New houses that pile up empty, used properties that don't sell. Times that lengthen and demand now reduced to a flicker. Yes, because whoever sells doesn't go down in price. Those who buy are convinced that prices will drop further and are no longer willing to pay past quotations. So in Milan the market is blocked: in the second quarter of 2012, sales fell by another 10,7%. The market for exclusive homes does not escape flat calm: i.e. properties over one million euros or from 7 thousand euros per square meter or located in well-established luxury areas. Which are usually able to show greater liveliness even in times of crisis. But which today languish with increasingly rarefied transactions: in two years the percentage of properties sold, out of the total offer, has dropped from 24,9% to 7%, according to data from Tirelli&Partners and Nomisma who presented the Observatory on exclusive residences in Milan in the first half of 2012.
“During the first part of 2012, signs of a slight improvement appeared initially compared to what was observed in 2011. These signs disappeared during the second part of the semester”, writes Tirelli. Pure investors are disappearing: investment demand in the first part of 2012 fell to 9% from 13%. And foreign investors, coming only from European countries, are now stuck at 2% since the beginning of the crisis. Those who move homes think at least twice: today 32% of those who bought a home to replace them compared to the previous 40%. On the contrary, those who buy their first home are increasing again: 59% of transactions from 47%.
On the other hand, income generation has also become more difficult. Signing of lease agreements fell to 20,6% of available apartments, half the figure recorded in the first part of 2010. "In the rental market - explains Tirelli&Partners - in theory, it could benefit from the slowdown in the number of sales which leads to moving properties from one segment to another, but the mediocre quality of the properties continues to be the main obstacle in the negotiation phase, so we are witnessing an inexorable contraction in the number of properties leased out of the total placed on the market”.
Leasing and storage times are decidedly high, at 7,5 months and 10,6 months respectively. However, the discount on the final rental has been reduced to 6,3% from 7,8% in the first half of 201. But, as Tirelli points out, this depends on "rentals that have now been declining for some six months". And in the figures of Tirrelli&Partners the first half of 2012 was also characterized by a new contraction in rents: -3,8% on a half-yearly basis (the contraction was -2,2% at the end of 2011). The average gross rental yields in the first half of the year, on the other hand, remained essentially stable between 2,61% and 3,3%.
THE MARKET OF SALES
The criticalities of the trading market concern both supply and demand. On the one hand, the availability of exclusive quality residences on the Milan market is chronically non-existent but sellers are still anchored to outdated valuations, on the other, buyers wait for prices to drop. Result that today it takes about 14 months to place a property, however luxury it is, compared to 7,5 in the first half of 2010. The transactions that are closed bring home a discount that is now tripled compared to two years ago. In the first half of 2012 prices fell overall by 2,3% and 3,2% on an annual basis, with the decreases involving both the minimum and maximum levels. But to indicate the difficulties of the market also for luxury is above all the decline in top prices.
”The most significant drop – writes Tirelli&Partners – is that recorded by top prices which drop in all areas except Duse. The average price went from 16.500 euro/sqm to 14.700 euro/sqm and from 7,27 million to 6,3 million. A clear indication from the owners of the trophy assets (particularly important and valuable properties ed) that in the face of a very difficult market they decide to withdraw their assets from sale”. The primacy of prices remains in the Quadrilatero and Venezia-Duse areas where prices reach an average of 17.500 and 13.900 euro/sqm. But these are values that are currently struggling to meet demand. In terms of requests, even the Historic Center is struggling for issues related to the livability of the area. The most requested locations are, once again, Brera-Garibaldi and, subsequently, the Magenta area.
However, there are those who continue to buy and sell. “Faced with a difficult market, in the first part of 2012 the potential customers of the highest range remain active - writes Tirelli&Partners - The average size of the request has increased, settling between 190 and 240 m130 with at least three bedrooms Bed. As always, the upper floors are preferred to the point that it is increasingly difficult to visit the apartments on the first floor". Further essential features are a parking space or a garage and external surfaces. The period and silent context complete the picture, as well as an excellent state of repair. On the rental side, preferences go to small sizes, between 150 and 2 mXNUMX with XNUMX bedrooms. The most requested locations are always Brera-Garibaldi and Magenta and then the Quadrilatero.
EXPERT ADVICE FOR SELLING AND RENT
But be careful, the crisis has debunked the old creed of must-have areas: it is not said that a house in Brera has the prices of the area just for being there. On the contrary, it is possible that residual areas (outside the consolidated areas of interest) can even reach 9 thousand euros per square meter. As the experts explain, today there are more and more houses in the best areas that are impossible to sell. In the first place, therefore, attention to the selection. In particular, both on the sale and rental front, with the crisis the state of the apartment is increasingly decisive compared to the past.
“The availability of exclusive quality residences – writes Tirelli&Partners – is chronically insufficient. Within the more consolidated areas it is increasingly difficult to find properties for sale while in the remaining areas, even in a context of greater availability, the state of repair and inadequate functionality represent a brake on the closure of negotiations”. Thus the market is split in two and the average values are the result of two completely opposite situations: on the one hand quality properties that are sold and on the other properties that remain on the market for years.
More and more out of the market, for example, are the old family properties that are put up for sale to be completely restored. The state of maintenance becomes even more crucial in the rental market where, explains Tirelli, "the demand for prestigious residences has remained, at the city level, rather small and increasingly interested in apartments in conditions of immediate habitability, renovated and possibly furnished" . A trend so strong that Tirelli&Partners has just set up a company dedicated to renovating the homes of customers who want to rent or value the property's prices.
In any case, for those who want to close the deal by unlocking the seller's resistance to the price, it is useful to do the first move. "The meeting between the two parties in a short time - explains Tirelli - takes place only if the buyer is the first to expose himself with his offer, even if this is lower than the requested price". And in this case the psychological strength of a written offer should not be underestimated. Thus, for those who believe in brick and mortar, the experts suggest being a "first mover" and moving against the tide: it's time to buy by making the first offer, perhaps incorporating the expectations of further price reductions. Only in this way will the market unlock for Tirelli&Partners.
“We believe that the second half of 2012 may see a partial return of interest in the buying and selling market from demand that has been extremely reflexive for some time now - Tirelli points out - This phenomenon will be all the greater the more buyers are willing to make the first move in the negotiation by proposing the their purchase price. Faced with owners who keep their claims firm thus adopting a wait-and-see strategy, any liability of potential buyers will not achieve any result other than perpetuating the state of the market that we have been observing for many semesters".
Attachments: Observatory exclusive residences.pdf
