A sharp decline in sales compared to last year and a real collapse in mortgages. A double whammy confirming the negative moment of the Italian real estate market: buying a house is no longer so easy due to the crisis that can cause multiple and large-scale effects on the sector. A “domino effect” on banks that could endanger the entire financial system. The causes, effects and possible solutions we analyze together with Notary Flavia Fiocchi.
decline in sales
Let’s start with the numbers. Istat’s latest data on real estate sales for the first quarter of 2023 shows a decrease of 5 percent compared to the previous quarter and 11 percent on an annual basis. A contraction reflected in every geographical region of the country except the North-East (North-West -11.3%. South -4.7%, Center -4.3%, Islands -2.2%). 1% growth. With the first quarter of 2022, the difference is even larger: Real estate transactions decreased by 11.6 percent in the housing sector, while they increased by 1.6 percent in the economic sector. The decline on an annual basis concerns the entire country without exception: North-West -16.5%, Center -16.0%, North-East -7.8%, Islands -4.9% and South -4.6%. The decline in housing sales concerns both small and large centers (-18.3% and -6.4% respectively).
A negative trend, reflecting the trend observed by Istat in the third and fourth quarters of last year: “According to the Institute of Statistics’ interpretation in the report, after eight consecutive quarters of growth recorded between the third quarter of 2020 and the second quarter of 2022” The last three were mainly It shows a contraction caused by housing, which is the locomotive sector of the entire real estate market. Mortgages, financing and other liabilities, along with the creation of real estate mortgages, project a quarterly downward trend; trend and cyclical, observed from the second quarter of 2022. The decline becomes more intense in the third and fourth quarters of 2022, reaching the most pronounced negative changes in the first quarter of 2023, after those already highlighted in the second quarter of 2023. 2020. This dynamic stands out compared to both the previous quarter and the same quarter in 2022.”
mortgage collapse
Experts are worried about the decline in sales as well as the literal collapse of mortgages and financing. According to the data of the National Council of Notaries for the first half of 2023, there was an 8.7 percent decrease in housing sales in Italy in the first six months of the year (from 303 thousand 375 to 277 thousand 52) compared to the same period of 2022. In addition, mortgages for housing purchases in the first half of 2023 decreased by 29.5 percent compared to the first half of 2022. “We read in the notary document, the decrease in bank loans in the first quarter of 2023 has been realized so far.” In the second quarter, it will be even stronger, with a decrease of 32.6% and 25.9%. The trend of a double-digit decrease in mortgages issued (-29.5%) compared to a decrease in sales (-8.7%) continues, highlighting how the increase in interest rates has led people to use their capital more than other forms of financing. The decrease in sales is clearly visible in large cities: (Milan -8.4%; Turin -3.4%; Verona -3.7%; Bologna -4.6%; Florence -10.3%; Rome – 9%, 6%; Naples -7.3% ; Palermo -0.3%; Bari -12.4%, also the collapse of issued mortgages: -26.4% in Milan; -31.5% in Turin; -25.6% in Verona; Bologna -30%; Bologna -32.6%; Rome -29.1%; Naples -31.4%; Palermo -33.6%; Bari -28%.
ECB’s alarm
A worrying event that does not only concern Italy, as evidenced by the alarm raised by the European Central Bank with its Frankfurt experts calling on governments to take countermeasures: “Residential and commercial properties entered recession in mid-2022. Weak profitability” expectations, banks exposed to the commercial real estate market creates greater downside risks to their portfolios.” High interest rates, which increased mortgage costs for families and businesses, ultimately reduced sales and lowered prices. The European Central Bank report also warns of the possible effects of a significant weakening in the labor market, which “could pose a significant risk to residential real estate portfolios, and even if banks have less exposure to commercial real estate markets, losses in this segment could have a negative impact.” “A factor that amplifies the situation in the event of a broader shock that would strongly affect financial companies, from investment funds to insurance companies.”
2023 predictions
Turning to Italy, according to the estimates of the National Council of Notaries, the decline in the market for 2023 is expected to be around 10.5%. “We read in the report that when the difference between first and second homes purchased by private individuals and businesses is analyzed, the decline is generalized, but there is an important fact that we must underline: the second home market among private individuals remains afloat. In particular, even the percentage of first home purchases by private individuals 13.8, and there was a 32.3 percent decrease in first business homes. There is a 15.3 percent decrease in second home purchases by businesses, but in this case it is clear that the number of sales is 2.5 compared to the sales of first business homes (18,515 properties). times higher (equal to 43,798 properties)”. A decrease of -23.8% is expected in mortgage loans; This contraction will be much higher than the contraction in sales and will be caused, above all, by the increase in interest rates compared to 2022.
Causes, consequences and solutions
So what caused this crisis? We talked about this topic with notary Flavia Fiocchi, member of the national council responsible for communications and notary statistical data – Notartel Councilor: “The real estate market is clearly slowing down and is strongly affected by the dizzying growth in mortgage interest rates. The two phenomena are close to each other. Often home buyers do this with financing “But if these cannot be achieved, sales are automatically blocked. It is not a coincidence that the second home market, which is generally purchased for investment purposes, is in this market. It was the city least affected by the crisis, and positive figures were even recorded in some cities.”
Approximately 80% of Italians own property; This confirms that “brick” is still one of the more certain investments. However, as confirmed Today According to Flavia Fiocchi of the National Council of Notaries, the forecasts for the end of 2023 are not at all rosy: “In the first six months of the year, sales fell by 8.7% and mortgages fell by 25.9%; these figures are expected to increase. Based on the available data, based on statistical analysis According to, the ever-increasing increase in these estimates leads us to think: high mortgage prices are one of the main obstacles. Salaries are not increasing, but mortgage rates are increasing, which makes it difficult for many citizens to cope with the purchase and at the same time ensure daily survival”.
“High rates – added Flavia Fiocchi – hinder access to mortgages, especially for certain categories. It’s not just young people, in fact the age group that recorded the most impressive decline, exceeding 50%, was those over 65.” .
Negative data and bearish forecasts in a period of complete uncertainty affected by the conflicts that have erupted in recent years. So what can be done to reverse this trend and stimulate the real estate market? “While we wait for the rise in mortgage interest rates to stop – this factor also largely depends on what is happening on the global stage – various measures can be implemented to promote access to finance and contribute to increased sales,” said Flavia Fiocchi. At the Congress of Notaries in Rome last month, we outlined various proposals on the subject to many politicians present, starting with a proposal for a new public housing construction plan that would allow access to housing for mostly young and less well-off people. “Clearly, in the context in which we find ourselves, public intervention is required, aimed not only at reviving the sector and solving housing crisis situations, but also at preserving the territory.”
“One of our proposals in this direction – added the notary – envisages a virtuous intergenerational agreement that could ensure less depletion of the region. The package also envisages interventions to save land and buildings, the introduction of more subsidized construction agreements and making them more efficient. Better organized When we analyzed the data, we realized that a large part of the Italian population (more than 24% of people over 65) consists of older people and in most cases live alone, so we also considered the silver co-housing solution, with complete freedom of spaces coexistence or sharing; this should be protected by contract and encouraged by tax deductions, in accordance with the needs and rights of all subjects involved, and enable the notary to provide any necessary technical support. “These are ideas, concrete proposals to start working on,” said Flavia Fiocchi.
The numbers speak clearly and ring an alarm bell. If the right precautions are not taken, we run the risk of the “brick” falling on us.
Continue reading Today.it…
Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
