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House Prices fall in Italy
Italy is the only member state to have seen house prices shrink last year. It was revealed by Eurostat which reported that house prices across the rest of Europe have risen by more than 10% since 2010.
Between 2010 and 2017, house prices across the EU grew by an average of 11%. They shrank only in 2009 as a result of the financial crisis to start growing again in 2014.
Some countries saw a massive price increase during the seven-year period included in the report. The most significant increases were in Estonia (+73 %), Sweden (+56 %) and Austria (+49 %), while in Spain, Italy and Cyprus, prices dropped by 17%, 15 % and 9 % respectively.
However, house prices in Spain and Cyprus started to grow again in 2014 and 2016, but Italy has continued to lag behind and in 2017 was the only country in the EU to record another drop estimated at 0.8%.
The data is confirmed by the European Construction Sector Observatory’s June 2018 report according to which the number of Italian construction companies fell by 8.9% between 2010 and 2016, and production dropped by nearly a third over that same period. This downwards trend is continuing as also in the third quarter of last year house prices dropped by 0.5 percent.
The decreasing price of properties is extremely relevant in Italy because 72 percent of Italians own their own property, this means that homeowners were damaged by the decreased value of their house as values drops 23 per cent in a decade. Heavy damage was also caused to the construction and property sector.
According to data from Cerved, an Italian business information provider, in 2016, 4.4 percent of construction firms failed, as well as 5.5 percent in 2013, this is a lot higher than the 2.6 percent average across the industry. The country’s banking system, which is still suffering from the 2008 financial crisis was negatively affected by the property market.
In the last years, the manufacturing sector has seen twice the amount of bad loans (loans where repayments are not being made as originally agreed between the borrower and the lender) which may even never be repaid. The property sector now accounts for more corporate bad loans than any other sector, 42 percent compared with 29 percent in 2011.
Homeowners have been reluctant to acknowledge the reality of lower prices. This has fed in to the rising stock of unsold housing that has delayed a recovery of the market. A decade ago, property investors could help the housing sector to recover as they accounted for one in five transactions, however, now they are completely absent from the market.
On the other hand, in Germany prices have become stifling. A large amount of the population in the country’s capital Berlin is outpricing the average earner. Rents have risen by 72 percent over the last 10 years, and the purchase price for an apartment has doubled in the same period.