EMERGING TRENDS IN THE ITALIAN HOUSING MARKET

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EMERGING TRENDS IN THE ITALIAN HOUSING MARKETFirst attempts to analyse the current Real Estate crisis impact on the Italian context.

Which oncoming market expectations?

Istituto Superiore suiSistemi Territoriali per l’Innovazione

STOCKHOLM 26 JUNE 2009SESSION 5-F

arch. Luisa INGARAMO

arch. Stefania SABATINO (PRESENTER)

dott. Luca D’ACCI

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MAIN QUESTIONContrary to the current uncertain situation, we want to know if in the Italian

housing market there are particular locations in which it is still possible to make an appropriate investment in Real Estate.

The current uncertain situation

The current cycle reversal

The Italian housing market

THE ANALYSIS

RELATED ISSUES

Study n.1: Emerging Trends divided by location and urban position

Study n.2:

Trend of the spatial uniformity of the real estate value

RESULTS and CONCLUSIONS

URBAN RANK

GEOGRAPHICAL POSITION

INNER DISTRICT AREA

OTHER INDEXES: demographic and yield dynamics

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ANALYSIS The current uncertain situation

The Real Estate partecipation in the financial markets greatly increased since 2003 (up to 5,25% in USA)

The mortgage crisis has been contracting the liquid assets The risk inclination of the investors’ profile has been

progressively reducing

INTERNATIONAL FRAMEWORK

ITALIAN CONTEXT The Real Estate partecipation in the financial

markets remained below 4% (UE average level)

the onerous tax system protected our markets

The risk inclination of Italian investors’ has never been high

Different levels in the economic development, depending on “geographical position” and “urban rank”

SHORT TERM FORECASTS*

The Real Estate MIB Index from 2007 to 2009: has been facing a 3-monthly negative variation since

the trend reversed in May 2007

Northern Italy: a growing demand for high quality Real Estate

Small towns: a probable expansion of the housing demand

A preference for investments able to increase the operational revenues

*Sources:

www.scenari-immobiliari.it

www.nomisma.it

www.ubh.it

www.gabetti.it

A DEEP STRUCTURAL CRISIS IN THE INTERNATIONAL ECONOMY

A CONJUNCTURAL AND CYCLIC SLOW DOWN

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Turin excluded, all major cities reached their price peaks in 1973, 1981, 1990 and 2007

Turin and Rome excluded, the metropolitan areas are facing the reversal earlier than the others

Turin, in particular, shows a 2 – 3 year delay in comparison with the national average trend

the smaller cities do not clearly evidence the four Real Estate cycles

2005: a first slow down

Major cities Minor cities (same Regions)

ANALYSIS The current cycle reversal

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ANALYSIS The Italian housing market

It is useful to compare the residential quotations (inflation rate-free) over a long period; It is enables to identify, for each city, 4 Real Estate market cycles; It allows us to understand how the national and international macroeconomic

factors have impacted on the Real Estate market It permits to find out which urban areas have local and specific dynamics

It shows the last 8 year trend (inflation rate-free); It shows the final ascending stretch of the last Real Estate cycle; It allows us to evaluate where the effects of recent urban policies have speeded

up the rise in pricing.

It shows the effects produced by the present Real Estate crisis in the Italian context; values are considered “constant”.

1° Trend Period : 1967 – 2008 (always positive)

2° Trend Period: 2000 – 2008 (predominantly positive)

3° Period: 2007 – 2008 % variation in price quotations (decreasing)

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The % variation between 2007 – 2008 is almost staeady or decreasing

Study n.1: Emerging Trends divided by location and urban position

C S P average C S P average C S P average

NORTH WEST LIGURIA IMPERIA 1088% 1385% 573% 1015% 113% 102% 45% 86% 0% -2% -2% -1% 41.500 4900 3% -20%WEST COAST - CENTRAL CAMPANIA SALERNO 1390% 1045% 601% 1012% 110% 101% 57% 90% -2% -2% -2% -2% 140.580 6000 3% -31%CENTRAL EMILIA ROMAGNA MODENA 1148% 822% 736% 902% 57% 33% 31% 40% 2% 1% 2% 2% 179.937 4500 3% -26%WEST COAST - CENTRAL CAMPANIA NAPOLI 1109% 1147% 355% 870% 120% 145% 83% 116% -2% -2% 8% 1% LAST 10 973.132 9000 3% 1%CENTRAL EMILIA ROMAGNA PARMA 1163% 841% 521% 841% 82% 67% 52% 67% 6% 6% 1% 4% 178.718 5400 3% -28%NORTH EAST TRENTINO ALTO ADIGEBOLZANO 594% 910% 1013% 839% 122% 18% 4% 48% 10% 3% -2% 4% 100.629 3300 3% -6%EAST COAST - CENTRAL MARCHE PESARO 618% 697% 915% 743% 61% 67% 73% 67% 0% 0% 4% 1% 93.488 4100 3% -2%NORTH EAST VENETO VERONA 1179% 476% 328% 661% 93% 70% 32% 65% 9% 19% 7% 11% 264.191 6000 3% -30%NORTH EAST VENETO VENEZIA 901% 299% 644% 615% 71% 70% 99% 80% 11% 13% 0% 8% 268.993 8500 4% 22%WEST COAST - CENTRAL TUSCANY SIENA 560% 1053% 92% 568% 104% 76% 122% 101% -2% -2% 1% -1% 53.881 6000 3% -5%WEST COAST - CENTRAL TUSCANY FIRENZE 691% 447% 542% 560% 99% 75% 74% 83% -2% 0% 1% 0% 364.710 6800 4% -33%NORTH EAST VENETO TREVISO 826% 478% 277% 527% 82% 37% 34% 51% 0% 1% -2% -1% 81.642 5500 3% -27%WEST COAST - CENTRAL TUSCANY GROSSETO 525% 588% 459% 524% 96% 48% 54% 66% -2% 0% 0% -1% 78.823 3600 3% -28%NORTH EAST VENETO PADOVA 659% 538% 356% 518% 61% 58% 24% 48% 0% 1% 3% 1% 210.173 4600 5% 15%NORTH EAST TRENTINO ALTO ADIGETRENTO 572% 459% 376% 469% 97% 51% 38% 62% 5% 8% 7% 6% 112.637 6800 3% -25%NORTH LOMBARDY BRESCIA 475% 435% 409% 440% 49% 32% 31% 37% 2% 7% -2% 2% 189.742 4800 3% -13%EAST COAST - CENTRAL MARCHE ANCONA 534% 357% 426% 439% 35% 51% 52% 46% -2% -2% -2% -2% 101.424 3600 2% -28%NORTH EAST VENETO VICENZA 555% 449% 284% 430% 46% 51% 28% 41% -2% -2% -2% -2% 114.108 4000 4% 0%WEST COAST - CENTRAL TUSCANY LIVORNO 526% 373% 355% 418% 150% 128% 100% 126% 0% 1% 1% 1% 160.949 4600 3% -20%NORTH LOMBARDY MILANO 446% 421% 380% 416% 152% 72% 73% 99% -2% -2% -2% -2% LAST 10 1.299.633 12000 11% -25%

REGIONYIELD

PERFORMANCE 2002 - 2008

YIELD LEVEL 2008

N° INHABIT. MAXIMUM PRICE LEVEL

GEOGRAPHICAL POSITION

DEM.TREND 1967 - 2008 TREND 2000 - 2008 % VAR. 2007 - 2008

MAIN TOWN

The yield performance index during last few

years is almost negative

Top 20 ranking Maximum average increase during last 42 years

ANALYSIS BY GEOGRAPHICAL POSITION: Northern and Central regions show a huge increase during last 42 years;

ANALYSIS BY URBAN RANK:

Venice is the unique city showing a high price level, a good yield performance, and a constant increase in prices for all the three time periods and urban areas.

Milan, Florence and Naples present a negative market performance

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C S P average C S P average C S P average

CENTRAL UMBRIA PERUGIA 268% 208% 245% 240% 2% 50% 56% 36% -2% -2% -2% -2% 163.287 3000 4% 79%SOUTH WEST CALABRIA CATANZARO 312% 176% 107% 198% 112% 7% 26% 49% 3% 4% 6% 4% 94.004 2200 3% 47%NORTH WEST PIEDMONT TORINO 103% 150% 218% 157% 37% 17% 34% 29% 3% 9% 7% 6% 908.263 4000 4% 33%CENTRAL EMILIA ROMAGNA FORLI' 423% 379% 286% 363% 26% 31% 27% 28% -2% -2% -2% -2% 114.683 2800 4% 32%NORTH WEST PIEDMONT CUNEO 243% 174% 105% 174% 34% 27% 35% 32% -2% -2% -2% -2% 54.970 3600 3% 25%NORTH EAST VENETO VENEZIA 901% 299% 644% 615% 71% 70% 99% 80% 11% 13% 0% 8% 268.993 8500 4% 22%ISLANDS SICILY SIRACUSA 129% 130% 84% 114% 9% 12% 21% 14% -2% -2% -2% -2% 123.595 2500 4% 20%NORTH LOMBARDY CREMONA 355% 279% 240% 292% 26% 19% 14% 20% 2% -2% 4% 1% TOP 10 71.998 2700 4% 16%NORTH EAST VENETO PADOVA 659% 538% 356% 518% 61% 58% 24% 48% 0% 1% 3% 1% 210.173 4600 5% 15%SOUTH EAST APULIA FOGGIA 178% 146% 150% 158% 29% 44% 40% 38% -2% -2% -2% -2% 153.469 2700 3% 13%CENTRAL EMILIA ROMAGNA BOLOGNA 291% 375% 475% 380% 54% 53% 53% 53% 5% 3% 4% 4% 372.256 5600 4% 13%ISLANDS SICILY RAGUSA 198% 174% 397% 256% 71% 77% 44% 64% -2% 3% -2% 0% 72.511 1600 4% 12%WEST COAST - CENTRAL CAMPANIA AVELLINO 147% 96% 24% 89% 102% 48% 22% 57% -2% -2% -2% -2% 57.071 3000 3% 12%CENTRAL EMILIA ROMAGNA PIACENZA 401% 382% 239% 341% 47% 35% 27% 36% 6% -2% 8% 4% 100.286 3900 3% 11%SOUTH EAST APULIA LECCE 244% 252% 178% 224% 56% 42% 25% 41% -2% 4% 5% 2% 94.178 2600 4% 10%ISLANDS SICILY MESSINA 120% 157% 88% 121% 44% 42% 9% 32% 1% 7% 4% 4% 243.997 3200 4% 10%SOUTH EAST APULIA BRINDISI 160% 142% 128% 143% 29% 33% 12% 25% 3% -2% -2% 0% 89.979 2000 4% 9%EAST COAST - CENTRAL MARCHE ASCOLI PICENO 204% 262% 254% 240% 27% 28% 27% 27% 0% -2% 4% 1% 51.629 2550 3% 8%NORTH LOMBARDY BERGAMO 314% 249% 228% 264% 40% 57% 31% 43% 5% 5% 3% 4% 115.781 4500 4% 4%NORTH EAST FRIULI VENEZIA GIULIAPORDENONE 291% 395% 450% 379% 19% 27% 29% 25% 0% 3% 4% 2% 50.851 2600 4% 4%ISLANDS SARDINIA SASSARI 286% 202% 130% 206% 53% 50% 45% 49% -2% 3% -2% -1% 129.086 2700 4% 3%

YIELD PERFORMANCE 2002 - 2008

YIELD LEVEL 2008

N° INHABIT. MAXIMUM PRICE LEVEL

GEOGRAPHICAL POSITION

DEM.TREND 1967 - 2008 TREND 2000 - 2008 % VAR. 2007 - 2008

MAIN TOWNREGION

Top 20 ranking Maximum yield performance during last few years

Study n.1: Emerging Trends divided by location and urban position

• Turin excluded, only medium or minor cities show high yield performances

• Venice is the only city showing: an high price level, a good yield performance, and a constant increase in prices for all the three time periods and urban areas.

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In brief, the positive mantaining drivers are:• the absolute profitability level (3-4%);• a high price level (huge increase over the last 40 years);

The standstill or the decline in performance can be attributed to the following:• the metropolitan areas are exposed more than the others to the international markets;• the major cities reached before than the others the saturation in the current cycle of the Real Estate market;

Exceptions:

Rome which registers still growing values (+9% since 2007), and the best performance in the semi-central areas (+13%);

Turin which records the best combined performances The city holds an advantage regarding the trend dynamics: in all the three periods analysed in this study, centre, mid-centre and suburb locations have been constantly increasing.

Venice which has an outstanding performance both in the dynamic yield (+22% since 2002) and in price levels (on average up to 8,500 €/sq m).

TURIN: Venue of 2006 Olimpic Winter Games

ROME: Real Estate values still growing

MILAN: the current slowdown waiting for 2015 EXPO challenge

Genoa: the current drop following 1992 EXPO

THE MAJOR CITIES DECLINE

Study n.1: Emerging Trends divided by location and urban position

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Some minor cities show a combined good performance in:

• dynamic profitability, mostly emerging in the Central and Southern Regions (Perugia, scoring a +79% since 2002, gains the first position, followed by Catanzaro, Cuneo, Siracusa, Trieste, Cremona, Foggia, Piacenza, Bologna, Ragusa, Messina, Padua);

• demographic attractiveness, confirming a good performance in Central and Southern Regions for cities that do not exceed the 150,000 inhabitants (Cremona, Latina, Pescara, Pistoia, Ravenna, Rieti, Viterbo, Vicenza);

Some historical Towns combining:

• Heritage & Amenities (Lecce, Matera, Siena, Caserta, Lucca, Pisa, Ferrara, Parma, Verona, Vicenza, Modena, Perugia, Ravenna, Ragusa and Siracusa);

• branches of Main universities (Milan and Turin Polytechnic, Università Cattolica, etc. as in Piacenza, Cremona, Perugia…).

MINOR CITIES GROWING IN APPEAL

Study n.1: Emerging Trends divided by location and urban position

MESSINA: Old Housing Stock and a Strategic Harbour

CREMONA: Historical city centre hosting an important university branch

PIACENZA: Historical city centre hosting an important university branch

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The spatial uniformity of the Real Estate value is studied by means of two coefficients:

a. Relative Gap = ratio of the difference between the maximum and the minimum value, and the average value among the maximum, the medium and the minimum one

b. Dispersion = ratio between the standard deviation of the values in each area and the average value of every area

Study n.2: Trend of the spatial uniformity of the Real Estate value

a. Relative Gap [RG]

Only Turin shows a strong negative RG

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b. Dispersion increase/decrease between 1997/2005:- Roma=+9%,- Milano=-16%,- Napoli=-10%,- Torino=-30%,- Genova=-20%,- Bologna=+68%,- Firenze=-19%,- Bari=21%.

Study n.2: Trend of the spatial uniformity of the Real Estate value

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MAIN QUESTION

CONCLUSIONS AND EXPECTATIONSCONCLUSIONS AND EXPECTATIONS

Even if it is quite difficult to indicate which cities are expressing at the moment the best performances in the housing Real Estate market we can conclude that:

Minor cities present new and topic opportunities to exploit;

Major cities don’t present a local growth mechanism, are declining and might be re-launched through “great events” as Turin in 2006 or Milan in 2015;

The “Great Event” opportunity (for Major cities) is a risky variable due to the “heavy heritage” fall out effect: see the Genoa decline following the 1992 – Columbus Year Celebration.

Genoa: the current drop following the 1992 Columbus Discovery Anniversary

Contrary to the current uncertain situation, we want to know if in the Italian housing market there are particular locations in which it is still possible to

make an appropriate investment in Real Estate.

MAIN QUESTION

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Many thanks for your attention!

CONTACTS:

Study n. 2

Study n. 1

PRESENTER AND CO-AUTHOR: stefania.sabatino@polito.it

CO-AUTHOR: luisa.ingaramo@polito.it

AUTHOR: lucadacci@gmail.com