ITALIAN JOB – DIFFERENT EUROZONE ECONOMY SAME PROPERTY PRICE DECLINE

As with many of its Southern European neighbours Italy has seen a decline in its housing price index. After 5 years of continual property price decline it is now beginning to slow, however in this period prices fell by 20%. A significant fall but not as dramatic as some neighbouring countries which we have covered previously. By the end of this year prices will fall by another 2% but from 2016 onwards, providing the economy does not worsen, we will begin to see small incremental rises.

 

(Italy House Price Index 2011-2014)

As with many countries prior to 2008 the property market in Italy was overheated with prices rising by 85% from 2000-2008. Simply, this drastic increase was not sustainable as we have seen across the Eurozone. Italy was one of the first to feel the brunt of the global financial crisis of 2008, despite it being the Eurozone’s third largest economy. The country has seen declining GDP whilst public debt increased and reached 137% of GDP in 2014. The outlook looks better for the country moving forward and the IMF predict small incremental increases in economic performance from 2016 onwards.

Currently, the mortgage market in Italy is underdeveloped, this is due to Banks being extremely cautious with lending. Their caution is justified given the loan recovery process is against lenders and from the time of initial default the recovery process can take 5 to 7 years.

Recently however the Italian Government have made the mortgage and borrowing process more favourable and the mortgage market may now develop and become a useful aid in any housing market recovery. Another attribute assisting the property market recovery in Italy is increasing foreign investment. Investors from UK and USA account for 32% of foreign property investment alone. The favourable sterling to Euro exchange rate at present is allowing borrowers to purchase properties at a higher value and the average property request from a UK investor in Italy is now at €324,000.

Our enquiries from Italy are not as frequent as Spain, but nonetheless there are borrowers who have fallen foul to declining property prices in the country. If this applies to you or anyone you know then please contact EU Property Solutions. One of our advisors will be happy to discuss your situation and arrange a free initial consultation at a time to suit you. So give us a call on +44 (0) 330 1241130. We look forward to hearing from you.

James Bell – Director

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