The Italian property market looks to have turned the same corner that many established markets did in the second half of last year, the corner onto the road leading to recovery.
Un the final quarter of 2009, property transactions declined by just 0.4% year on year, according to the latest housing market review from the Agenzia del Toro (Italian Land Registry). This is compared to a year on year drop of 18.6% in the first quarter. In the second half of 2009, Italian property prices were just 0.2% lower than in the first half, and just 0.7% lower than the second half of 2008.
This is hardly surprising. The trend in 2009 was buyers going for safety and stability. This made property markets where prices had held up well against the downturn much more popular than those that hadn’t.
Italian property prices fell by among the smallest amount in Europe throughout the entire course of the crisis. In fact, in Knight Frank’s index in Q2 of last year, Italy was the 10th best performing market in Europe (16th in the world), with prices down just 3.5% on Q2 of 2008. The same index in Q3 showed prices were still down only 3.5% year on year, by which time the market was clearly already on the turn.
Italy is a strange one though. The other markets that have seen prices holding have tended to fit certain criteria:
In economies that have not endured a severe recession, and, in some of these places, an economic stimulus has been far more than was needed, creating a liquidity surge.
Italy has endured a severe recession, and its stimulus has tended to be very measured. For this reason, when Italian property prices do start to grow now, going forward there will be no need for anyone to fear that a bubble is forming.
In terms of foreign demand, Italy may well suffer in the short term, as buyers look for bargains in the markets where prices have been slashed. Whether it does or not, Italy has now proven that the management of its property market is capable of preventing speculative bubbles, and this makes it a stable long-term growth market. This will do it more good than harm over the long term.
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