The Italian Property Market - Resilient Not Speculative
Jumat, 04 Januari 2013
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I remember sitting in the offices of a big mover and shaker in the Italian property industry discussing the repercussions of Lehman Bros and whether the, at the time, soon-to-be-sworn in Barack Obama would have any impact, while fingering the sugar sachet that came with the espresso he'd just sent out for. The motto on which declared 'There wouldn't be so many wolves if there weren't so many sheep', which did make me smile ever so slightly being sat, as I was, across the table from one of the biggest, although admittedly infinitely likeable wolves you could ever meet. Which, oddly enough, brings me to Pinocchio and a small detour before arriving at the Italian property market...
Pinocchio is the quintessential Italian story. Watch Roberto Benigni's version set in Umbria and you will get a true insight into the Italian psyche. Anyway, shortly before his experiences with a whale and a land of donkeys, Pinocchio is conned out of his bag of gold coins by a very charming cat and fox - they tell him to invest in a hole in the ground for an enormous, guaranteed return, and so he does. They return and promptly steal the lot. We then witness a hysterically desperate wooden top jumping around the countryside. Does this sound familiar?
No doubt there are cats and foxes circulating in the Italian property industry, as there are anywhere else, along with wooden tops hoping to get rich quick. Unfortunately, when conducting initial conversations with clients enquiring about property search services in Italy I do sometimes feel like the very first cat the newly feline-averse Pinocchio encounters after his painful experience. Despite this, I will now give you good reason to look carefully at the residential property market in Italy, you may feel I am either a cat or a fox, but if you do, I reserve the right to call you a wooden top.
Market resilience; a brief trip back in time
Unfortunately statistics have a very bad reputation, but here are a few worth taking note of: According a FIAIP market report for residential property bought for holiday use in Italy, values rose for top-end holiday properties by between 9 and 27% between '04 and '09. 'Well,' you may say, 'what about just 2008?' The same kind of properties fell by only -0.6%, this in a year when many property markets went west. The first half of 2009 saw a drop of between 0.85% to 1.25%, again for the same kind of property, that is quality residential property for holiday use. The conclusion would seem to be that if this market can prove so robust during one of the worst economic downturns in living memory then it is a resilient market indeed. When making this point to one journalist the reply came back " 'buy in Italy and you won't lose your money' isn't the most captivating headline," however I would argue in the context of today it actually is. Looking at FIMAA's study of annual variations in prices for holiday homes in all regions of Italy published in August '09, in some regions prices rose so slightly (+0.1% to 0.3%), others remained stationary and the ones where prices fell were in the region of maximum 1.1%. To back this up further, recent activity during the Euro crisis has shown that people are choosing to buy in Italy, even at the top end of the market, putting their capital in bricks and mortar.
In the last quarter of 2008, I was advising that quality homes in areas like Tuscany, Venice, the northern lakes were not going to see a wholesale collapse in price, and, at best, buyers could hope for slightly more leverage on discounts once negotiations began. This was not a daring, off the wall forecast by any means - it was as risky as sticking your neck out and saying 'I guarantee that in the next six months you will not find a member of the Danish Royal family riding bareback in Billy Smart's circus in a glitzy purple leotard.' However, many foreign buyers were not to be persuaded. But what happened? Talking to one top-end property broker in Florence at the time, they found that in Q2 of '09 buyers started to realize the market wasn't going to collapse and in fact Q3 proved very busy, but not with UK/US buyers, who started the year expecting a collapse.
Nomisma, a well-respected research institute, reported on the Italian property market at the end of 2009, indicating that March-April saw the market hit bottom, and that while sales volumes were still low (down 15% compared to 2008), things were ever so slightly improving. Overall, prices for residential property fell by 1.6% in the last six months of 2009, which for the year was placed at -4.1%, contrast that with -30% for the US and UK in the same period.
The history lesson:
So, what's the message here? Basically, if the Italian residential market, and it would seem, specifically the second home/luxury property market, proved so robust during the Great Recession, there is a basis to expect that it will continue to behave in this way, unlike some more speculative markets that went up in smoke.
This should influence the foreign buyer's approach to the market:
As a general guide to purchasing in Italy in the top end of the residential market, therefore over €1M, expect that during times of economic downturn what will be affected above all is the volume of sales, so houses may be on the market for a lot longer. Or, indeed, some of these properties will be taken off the market. To illustrate: I was speaking to a property investor with a particular interest in Venice who said flatly that property with a value of €2M-€4M would only move with huge discounts on price and he and others were simply taking these off the market. There may be some leverage on price, although don't expect sellers to knock 30-40% off the moment you leap out of your rental car. A general rule would be around the 10% mark is realistic and slightly less if not buying in a downturn, 15 to 20% less frequent. Again, this type of vendor, unless they are a distressed seller, will prefer to wait than slash prices. Especially is this the case with Italian owners who still view the brick as a sound place to leave your money.
Buy to enjoy
Pinocchio came unstuck of course because although he had a bag of gold coins, once the cat and the fox had had a chat, he was convinced he could become truly rich investing in their hole in the ground. Do not buy in Italy using the same rationale. As detailed above, the market, historically, doesn't lose hugely, in fact pre-crisis, it had a healthy habit of going up, but not spectacularly. Buy in Italy because you actually want to enjoy visiting/living in the country.
Italy is not a speculative market but rather a fairly stable one. Buy something there to enjoy. Watch out for the cats and the foxes, listen to Jiminy Cricket, or at least retain a buying agent, and above all, never ever tell a lie.
Pinocchio is the quintessential Italian story. Watch Roberto Benigni's version set in Umbria and you will get a true insight into the Italian psyche. Anyway, shortly before his experiences with a whale and a land of donkeys, Pinocchio is conned out of his bag of gold coins by a very charming cat and fox - they tell him to invest in a hole in the ground for an enormous, guaranteed return, and so he does. They return and promptly steal the lot. We then witness a hysterically desperate wooden top jumping around the countryside. Does this sound familiar?
No doubt there are cats and foxes circulating in the Italian property industry, as there are anywhere else, along with wooden tops hoping to get rich quick. Unfortunately, when conducting initial conversations with clients enquiring about property search services in Italy I do sometimes feel like the very first cat the newly feline-averse Pinocchio encounters after his painful experience. Despite this, I will now give you good reason to look carefully at the residential property market in Italy, you may feel I am either a cat or a fox, but if you do, I reserve the right to call you a wooden top.
Market resilience; a brief trip back in time
Unfortunately statistics have a very bad reputation, but here are a few worth taking note of: According a FIAIP market report for residential property bought for holiday use in Italy, values rose for top-end holiday properties by between 9 and 27% between '04 and '09. 'Well,' you may say, 'what about just 2008?' The same kind of properties fell by only -0.6%, this in a year when many property markets went west. The first half of 2009 saw a drop of between 0.85% to 1.25%, again for the same kind of property, that is quality residential property for holiday use. The conclusion would seem to be that if this market can prove so robust during one of the worst economic downturns in living memory then it is a resilient market indeed. When making this point to one journalist the reply came back " 'buy in Italy and you won't lose your money' isn't the most captivating headline," however I would argue in the context of today it actually is. Looking at FIMAA's study of annual variations in prices for holiday homes in all regions of Italy published in August '09, in some regions prices rose so slightly (+0.1% to 0.3%), others remained stationary and the ones where prices fell were in the region of maximum 1.1%. To back this up further, recent activity during the Euro crisis has shown that people are choosing to buy in Italy, even at the top end of the market, putting their capital in bricks and mortar.
In the last quarter of 2008, I was advising that quality homes in areas like Tuscany, Venice, the northern lakes were not going to see a wholesale collapse in price, and, at best, buyers could hope for slightly more leverage on discounts once negotiations began. This was not a daring, off the wall forecast by any means - it was as risky as sticking your neck out and saying 'I guarantee that in the next six months you will not find a member of the Danish Royal family riding bareback in Billy Smart's circus in a glitzy purple leotard.' However, many foreign buyers were not to be persuaded. But what happened? Talking to one top-end property broker in Florence at the time, they found that in Q2 of '09 buyers started to realize the market wasn't going to collapse and in fact Q3 proved very busy, but not with UK/US buyers, who started the year expecting a collapse.
Nomisma, a well-respected research institute, reported on the Italian property market at the end of 2009, indicating that March-April saw the market hit bottom, and that while sales volumes were still low (down 15% compared to 2008), things were ever so slightly improving. Overall, prices for residential property fell by 1.6% in the last six months of 2009, which for the year was placed at -4.1%, contrast that with -30% for the US and UK in the same period.
The history lesson:
So, what's the message here? Basically, if the Italian residential market, and it would seem, specifically the second home/luxury property market, proved so robust during the Great Recession, there is a basis to expect that it will continue to behave in this way, unlike some more speculative markets that went up in smoke.
This should influence the foreign buyer's approach to the market:
As a general guide to purchasing in Italy in the top end of the residential market, therefore over €1M, expect that during times of economic downturn what will be affected above all is the volume of sales, so houses may be on the market for a lot longer. Or, indeed, some of these properties will be taken off the market. To illustrate: I was speaking to a property investor with a particular interest in Venice who said flatly that property with a value of €2M-€4M would only move with huge discounts on price and he and others were simply taking these off the market. There may be some leverage on price, although don't expect sellers to knock 30-40% off the moment you leap out of your rental car. A general rule would be around the 10% mark is realistic and slightly less if not buying in a downturn, 15 to 20% less frequent. Again, this type of vendor, unless they are a distressed seller, will prefer to wait than slash prices. Especially is this the case with Italian owners who still view the brick as a sound place to leave your money.
Buy to enjoy
Pinocchio came unstuck of course because although he had a bag of gold coins, once the cat and the fox had had a chat, he was convinced he could become truly rich investing in their hole in the ground. Do not buy in Italy using the same rationale. As detailed above, the market, historically, doesn't lose hugely, in fact pre-crisis, it had a healthy habit of going up, but not spectacularly. Buy in Italy because you actually want to enjoy visiting/living in the country.
Italy is not a speculative market but rather a fairly stable one. Buy something there to enjoy. Watch out for the cats and the foxes, listen to Jiminy Cricket, or at least retain a buying agent, and above all, never ever tell a lie.
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Judul: The Italian Property Market - Resilient Not Speculative
Ditulis oleh Unknown
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