The Real Estate Italian Bubble

A short analysis

It’s the Italian real estate market the next bubble that unexpectedly could make fail the Eurozone?

No one is talking about the fact that in Italy the real estate market is surprisingly stable, ok, a little reduction in prices 5-8% maximum compared to the 2009-2011 quotations. Nothing compared to what’s happened in US and the P’I’GS, why?

Should we be worried about that? No, on the contrary, a normalization of the market, we can say a reduction of prices at least of the 30%, could it be extremely sound for the Italian and the Eurozone Economy.

The reason why the real estate market in Italy it’s so stable is due to the fact that the property market is in the hands of the few as corporations, (i.e. Pirelli RE), the Vatican, (i.e. IDSC), Individuals, (i.e. Caltagirone family). These entities got the financial power to keep the market stable for a long term, compared to the other countries where the real estate market is more fragmented.

I live i.e. in a residential area not too far from Milan, among vineyards and lakes, in this location the price are still standing to the 2008 levels, therefore when we consider the inflation we can assume that prices are decreased, but notwithstanding that even a very small house, (i.e. 80 square meters), it’s prohibitive for a young couple. It’s impossible for two main reasons, the first the bank is asking you the 30% at least cash, the second one, it’s that the loan monthly debit rate must be no more than the 30% of your income. In such a scenario none has an affordable income to purchase a home that cost more or less 200.000€.

So what could happen in Italy?
a. The new Govern may introduce a tax on empty apartment/houses hold from Real Estate private companies
Not bad, just in my municipality we are 10.000 habitants, and we’ve got 3.000 apartment empty, try to imagine in a big city

b. Parents will continue to support young couples
Cause to the crisis, the loss of work, the retirement that’s now over 60, money’s are at the end

c. The bubble may explode
Not bad, the real estate market will return back to normal and affordable to the people, so don’t be worry, it’s simply the signal that the Italian crisis it’s near to the end, and that we will face a new Italian and EU prosperity

d. Nothing will happen
The worse case, we will have poor and rich and the middle class will definitively disappear, having lost money in the stock exchange, in the real estate, and finally in bonds.

Remember, this is only an opinion, ok, but My Opinion.

EB