Negative prospects for the real estate market in the post-Coronavirus. This is what Nomisma predicts which, in its 2020 Observatory, estimated a drop in prices in the sector between -1,3% and -4% for the two-year period 2020-2021.
The Bologna-based company has hypothesized two different recessionary scenarios. For the corporate segment, in the less negative scenario, a cumulative decline is expected at the end of the next three years of 278 thousand residential transactions (of which 48,4 thousand in 2020) e 9,4 billion of invested capital (of which 2,6 billion in 2020). In the worst case the meltdown would amount to 587 thousand units (almost 119 thousand in 2020) e 18,3 billion euros of invested capital (of which 5,8 billion in 2020).
The predictions are not better for the residential sector, in which a loss is estimated between i 54,5 and 113 billion euros in turnover (between 9,2 and 22,1 billion euros in 2020 depending on the scenario). On the other hand, a timid attenuation of the decline is expected for 2022.
Among the factors that will slow down the recovery - underlines the company - there will be on the one hand the inability of real estate values to adapt to a changing context, on the other the priority of Italian families to increase their savings, for preventive purposes, in the event of further economic setbacks.
A dramatic scenario, clearly in contrast with the results recorded in 2019. According to the CEO of Nomisma, Luca Dondi, until a few weeks ago, the potential purchase demand was such as to quadruple the size of the residential market, albeit with a strong dependence on bank credit (an element of fragility that has always linked the real estate sector to the Italian economy). However, credit was supported by extraordinarily low interest rates, a decline in bank non-performing loans and the consequent impulse for subrogations and replacements of mortgages which made borrowing less expensive.
A result supported by the increase in mortgage applications, exceeding 600 residential transactions. This, thanks also to the recovery of the dynamics of prices, with Milan leading the way, the more dynamic urban contexts towards the ascent and the intermediate centers on the right track.
As far as corporate real estate investments are concerned, the situation appears more complex. Until shortly before the pandemic, the corporate segment showed strong dynamism: during 2019 investments had reached the record amount of 12,3 billion, with a European incidence of 4%.
The results obtained since last year, however, become irrelevant for understanding the future dynamics of both the Italian economy and the real estate market. This is because the virus hit a system that was already showing symptoms of the disease.
Let's take a step back. The Italian economy was already marked by the recession even before the viral onset, therefore the pandemic has ravaged an already very weak country. The global crisis began with the slowdown of the Chinese economy which caused a drop in the price of copper and an increase in the price of gold (which has become a safe haven), indicating an expectation of a slowdown in industrial activity.
Then the spread of the virus began. And as if that weren't enough, she added the crisis of the Opec plus cartel, leading to the collapse of oil prices and Russia's exit from the agreement, after Saudi Arabia decided to increase its production. A strategic move, to grab the few market shares that will remain active.
What happened with oil will happen to any consumer good. Firms will cut prices to grab market shares, which are increasingly small due to the unemployment and wage cuts, which will influence consumer choices such as the purchase of a home. This will change the economic geography, leading our country in deflation.
At the same time, the Italian productive forces will have to be strong and hold their ground, to prevent potential foreign competitors from taking over and further aggravating the consequences. However, in this dramatic situation, a key role will be played by finance, which will have to support an incredibly fragile credit demand.
