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We’ll have to wait for a price increase

12 July, Il Sole 24 Ore

The long-hoped price recovery is struggling to take off. The most dynamic areas have registered positive performances, but the general transactions are still below the expectations, and the operators are talking about an “adjustment” of the growth trend.

If we look at the transactions only (+4.3% in the first quarter of 2018), the situation looks positive, although it just pictures the intensity of the demand. If we consider the price trend, the average selling times and the discounts granted during negotiations, the wellbeing of the market appears uncertain. Excluding some exceptions, prices haven’t reported a countertrend yet. Luca Dondi, Nomisma Ceo, said: “In the last few months, the market seemed to have paused in its slow-paced growth process”.

Some external factors can explain this situation, like the worsening of the economy and the political uncertainty. Then we must add the peculiarities of Italian real estate such as the property owners not willing to lower their prices and the excess of supply in some cities. Fabiana Megliola, from the Tecnocasa research department, while presenting the latest report on the market trend for the first months of the year, added: “Prices are stable, with some slight increases in the big cities, especially concerning properties in good conditions”. While Milan and Bologna have left the recession behind, the provincial capitals registered a 2% reduction, and the hinterland closed with -2.7%.

There are evident obstacles to overcome if we look at the average selling prices (namely limited purchasing power) and the quota of purchases financed by mortgages. Dondi comments: “We estimate that about 55% of the transactions are funded by property loans or other types of loan. This number has grown a lot over the years, and it has never been so high in Italy”. Purchases for investment still represent a limited quota. This component, thanks to its high volatility and its capability of transferring capitals quickly, would be the only one to impact prices significantly.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi

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