Italian Real Estate May Finally Get the Boost It's Yearning For

(Bloomberg) -- The real-estate industry, which accounts for 14 percent of Italy’s economy, has never really taken off on the Milan exchange. A plan to extend a popular type of investment instrument to include property stocks may present the spark it’s yearned for.

Ten years after the introduction of real-estate investment trusts in Italy, only about a dozen real-estate companies are listed on the Milan exchange, representing 0.5 percent of the total market capitalization. That compares with more than 3 percent for France, according to data compiled by Bloomberg. The changes are set to take effect as residential sales rebound from years of slump.

Italy’s budget law, currently being debated in parliament, includes measures allowing real-estate companies and SIIQ, the local version of a real estate investment trusts, to become eligible for investment plans, called PIR, which benefit from tax breaks. Italy introduced PIRs a year ago to boost investments in the country’s small and mid-cap stocks and bonds. That helped the FTSE MIB benchmark index outperform larger European peers this year, with a 15 percent increase.

Shares of real-estate companies have begun to anticipate the possible catalyst, outperforming the rest of the market in recent weeks. Beni Stabili SpA Siiq and Immobiliare Grande Distribuzione SIIQ SpA, the biggest, have recently reached a 10-year and a three-year high, respectively.

“The measure would undoubtedly provide a positive boost for the sector, helping it to emerge from the limbo in which it has been for the past few years,” IGD Chief Executive Officer Claudio Albertini said in an interview. “Italy is lagging in terms of listed real-estate companies and the move may help bring in new investors.”

Interest in Italian mid and small-caps remains strong, analysts at Mediobanca SpA said in a Nov. 14 note. Inflows in the new PIR funds could top 9 billion euros ($10.6 billion) in both 2017 and 2018 with the extension of legislation to real estate, the brokerage said.

The measure would boost liquidity in the sector with significant investment flows while also prompting other real-estate companies to list shares, Paolo Crisafi, director general of industry association Assoimmobiliare, said in an interview. “Real estate is one of the pillars of the Italian economy.”

--With assistance from Giovanni Salzano

To contact the reporter on this story: Chiara Remondini in Milan at cremondini@bloomberg.net.

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Marco Bertacche, Angela Cullen

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