(Finance) – “While waiting for the economic outlook to become clearer, the Italian real estate market is showing signs of further weakening. The progressive increase in interest rates, combined with the newfound selectivity of the banking class, have abruptly interrupted a mechanism that seemed destined to constantly increase even the most fragile aspirations”. This is what we read in first Observatory on the Nomisma Real Estate Market presented today, which analyzes the situation of the sector with a focus on 13 intermediate markets (Ancona, Bergamo, Brescia, Livorno, Messina, Modena, Novara, Parma, Perugia, Salerno Taranto, Trieste and Verona).
According to Nomisma, the metronome of the market’s recovery will be the credit component, the indispensability of which is now clear, especially in a phase of cyclical weakness. The high cost of money has meant that the share of mortgage-backed sales decreased from 48.4% in 2022 to 39.9% of total purchases in 2023. The difficulties in accessing the buying and selling market have favored a potential shift in interest in demand towards renting, which has grown by 3 percentage points compared to last year.
In other words, in 2023, 48 thousand families have given up buying a house in favor of renting. In this context, the rigidity of real estate values, which in Italy historically characterizes the phases of cyclical inversion, inevitably ends up widening the distances between supply expectations and demand availability, contributing to further slowing down transaction activity. In 2023, sales suffered a decline of close to 10% with almost 710 thousand total homes changing hands on the market.
According to Nomisma, the decline in sales recorded in 2023 is attributable exclusively to the demand component that left the market because it was dependent on credit (-26%), while purchases without a mortgage continue to grow (+4.8%). The positive change that affected the values of homes in intermediate markets, although modest (+1.2% for used and 1.7% for excellent condition) is a synthesis of local dynamics that are anything but homogeneous. For example, if the markets of Messina and Ancona show a nominal decline in prices (-2.2% and -1% respectively), those of Trieste and Novara (+3.2% and +3% respectively) show a variation double the positive trend compared to the market average.
In light of this framework, for Nomisma a more accommodating attitude on the part of the ECB will not be enough to determine an immediate increase in transactions, but a normalization phase will be necessary to facilitate the restoration of conditions more favorable to demand.
“Uncertainty about prospects represents a factor in the inevitable deferral of choices, especially those that require a large capital commitment, such as purchasing a house. It should therefore not be surprising that in the last year purchase demand has shrunk compared to 2022 levels, when the wind of euphoria swelled the ranks of aspiring owners. What has failed is not so much the potential interest, which remains structurally overabundant in our country, but rather the willingness of the banking sector to support the path of aspiring borrowers – he comments Luca Dondi, CEO of Nomisma -. There are quite a few unknowns that punctuate the trajectory of the Italian real estate market in 2024, even if the main one remains linked to the orientation of financial institutions at every level. The possible return to more favorable conditions, in terms of propensity to disburse and onerousness of credit, would make it possible to avoid repercussions on prices of the decline in demand and transactions. If in the first half of the year the picture does not seem destined to change, from the second half it is reasonable to expect a change of direction, with effects that at least initially will be rather timid”.
On the rental front the growth in rents does not stop (+2.9% per year). The average summarizes a certain variability between the monitored markets: from the decline in Messina (-1.3%), to the stability in Bergamo (+5.1%) up to the peak in Perugia (+5.2%). The shift in interest towards rental will further highlight the overcrowding of a sector which already suffers from a clear lack of supply. In the residential sector, the better performance of the rental segment compared to the purchase segment supported the growth – albeit slight – of gross rental returns which stood at 5.6% per year.
Considering the average sales times in the residential sector, there is a certain stabilisation, in the order of 5.2 months for homes in excellent condition and 5.6 months for those in good condition. Also in this case there is a certain variability between the markets, with sales times fluctuating between 3.5 months in Trieste and 6 months in Ancona.
Finally, from the Real Estate Observatory emerges how the housing demand, both aimed at purchasing and renting, is increasingly oriented towards favoring internal amenities such as the balcony or terrace, the double bathroom, the brightness of the rooms and the availability of a parking space or garage, as well as connectivity services. Next, the research favors the characteristics of the context, such as the presence of greenery and proximity to public services and transport and, finally, the type of building, which is evaluated in terms of condition of use and energy performance.
“Real estate operators expect, for 2024, a further decrease in the quantities traded on the market (47.5% of opinions) or, at most, an invariance on last year’s levels (44.3%). Only 8.2% of those interviewed expect a recovery in sales due to greater accessibility to creditthe availability of new homes for sale and an increased propensity to purchase, also supported by the onerousness of rents”, concludes Elena Molignoni, Head of Real Estate Nomisma.
(Photo: Tierra Mallorca on Unsplash)