After times of relative stability and seven years of uninterrupted growth in a large part of the Union, one is in sight decline in the real estate market marked by a marked decline in sales and valuations. The phenomenon, recorded to date especially in Sweden where the values per square meter have already dropped by 15%, divides analysts and at the moment there is no univocity in reading these signals.
On the one hand they might be specter of a new crisis like that of 2008 on the other it could be a physiological flexion without weight consequences.
Il bubble risk therefore it cannot be excluded and what is worrying above all is one fact: it is above all Germany and the Netherlands that are feeling the effects of these uncertainties and fragility, emblems of soundness in public finances. Vulnerabilities, at this point it is necessary to ask, could soon also affect theItalia and if so, to what extent?
Minus sign for real estate: the sectors most at risk
In the EU in the last three months of last year a negative sign was recorded for the growth of the entire sector and the real estate sectors that today we could consider most at risk are those of the commercial real estate i.e. skyscrapers, offices and hypermarkets.
In fact, compared to the residential sector, the commercial sector has recently seen decisive and incisive contractions with soaring prices and a strong impact of smart working which has notoriously decreased the need for shared company spaces. The latest macro-prudential bulletin also speaks about it at length European Central Bank which between October and December 2022 reports that transactions fell by 44% in the annual comparison, while in the previous two quarters prices had already fallen by 14%.
What’s more, the commercial field is dominated by investment funds exposed to sudden changes in the scenario whose assets have exploded.
Ultimately the ECB recommends adopt strategies that reduce “the risks to financial stability”. These measures would translate into activities aimed at:
- strengthen liquidity management tools, with limits on the withdrawal of funds;
- regulatory encouragement of closed-ended funds, whose investors cannot withdraw prematurely.
Only problem? Frankfurt is well aware of how these recommendations have already been made in the past without giving rise to any follow-up.
There are some worrying notes, however, also with respect to the value of the houses. This is highlighted by a recent study by the Monetary Fund which speaks of unweighted increases:
“There are growing signs of overvaluation in the European real estate market, between 15 and 20 percent in most countries.”
Italy could save itself
As mentioned, Italy at the moment does not fall within the areas of greatest alert and interest and, on the contrary, seems to be demonstrating an unprecedented – and unexpected – stability.
As reported by Republic, even our country on the residential front is suffering from eroded wages and the surge in mortgages as well as the selectivity of the banks but no other significant growth has been recorded. The consulting firm Nomisma launches only one note for this year, namely the one relating to sales declining by 14% – compared to the record of 2022.
Another point in favor of this first overview is that no further declines are expected, so much so Luca Dondithe company’s managing director, explains how “in Italy real estate dynamics are always a bit deferred and rounded off, for better or for worse: assets are safeguarded at the expense of market accessibility”.
When asked about the commercial brick he comments:
“I don’t see a need to liquidate assets and then resort to significant writedowns. I don’t see any meltdowns in sight.”
Ultimately, his explanation is as follows:
“We are overcoming the anomalous euphoria of Covid, but reaching physiological levels”.