Italy’s property market has ground to a halt, as have the vast majority of sectors in a country that up until a few days ago was the worst hit by this global pandemic (now only surpassed by the US).
Estate agencies will remain closed for the foreseeable future and house viewings aren’t allowed, despite the gradual loosening of restrictions for some industries as of Tuesday April 13th.
Real estate agents say some 20,000 property sales in Italy have already been cancelled due to the coronavirus outbreak.
“Sometimes people have changed their mind and prefer to stay with their parents… or they have lost their job and the bank will not longer give them a loan,” said Chiara Ippoliti, an estate agent with Link in Rome.
So the question for many would-be houseowners – especially those with enough financial and employment stability to still consider it – is whether Italy’s unavoidable economic recession will result in house prices plummeting in the months to come.
Not quite, say the experts.
Italian financial consultancy firm Nomisma has studied current trends and published its results in its first report on Italy’s 2020 Real Estate Market.
The Bologna-based research company concluded that the Italian property market’s situation is undoubtedly very serious, with a drop in turnover of €9 billion to €22 billion compared to last year’s results for this first quarter.
Their estimates suggest it will take three years for the country’s property market to recover, racking up a total of €122 billion in losses.
Nomisma also stressed that in 2020 there will be a fall of between 15 percent and 30 percent in disbursement of mortgages, all the fees and taxes the solicitor has to pay out to other organisations as part of the house-buying process.
“The real estate market is deeply linked to the trend in employment,” they’re quoted as saying in Vanity Fair’s Italy edition.
“The more unemployment and layoffs increase, the fewer families will buy houses.”
Before the outbreak of Covid-19 in Italy, Nomisma expected the unemployment rate to fall below 10 percent in 2020, but now the joblessness forecast is between 11 percent and 12.4 percent with a tendency to worsen in the following years up to over 13 percent in 2022.
This consequently means there will likely be a sharp drop in the real estate market for residential homes – between 50,000 and 120,000 fewer sales – in contrast with the 650,000 purchases that were expected before the pandemic.
The figure represents an overall fall in the property market of between 8 and 18 percent.
So with all this in mind, is it actually possible that house prices won’t drop?
Nomisma believes there will be a fall in prices, just not as dramatic as the drop in sales, at least not in the short term.
Property renting and buying platform Idealista.com reported in early April that the effects of the coronavirus crisis have yet to be noticed on the market, although they warned the next quarter will probably shed more light on the situation.
According to their data from the first quarter of 2020, house prices across Italy dropped by 0.4 percent, with the average price for second-hand properties now standing at €1,699 per square meter (annual decrease of 2 percent).
“Now that Italians have spent weeks confined in old houses or properties without balconies, their prospects for what constitutes a good family investment will change,” Mario Breglia, President of Scenari Immobiliari (Real Estate Scenarios), told Wall Street Italia.
“Rather than a new SUV model, they'll think it's better to buy a house with an extra room.
“The demand for homes, which has long been there, will grow and will need properties (new or refurbished) that are suitable for the times, high quality properties capable of offering a safe and healthy living and working environment.”
For those still intrigued by the prospect of buying an Italian property at a discount, it’s worth noting that viewings in person may not be possible for a while, with one option that will perhaps become more common being virtual viewing.
How about you? Would you buy a home without seeing it in the flesh?