocasa.
Since the second part of the Nineties, the Italian property market had registered a phase of expansion. The factor for this positive cycle is related to the low interest rates on mortgages, the introduction of the euro that generated a more pronounced tendency to debt, and the consequent growth of demand on houses. We must also add the volatility that concerned the financial markets. All these elements combined contributed increasing the sales volumes with a pick in 2006 of nearly 845 thousand transactions and a growth of values that lasted till 2007, the year the market reported a countertrend.
The descending phase of the real estate cycle started in the second semester of 2007 when for the first time, prices of properties have registered a contraction.
2007: the mortgage credit destined to families for the purchase of houses registers a standstill for the first time, due to the crisis of the sub-prime mortgages market that makes banks very cautious in granting loans and the rise of interest rates. All this reflects in the property market that reports a reduction of the purchasing power, with the consequent first reductions of volumes (-4.6%) and of property prices (-1.0%).
2008-2009: The credit crunch continues, some categories of potential buyers can’t access to credit anymore (immigrants, singles, workers on temporary contracts), the times to sell properties get longer, the offer of the market grows and consequently prices and transactions drop further. In 2008 transactions report a reduction of 15% compared to the previous year. It’s the first significant fall.
2010: transactions stabilize thanks to banks relumining the issuance of mortgages, government’s regulations to help accessing credit, and the rise of the demand from families. However, there is still the tendency of banks to be cautious. Transactions are 611,878.
2011: the economic situation of the country shows negative signs, unemployment rises, trust from businesses and families diminishes, along with the intention of buying a house. The credit market sees again a deep fall in the issuance of mortgages causing a reduction of transactions and lower prices in the real estate market.
2012: a horrible year for Italian real estate. The year registers the biggest contraction of prices (-10.2% in just one year) and the volumes start to plummet (-25.8% compared to 2011) due to the lack of trust, a very negative economic situation, and the increased cost of mortgages that makes more difficult accessing to credit. We must also add the heavy taxation, impacting especially the second houses, that causes a surplus on the real estate offer.
2013: the market reaches its lowest point with 403,124 transactions, and it goes back to the levels of the Eighties, prices are still falling (-8.7%). The credit market starts seeing the first signs of recovery of the demand for loans from families, which return being hopeful, despite the not so brilliant trends of consumptions and of the job market.
2014: mortgages restart, the demand for credit from families rise and the ECB introduces additional cash in the financial markets through the Quantitative Easing. Trust from companies and consumers returns. These elements cause the demand for properties to increase, even though such demand has become more selective than in the past. Transactions increase while prices are not rising yet.
2015: the demand continues growing, the time to sell gets shorter, the sign that the market is going towards a new phase. All this doesn’t reflect, however, in prices that continue to decrease even though less than in the past, going towards stability. The situation is favoured by the increased demand in the credit market and by very low interest rates (negative index for floating rates). The low interest rates and the very convenient house prices are a mix that triggers the recovery of the market.
2016: sales make a leap and reach 18.9%, supported by the recovery of the credit market. In fact, the issuances of mortgages grow by 20.6% in 2016. Prices go towards stability and close the year with a reduction of -1.6%.
2017: the market is getting out of the real estate crisis. The demand for properties recovers, investments are back, the selling times reduce to 140 days. The credit market continues giving positive signs even though the volumes are aligned with the previous years. On the property market, a growth in sales (between 550 thousand and 570 thousand) and steady prices are expected for the year-end. Values will recover in 2018.
Translator: Cristina Ambrosi