The Italian property market will inevitably feel the impact of the COVID-19 emergency. An essential part of the national economy, all three relevant sectors – residential, commercial and tourism – have already been badly affected and are likely to feel the effects for months to come.
According to experts, the impact will be nationwide and whilst the region of Lombardy has always been considered one of the richer regions, it won’t be able to rely on its resources, as it has tragically suffered the highest death toll. Consequently, it will be among the last regions to lift its stringent restrictions.
A considerable increase in house sales were registered in Italy in the months prior to the lockdown. This was mainly due to a willingness of Italian banks to provide mortgages, low interest rates, a surge in short-term lets (which made purchasing properties to rent an attractive prospect), and some good deals available throughout the country.
Unsurprisingly, residential property sales suffered a huge decrease in March. According to the Italian market analyst firm Nomisma, 603,000 residential sales were registered in 2019. Nomisma now estimates that there will be a drop in sales of between 40,000 to 110,000 in 2020. Without Coronavirus, Nomisma had anticipated 613,000 residential property sales this year.
Whilst there is some expectation of a considerable fall in Italian property prices (some say by about 50%), this is overstated. It’s true that house prices will fall – most predictions point to prices falling by 1.3% to 4% in 2020/2021, and then increasing (slightly) in 2022. As this is a global crisis, and because in some regions the houses being sold are “second homes” owned by wealthy individuals who can afford to keep these without having to undersell them, saves the residential property market from crashing even further.
Interest from foreign buyers has decreased, due to the borders being closed and the economic uncertainty which has deterred potential investors. The social distancing restrictions have also made the situation more difficult for estate agents, as they are unable to visit properties and speak to the owners and interested buyers.
Clearly, the majority of conveyancing transactions have been put on hold for the time being. Some prospective buyers (although I am told they are in the minority), have pulled out of negotiations completely, even where a verbal agreement had already been made with the seller. It’s important to note that Notaries can and should proceed with the final Deed of Sale. Therefore, if a date was set for completion in this period, it must still go ahead unless it’s impossible for the parties to do so.
However, notwithstanding the current situation, there still appears to be some foreign interest. This is evidenced by an increase in potential buyers researching properties in Italy online to gather as much information as possible before they are able to travel to Italy again to visit the properties in the future.
Some of our contacts are expressing a positive outlook on the future and expect that the current hiatus is temporary. They believe that, once travel restrictions are lifted, there will be a surge of interest from new buyers, as well as from individuals who had previously shown interest in an Italian property but had to halt proceedings. The question here is when this will happen. Currently, we do not have clear guidelines and it is unlikely that restrictions will be lifted equally in all countries at the same time.
The Italian government has adopted measures to protect the most vulnerable individuals and mitigate the economic effects of the crisis. The current restrictions are temporary and life will hopefully return to normal again soon, with individuals wanting to purchase properties abroad once more. However, it’s widely acknowledged that political and financial support is essential for this to happen, and it’s impossible to think that there will not be significant effects.
It’s not just the residential property market that is suffering in Italy. The tourism sector has also been severely affected. In the region of Liguria, around 98% of planned holidays were cancelled during the month of March alone. Whilst it’s not possible to predict how this sector will be further affected in the “high season” ahead, the outlook isn’t very positive at this stage.
The fact that all businesses are currently blocked from continuing their business has meant that commercial property prices have also dropped considerably. This can only be rectified once companies are “open for business” (physically and not just virtually) again.
Thanks to:
Matteo Montanari – Presidente Regionale FIAIP LIGURIA, Federazione Italiana Agenti Immobiliari Professionali – Montanari Immobiliare
Sergio Tomaselli – Estate Agent, Città della Pieve (Umbria)
