(Bloomberg) -- Italy’s home-buying recovery in 2016 will probably be short-lived and won’t pave the way for a much-awaited increase in prices, owners and real-estate experts said.
“Last year’s performance might well be a flash in the pan,” Giorgio Spaziani Testa, chairman of property owners’ association Confedilizia, said Monday at the Rome presentation of a real-estate market report. Home prices kept falling last year and perceptions of lower-than-expected economic and employment growth don’t bode well for the real-estate market outlook, Spaziani said.
Italians hastened to buy first homes in 2016, taking advantage of record-low mortgage rates and depressed residential prices. Total residential sales rose by an annual 18.9 percent to almost 534,000, a performance singled out in the report by the government real-estate agency as an “apparent return to a path of growth.” Transactions fell from an annual peak of 869,000 in 2006 to less than half that figure in 2013. Home prices fell by 14.6 percent in the 2010-2016 period, according to statistics institute Istat.
“Last year’s surprising sales data seem to have produced an excess of enthusiasm and optimism,” Luca Dondi, director general of Bologna-based economic researcher Nomisma, said in an interview. “With that enthusiasm now fading away amid an acknowledgment of the real prospects for growth, income and employment, we expect both a reduced appetite of potential homebuyers and less credit availability.”
For a noticeable part of the Italian population the willingness to buy a home is “somehow overly ambitious” due to low income and job insecurity, meaning banks will fail to grant them a mortgage, Dondi also said. That, combined with an excess in home supply reflected by the lenders’ amount of non-performing loans, will almost certainly bring about a further fall in residential prices this year, Dondi added.
“The slow adjustment in the banking sector” was singled out last week by the European Commission as a downside risk to Italy’s growth prospects in 2017. The nation’s economy is expected to remain below 1 percent this year with unemployment only slightly down to 11.5 percent, the Brussels-based executive arm said in its May 11 spring economic forecasts.
Dondi and other speakers at the Rome presentation agreed that the fear of higher borrowing costs might have also played a role in the home-buying frenzy in 2016.