However, 2020 which ended in a less negative way than expected should not lead us to overlook the alarm bells that come above all from housing demand and the mortgage market. This is essentially the thesis of Nomisma's first 2021 Real Estate Market Observatory, with forecasts up to 2023.
In general, the global macroeconomic situation, according to Nomisma's chief economist Lucio Poma, heralds a recovery. What must be considered, however, is the level of employment, which fell by 2% in 2020 (minus 440 thousand
units), reaching 58%, and with it the lower disposable income. Furthermore, Poma specifies, the fact that the recovery has actually taken shape not in a V shape but in a K shape - that is, with the most innovative entities consolidated and recovering but with the less strong ones in sharp decline - is implying the widening of wealth disparities, especially in the regions of Northern Italy.
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Italian real estate market and access to credit
What does this mean for the Italian real estate market? According to Nomisma CEO Luca Dondi, the macroeconomic situation seems to be only partially reflected in purchasing intentions, which appear to remain practically
unchanged.
The same goes for the dependence of demand on access to credit: 8 out of 10 families in fact take out a mortgage contract to purchase a new home. They do it to safeguard their financial situation
which, given the particularly low rates, is not so affected by the expense of purchasing a home.
In general, the forms of government support, even if partial, are still sufficient to avoid the perception of a desperate, even if serious, situation. Which favored the maintenance of purchasing intentions.
However, we need to understand how sustainable the situation will be in the future, when mortgage moratoriums and suspension of layoffs will cease. In fact, according to Dondi, there are already situations in place that require attention as if they were alarm bells. Already currently, for example, the level of non-performing loans is 1.4%, which in itself is not a worrying figure but is on the rise.
However, banking activity is favorable to the real estate market, also thanks to the "cleaning" of non-performing assets in recent years. Mortgage disbursements, even if with a reasonable percentage of subrogations and substitutions, result
to 50.2 billion euros in 2020.
Which translates into support for real estate sales, which in 2020 fell by only 7.7%, reaching 554 thousand, thanks also to the provincial markets, which recorded growth of around 10%. Also important is the component of purchases without debt, coming from situations of unchanged wealth and not always motivated by an investment to generate income but by simple "parking" of one's resources
financial assets in an asset which, although it returned less in 2020, nevertheless proved to be less volatile than other assets, configuring itself as a good safe haven asset.
In the 13 large cities, however, the Nomisma performance index sees a return to negative, although within the cities monitored there are some areas that are growing despite everything. As regards the intermediate cities
the drop in performance is significant but remains in positive territory.
Real estate prices and sales, the sentiment of operators
Home sales prices recorded a nominal decline between 0.7% (intermediate cities) and 2.0% (large cities) in 2020. The sentiment of operators is stable regarding the trend of sales
residential, however unbalanced, according to Nomisma project manager Elena Molignoni, towards an improvement in the northern regions and towards a worsening in the southern regions.
When asked "during 2021 the sales market will recover the levels of activity lost in 2020", 49.8% of respondents believe that this will occur compared to 50.2% who consider it unlikely.
The imbalance in supply towards obtaining higher prices will then be evident: if the prices do not satisfy the sellers, according to the Nomisma survey, the properties will be withdrawn from the market while waiting for better times,
while the demand for those with high spending resources will continue to be lively, to the detriment of that for those with lower spending resources.
In short, a polarization of the real estate market is emerging. According to Molignoni, the general decline in housing demand is due to the combination of an increase in savings and a decline in family incomes.
Looking closely, however, we notice a liveliness in the high-end market, explained by the fact that 20% of the Italian population holds 70% of the wealth, being able to afford purchases in an increasingly exclusive market.
This trend is also seen in real estate prices: in the face of a general drop in housing prices, the drop in maximum prices is lower than that in minimum prices. And there are even increases in the prices of
new and valuable buildings especially in Rome, Turin and Milan.
Non-residential real estate market
As regards the non-residential segment, the impact of the pandemic on offices and shops is evident, with a decline in 2020 of 7.6% compared to 2019 for properties intended for economic activities.
However, the purchase of non-residential properties remains in the saddle, often for residential redevelopment purposes which however leads to not always optimal results, in the opinion of the CEO of Nomisma.
Total rates of return for non-residential real estate are falling towards zero although they remain in positive territory. The non-residential performance index of large cities and intermediate cities is confirmed
stably in negative territory.
As regards corporate investments, in 2020 the share of foreign capital fell to 50% in favor of the share of national investors who kept the market dynamic. Prime yields, especially in cities like
Milan, have remained stable, but also in this case it is necessary to understand how sustainable fees and returns can be in a situation in which smart working and remote university lessons will continue to hold
the vacancy rate is high.
Real estate forecast 2021-2023
What forecasts for the next two years? The demand and sales situation, according to Dondi, should remain substantially unchanged; In fact, at the moment there is no sign of a worsening of the crisis situation of which we can see some emerging signs, which should however not be underestimated.
The trend of sales, explains Dondi, could prove similar to the trend of 2020, remaining below 600 thousand transactions. Any upward or downward variations must obviously be related to the evolution of the situation
macroeconomics and economic policies.
On the residential and non-residential prices front between now and 2023, according to Nomisma the situation is essentially stable if not slightly negative, which confirms the chiaroscuro in which the real estate market is moving despite
the climate of uncertainty linked to the evolution of the pandemic and the end of government support.
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