Property in Italy: Green shoots amid the gloom

March 16th, 2009 | by Ainsley |

Are these even further signs of optimism in the Italian property market?

Requests for mortgage finance rose two per cent in February, compared with a 15 per cent drop in January, financial group Crif has shown.

However, cautious experts fear these apparently optimistic figures may be a blip and are wary about believing the corner has well and truly been turned.

That tempered outlook about the property in Italy market is perhaps justified by figures showing sales down an estimated 18 per cent  in 2008, figures that should be confirmed this week.

The chill in the Italian real estate market has been felt most strongly in the provinces rather than the large cities and towns and confirms the downturn in Italy’s residential property sector.

The first signs of that downturn appeared in 2007, with the year’s 806,225 transactions down 4.6 per cent on the year before.

And despite 2008 being a year to mostly forget, industry experts are braced for 2009 to be even more challenging, with anything up to 10 per cent fewer transactions.

The troubled times have affected the lower middle-classes the most, and it is they overwhelmingly who are having to abandon their dreams of home ownership.

As obtaining a home loan has become more difficult, single-income families, young people, temporary workers and immigrants are increasingly being priced out of Italy’s housing market.

A crucial factor has been Italian credit organisations’ increasing reluctance to lend anything above 60-70 per cent of home value.

Mario Breglia, head of Scenari Immobiliari, says: “The slowdown in the housing market credit system has slashed by a third the numbers of immigrant workers buying homes and has halved purchases among households where one person is a temporary worker.

So what role will the Government’s so-called housing revolution play, under which property owners will be able to increase by 20 percent the size/volume of apartments? Nomisma analyst  Luca Dondi fears that homeowners committing resources to expand their properties could lead to a further tightening of the demand to purchase homes and thus see a further drop in sales volumes..

Alessandro Ghisolfi of property group Ubh says: “Many families who had planned home improvements could find a viable alternative in the restructuring of their homes by extending the living space by 20 percent. The typical costs involved are less than 50 percent compared with the average costs of acquiring a new home.”

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