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Newsletter January 2008
The Italian property market today, Lazio, Italy .
Topic : Real Estate News
Having the eternal city on your doorstep is, no doubt, a magic plus, but what makes the South Pontino 2 hours south from Rome, so appealing is its unexpected and surprising beauty.
Miles and miles of large, white sandy beaches, coastal lakes and rolling hills with secluded farmlands lie from north to south in this ancient bucolic land of sea and mountains. The majestic and idyllic beauty of the Ausoni and Aurunci hills .
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The antique and rural landscape appears at every corner blending into images of mountains with the scent of wild herbs under a clear blue sky over stretches of olive groves. A natural mosaic of rolling hills and the small medieval inland villages where time is only a word. Tiny, traditional rural communities secluded in many ways from the faster rest of the country and of the world.
The South Pontino commence 60 miles south of Rome, where the ancient so called “Campagna Romana”, the long plain terminates against the north-western slopes of Ausoni Mountains. Once there, the Circeo Promontory reigns with Mount Circeo over the blue Tyrrhenian Sea, with its outstanding vistas, luscious Mediterranean green ridges over high cliffs on the sea. Of 70 miles coastline, a long trait of the South Pontino coast here is formed by spectacular high cliffs and medieval towers towering the sea. Charming as it is, this area of Lazio is rather undiscovered by foreign buyers or investors.
The consequence is that good and beautiful properties proliferate. But, what is the situation of the Italian property market today? What are the risks involved in buying in the ‘Bel Paese’ these days? and what is the real estate market in this moment ?
With this January newsletter with we aim to give you an overall idea about buying and investing on a property here in the South Pontino. The newsletter will unveil the reality of the Italian property market at local level but also in relation to relevant matters at international level. We will give an in-depth look at the real estate market of the last 7 years with specific reference to the local reality of the southern Lazio; The most important comments have been formulated both reflecting important national reports by professional organizations such as ‘Nomisma', `Tecnocasa' and `Observatory FIAIP', but especially from the direct observation of the local real estate market of the South Pontino where Casesulweb operates.
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The Italian real estate market has been characterized in the last 6 years by a constant price increase, in particular the market South Pontino increased constantly between 1st January 2001 and 31st December 2006 with values such as between 100% and 200% (for example a property with price 100,00 euros increased to 200,000 – 300,000). At local level the lucky areas have been seaside towns of Gaeta , Sperlonga , Terracina and the expanding little hillside town of Itri right in the territory over 5 miles inland from the beaches. There has been a clear appreciation for the beauty of areas with artistic and historic value to offer. This has resulted in investments going up in value.
The reasons of such increase can be summarized as follows :
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1 ) Physiological growth of the real estate market that it has experienced a period of important prices boost in the years 1992 - 1993 and after that a period of approximately 5 - 6 years of still waters of the market. After a generalized reorganization of the market in the years 1999 - 2000 started a period of steady increase of the prices since 2001 until the end of 2006.
2 ) Opportunity to contract mortgages with favorable interest rates (around 3% variable and 4.5% fixed) and consequently a greater liquidity to invest. This was possible after the introduction of the Euro.
3 ) The real estate market offering the best and most stable opportunity for investment. After 2001 the stock market’s bad performances pushed many small investors to invest in the real estate market offering much better interest rates and peace of mind than bonds.
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MR Gualtiero Tamburini
President of Nomisma | |
Year 2007 has seen the conclusion of such period of increase of the prices. In particular the beginning of 2007 has been characterized from:
1 ) A lessening number of sales with associated lengthening of the average period of sale.
2 ) An increasing expectation from perspective purchasers for a reorganization of the prices.
Such phase of minor reorganization of the prices (approximately 10% less than in mid 2006) has been forecasted and is expected to take place in the first half of the year 2008. After such phase of correction of the prices the South Pontino property will also reflect such changes. Other factors may also contribute to this general trend:
Firstly , a slight rise in interest rates of 2 points percentages to obtain mortgages with fixed rates (approximately 6%) and a forecasted further rise of 0.5% in 2008. In spite of this, mortgages are still released at encouraging terms differently from the period 1993 - 1996 where the mortgages were distributed in Italian Liras with much higher interest rates of around to the 13 - 15%.
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Secondly , the real estate market is still considered a good, stable investment from small investors given also the not great performances of the other fields of investment like the stock exchange, obligations and bonds.
Finally , the local real estate market of the South Pontino exerts its own attractiveness irrespective of economic considerations affecting the general market. The nearness to Rome, its natural beauty and good transport connections attract the interest of local commuters and investors. Recently it has been noticed growing the interest also from foreign purchasers. In fact, it is becoming more and more common to have an international network of neighbors from all over the world.
To complete this report we want to evaluate the property market in relation to the subprime crisis cyclone that affected all the important economic systems worldwide.
Here we report the observations of Mr Gualtiero Tamburini, Nomisma President. Nomisma is one of the most authoritative Italian economic research institutes.
Following the ‘subprime cyclone’ that pulverized billions of euros with repeated crashes of the stock exchange and that in the USA caused a marked crisisi of the real estate market, Mr Tamburini attempts answering some of the most likely questions for investors looking at the Italian property market:
1 ) What are the useful factors that the financial institutions and the Italian and foreign investor alike must consider in relation to the subprime mortgages concern?
(ANSWER): The crisis for Italy is circumscribed and limited by several factors. In fact, differently from more mature and evolved markets (see US and UK), in Italy the distribution of these mortgages did not take place. The traditional precaution in releasing mortgages has turned out to be the best guaranty for the whole Italian real estate market system. This precaution made sure that the country has very little outstanding debts in this specific market. Paradoxically, the whole real estate market benefited from a factor that usually is a constraint of the economic growth: normally a larger economic debt fuels the consumption growth, but the traditional Italian prudence in the concession of mortgages was a strong factor of safety margin and protection for the Italian financial institutions.
2 ) So what are the risks from a subprime’s contagion effect for Italy? About the danger that also the Italian banks, having underwritten financial tools with insolvency in the real estate sector, could restrict the credit release?
(ANSWER): “For the Italian families the risk of a contraction in the distribution of the mortgages it is not likely to happen. For the real estate enterprises it is always worth to remember that local banks must improve the lending appraisal criteria on the base of the solidity of the investments that the entrepreneurs mean to carry out. This is because the Italian banks competence in this field is still inadequate.
At the end, the instinct to select carefully the customers will still prevail, but in no instances is foreseeable a crisis for land banks’ credit concession. In Italy, the effects of Basel II agreements (Revised International Capital Framework), with more focus on prudence and careful lending criteria, are much more likely to impact on lending institutions than the subprime cyclone. In general, smaller entrepreneurs and investors will experience more difficulty in accessing mortgages.”
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The local property market – FOCUS on ITRI
Among some interesting areas of southern Lazio, casesulweb operates in the surroundings of Itri. The village is located in the immediate inland between Gaeta and Sperlonga has developed considerably in the last 10 years from 3.000 inhabitants to nearly 11.000. The reasons are to be found:
1 ) Ideal connection with the most beautiful stretch of coastline in Lazio (approximately 9-10 KM from beaches), and direct railway links to Rome and Naples (approximately 1.45 hours from Rome and 1,15 hours from Naples). Cultural heritage and rich gastronomic traditions accompany the natural beauty of the landscape tied to sea and the Aurunci Mountains Regional Park.
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2 ) Expansive policies by the local administration that has allowed building a good number of villas in the surrounding hills and valleys. Many of these properties were initially built as farming houses and registered as such (deposito agricolo) as most of the properties in this rural area. The legal position of many of these properties was then cleared and legalized with three different ‘condoni edilizi’ in 1984 , 1995 , 2004 year. The condono edilizio is a declaration of conformity according to the building and town planning rules that legalize eventual building illegalities (the registration as farming homes to build larger properties) and a formal declaration that such illegalities have been remitted. Such permissive period ended in 2003 with much more restrictive building laws. These days are necessary to have 30,000 mq. plot of land (beyond the fact that one must be registered as farmer) in order to build in this beautiful rural area.
The approximate average price of a rural villa in the nearness of Itri is traditionally measured in square meters units (including the house walls) for both the house and the land. The actual prices are between € 2,200/3,000 per sq. mt. (for the house) and € 15 up to 40 (for the land). The main factors determining price are :
House price per sq. mt - Greater price for :
a) Villas near to Itri and surroundings in areas well connected with easy access roads to the coast between Gaeta and Sperlonga .
b) Villas on the summit or flank of hills, with panoramic view and greater costs carried out necessary to build a private access road to the property.
c) A legal building permission with registration as family house rather than farming property released as a result of the initial project or healed by a regular condono edilizio conceded by the local council.
d) Overall quality of building materials and the final details and presence of accessories such as handmade travertine fireplace, wooden beams, garden wood stove, covered parking space, swimming pools, mature garden, portico, or other.
House price per sq. mt - Greater price for :
a) Green areas and garden with natural stone paving such as porfido or other materials.
b) Lands cultivated and maintained with care and presence of olives trees or older fruits trees older (centenary olives trees, etc.).
c) Lands situated in areas which are not too steep but changed and leveled with the realization of man-made terraced areas, a very expensive job to do.
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