Housing Markets in Italy after the crisis

Uberto Visconti di Massino ERES 2010, June the 25th , 2010

UVM ERES 2010

Agenda

1. the Real Cycle and residential values

2. The PAST

3. The PRESENT

4. The FUTURE

5. The FUTURE 2: a great potential

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3

the Real Cycle and residential values

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Theory & practice

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Increasing Demand growth Under S

upply

Over S

upply

Decreasing Demand growth

2

4 1

3

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Values (Prices - Sq.

Meters – Built

volumes, etc.)

Expansion Stabilisation Downturn Recovery

Trend Conjuncture

Time

Complete market Cycle

Graph 1.The hypothetical pattern of the real estate cycle and its main four phases.

16 17

Quantity (Sq.

Meters – volumes,

etc.)

Time

Demand

Production

Tendency

OVERSUPPLY

Demand / Production GAP

Overall Trend

Conjuncture

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The PAST

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Past cycles in Italy

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200

350

500

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2005

Prezzi reali (deflazionati) Tendenza lineare di lungo periodo

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I II III VI

Source Scenari Immobiliari - Italy

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What went wrong?

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Prezzi reali (deflazionati) Tendenza lineare di lungo periodo

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0

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350

400

1958

1959

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197619

7719

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0020

0120

0220

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0620

0720

08°

2009

*

2010

*

2011

*

2012

*

2013

*0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

real prices (no inflation) number of sales

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Residential cycle analysis, results

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Res sales and Prices

a correlation

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

N° sales per annum €/sqm average (S-I) + Working scenario

3 years

5 years

1 year

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(residential)

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Overview of the past

(repeating itself?)

Synthesis of the last Cyclical downturns and the forecasted one

downtrn years Quarters Years Quarters Yearsreal values Nominal

Ist 1975 / 77 -8.5% Positive 12 3 0 0

IInd 1983 / 86 -19.0% Positive 16 4 0 0

IIIrd 1993 / 98 -29.4% -10% 24 6 15 5

-18.9% 17 4 5 2

IV 2008 / 11 -10.8% -3.4% 20 5 12 3

Nominaltotal price decline

Average past

real values

Table 1 – the residential cycles in the past 40 years, .

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A market going crazy….

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$

Cpv

t 2005

2004

2002

200120009997

96

94

76

78

79

80

86

87

88

89

90

93

9192

8584

83

82 81

77

75

9598

2003

100

110

120

130

140

150

160

170

180

190

200

210

220

230

240

250

260

270

280

290

300

80 100 120 140 160 180 200

Index of N° of sales transactions

Index ofPrices in constant Lira

Source: data processing by Reddy’s Group spa on data Censis, Agenzia del Territorio - Servizio Statistiche Giudiziarie

The Honeycomb cycle (Residential property in Lombardy)

The Honeycomb cycle (Residential property in Lombardy)

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The PRESENT

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..... after 3 years

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Overview of some current indicators

N° sales

►from 200 to 2007 province 67 to 72% / capitals 33 to 28%)

►The shift towards deurbanization was due to Moving out to buy a better, cheaper home

New stock available outside, + gardens!

►2009: there had been 600k sales: - 15,6% national level (I sem 2009 on I sem 2008)

… of which – 12% on capital cities / -17% in province

►The “back to town” shift province to capitals due to Difficulties in commuting

Lower periphery prices Vs province prices

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..... after 3 years

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Overview of some current indicators

€ - prices

►from 2000 to 2007 prices increasing, then decreasing: National level: – 6,3% (2009/2008)

End 2008 on I sem 2008: -3,6%

I sem 2009 on II sem 2008: -2,7% (decline reducing?)

►Focus on cities: Milan and Florence better than average

lower prices in cities due to inelasticity of new built (province)

►Peripheries versus city centers peripheries loosing more in value: lower quality homes

Less immigrants demand for old homes (in peripher.)

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The FUTURE

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Overlook, a correlation

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Italian GDP and constructons.Euroconstruct onCresme et Al. - Dec 2008

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Real Estate and the Economy

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2007Financial crisis begins (USA from housing mortgages)

2008The Global recession begins (hits Financial and Economic / w orld)

2009End crisis/boost to economy (Equity Investors emerge)

2010Stable Economic conditions(employment/spending increase)

2011Grow th of Economies (employment, spending increase)

2009End financial crisis (natural course of cycle)

2010End of Global recession(markets recover, still low “real” economy)

Upside scenario Downside scenario

2011Stable Economic environment (employment and spending increase)

2009Financial Crisis continues (no positive drivers, externalities)

2010Financial Crisis continues(no positive drivers, externalities)economy)

2011End of Global recession (markets recover, still low “real” economy)spending increase)

2012Stable Economic environment (employment/ spending increase)

Base scenario

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The Italian market (residential)

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Overview

► In general, Demand wise we can have three scenarios. The refer to the economic forecasts :

► if UPSIDE, then ALL TARGETS (residential) will recover in 2010

► if BASE scenario: in 2010 we will have only the “NEED TO BUY” “NEED TO RENT” ones active in the market, and in 2011 ALL TARGETS

► if DOWNTURN, we will have NEED TO BUY in 2011 and ALL TARGETS active in 2012.

(NEED TO BUY= have savings and need more space, more rooms (consolidated families whose children are growing) NO BUY: those who can only rent (young couples, no children), professionals singles, senior couples (still using their old home, empty nesters)

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The market cycle in the current setting : forecasts

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Fonte: nostra elaborazione su fonti varie tra cui Scenari Immobiliari, Banca d’Italia.

DATA - Nov 08 2004 2005 2006 2007 2008° 2009* 2010* 2011* 2012* 2013*

NOMINAL Residential Values Y.o.y. indexY.O.Y. 6,5% 5,2% 5,0% 4,4% 2,7% -1,0% -1,6% -0,6% 1,2% 3,5%

REAL Residential Values indexY.O.Y. 4,2% 3,4% 3,3% 2,5% -0,7% -3,0% -3,5% -2,5% -0,5% 1,5%

Construction Costs indexY.O.Y. 4,2% 4,2% 3,4% 3,7% 2,8% 1,1% 0,9% 1,4% 2,7% 3,0%

C.P.I. Inflation 2,2% 2,0% 2,1% 1,8% 3,4% 2,0% 1,9% 1,9% 1,7% 2,0%

-3,0%

-2,0%

-1,0%

0,0%

1,0%

2,0%

3,0%

4,0%

5,0%

6,0%

7,0%

2004 2005 2006 2007 2008° 2009* 2010* 2011* 2012* 2013*

NOMINAL Residential Values Y.o.y. index Construction Costs index C.P.I. Inflation

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CASE STUDY €/mq/anno €/mq/mese apt 100 mq apt 60 mq rendimento valore

al mese al mese lordo tasse €/mq

1 Abitazioni Popolari comune di Monza (Mz) 5 0,4 40 25 - - 2 Abitazione ACER Emilia, tipologia ERP 15 1,3 130 75 - - 3 caso Parma (E.r.s.) 40 3,3 330 200 3,50% 1.100 4 Milano social housing (FHS) 70 5,8 580 350 3,50% 2.000 5 Milano periferico 110 9,2 920 550 3,50% 3.100 6 Co-Housing semicentro ("Residance") 120 10,0 1.000 600 3,50% 3.400 7 Milano semicentro 160 13,3 1.330 800 3,50% 4.600 8 Milano centro ristrutturato 200 16,7 1.670 1.000 3,50% 5.700

IPOTESI IPOTESI

al netto delle spese

Table 1, Rents : popular (ERP, 1 e 2), sustainable (ERS, in the box, 3 -4), and “free” market

Source: our calculatios on : ACER, Fondazione Cariplo, Co-Housing Venture, Scenari Immobiliari

Whare are we now?

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THE FUTURE 2

What next? “Sustainable” homes

(social housing – Edilizia Privata Sociale) in Italy

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A shift in the residential mindset

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►From 100 B.C. to 1800 Brick and mortars (the roman “insula” to the condo.)

►In 1900 the first revolution Electricity – hydraulics

►2006 – 2020 the second revolution Energy saving and sustainability

►In 2011 the third revolution The ethic side, management and common services.

Institutional investors

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S.H.- What is it? Some cases

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Social Housing 360° - arch. LAURA ROCCAFonte: RoccAtelier (www.roccatelier.it)

E.R.S. a Crema, Fondazione Cariplo, Fondo Abitare Sociale - architetti D2U Fonte: Jacopo della Fontana (www.d2u.it)

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Social Main Street – Bicocca, Milano- arch. DANTE BENINIFonte: studio Urbam – C.d.O.

Concorso Figino (Fond Cariplo) arch. CINO ZUCCHI e Avventura UrbanaFonte: www.avventuraurbana.it

S.H.- What is it? Some cases

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Some models to learn from : Social Housing in the Netherlands

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Social Housing in the Netherlands

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Social Housing in the Netherlands

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Social Housing in the Netherlands

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CONCLUSIONS

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Uberto Visconti di Massino

Milano

Corso Italia, 17

20122 Milano

Tel. 02 00621170

Fax. 02 00621189

Roma

Via XX Settembre, 1

00187 Roma

Tel. 06 42020939

Fax. 06 42020951

www.epf.it

epf@epf.it

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GRAZIE - THANK YOU !