House prices in Italy not the same as number of sales. What can we expect in 2018?

The trends in the number of sales and property prices in Italy are not equal. "The recovery of the residential real estate market since 2014 has returned to the levels they were at prior to the second economic crisis, but in terms of prices there is still a slow decline.”

This was stated by Gianni Guerrieri, Central Director of Omise, during the presentation of the "Residential Real Estate Report 2018", created by the National Observatory on the Real Estate Market from the Tax Agency (Osservatorio del Mercato Immobiliare de la Agenzia delle Entrate or OMI), in collaboration with the Italian Banking Association (Associazione Bancaria Italiana or ABI).

Comparison of sales and prices

While in 2017 the number of sales in the residential sector grew by 4.9% compared to 2016, house prices continued to decline as they have done every year since 2012. From that year onwards, property values began to fall significantly, although at a slower pace in the last two years, as the Report indicates.

If we look at the last three years, it is clear that the residential market is recovering and, although prices are falling, they are slowing down. This decline is undoubtedly one of the causes of the recovery of the number of property transactions, together with the very low level of mortgage rates and the improved economic, employment and income conditions compared to the period 2012 – 2013.

What to expect in the near future

What can we expect soon from the real estate market? On a level playing field, especially in terms of economic developments and interest rates, moderate growth in the housing trade is expected to continue and prices are likely to remain stable.

In the presentation of the Report, Federico Polidoro, manager of the Integrated Services System on economic conditions and consumer prices of the National Institute of Statistics (Istituto Nazionale di Statistica or ISTAT), explained what could happen to house prices in 2018. He explained that, based on data from the last quarter of 2017, if prices stopped changing, the current year would close with -0.1%. This is the change in the housing price index that could take place during 2018. We need to wait and see what happens in the coming months, though.

Guerrieri stressed that: "It is likely that during 2018 the recovery that exists will be further consolidated, with growth rates more or less equal to those of 2017 and with prices that exceed the positive threshold, although always in conditions of stability. In the end, saying -0.1 or saying +0.1 is a statistical error. We are therefore at a sort of plateau, but I am confident that by the end of 2018 we will also be on a positive basis in terms of prices.”

Confedilizia's comment: "people still underestimate what has happened"

Commenting on the data in the Report, Confedilizia President Giorgio Spaziani Testa said, "The data published by the Agenzia delle Entrate, ABI and ISTAT show that the housing market in Italy is still in extreme difficulty. In terms of the number of transactions, the slow recovery of the losses recorded in recent years has not yet reached the levels of 2011, while the main reasons for this recovery (falling prices, lower interest rates, increased bank credit, increased purchase requirements, etc.) should have produced much better results."

He added, "With regard to prices and therefore the value of the savings of Italian households', the situation is even more serious. In fact, ISTAT confirms that Italy is the only European country where house prices have been falling steadily since 2012. Many people still underestimate what has happened since then, but those who live in the real world are well aware of it: property tax on real estate has almost tripled, with all the negative consequences this has for the economy. On this point, can we perhaps read some new recommendations from the EU Commission?”