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S&P: the improved economy hasn’t brought to an increase in house prices

21 February, Il Sole 24 Ore

The positive trend of the economy and the interest rates at their lowest have supported the Italian property market, but they haven’t brought to an increase in house prices yet. According to the real estate report published by S&P Global Ratings, “real estate transactions have grown by 5% over 12 months up to September 2017, despite the growth is going at a slower pace than in 2016”.

The average time necessary to sell a residential property has gone from 8.9 months to 7.5 in the third quarter of 2017. In this context, the elections in March “might bring a period of uncertainty, with a potential impact on the economy and the real estate market. In the medium term, the growth will depend on the effectiveness of the new Government and its ability to implement reforms”.

Concerning real estate, prices for residential properties are still decreasing, with a reduction of 1.3% in the third quarter on a yearly basis. Whereas the new construction market is doing better, with prices grown by 0.6% on a yearly basis. However, newly-built properties represent only 19% of the transactions in 2017, hence decreasing if we compare it with the 34% registered in 2010. Investments in new housing solutions are gradually recovering, even though in the third quarter of 2017 they are still by 30% lower than the percentage registered 10 years ago. Generally speaking, S&P estimated that “in 2017 house prices in the Italian property market dropped by 1%”. Looking forward, the rating agency believes that “the GDP will grow by 1.5% this year, thanks to the better conditions of the banking sector and to the solid and consistent expansion at global level”.

The better economic situation and the low interest rates should “support the demand on the real estate market and, considering the little investing in the residential segment, reduce the excess of the offer”, explains the agency. The gap between demand and supply should gradually reduce, with the consequent reduction of selling times and the increase in the property values.

For what concerns the European real estate market, S&P speaks about a trend varying depending on the country. In the UK, for example, prices will be impacted by the potential consequences of Brexit, “considering the large exposure of London after the exit of UK from the EU”. In France, after a very good 2017 in terms of number of transactions, the market will become more cautious and with levels closer to the long-term average. According to the agency, Germane will see “an only moderate increase of house prices, despite the excellent economic outlook”.

The outlook is also positive for Portugal, where the solid economic growth and the improvement of the labour market will continue to support the steady increase of house prices. In Spain also, the good economic condition will sustain the transactions, helping to reduce the stock of unsold properties.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi

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