Real Estate Market Overview Italy 2019 www.pwc.com/it 2 | Italian Real Estate Market Overview 1. Country Profile 5 2. Residential Mortgages 9 3. Investments in Construction 13 4. Transaction Trends 17 5. Italian Investment Trends 27 5.1 Alternative Asset Classes 36 5.2 Real Estate Funds 38 5.3 Italian NPL market 40 6. Milan 45 6.1 Residential 50 6.2 Investment Trends 54 6.3 Office sector 56 6.4 Hotel sector 59 7. Rome 61 6.1 Residential 64 6.2 Investment Trends 68 6.3 Office sector 70 6.4 Hotel sector 72 8. International trends 75 9. Glossary 82 10. Contacts 83 3 4 | Italian Real Estate Market Overview 1. Country Profile 5 Italian Country Residential Investments Transaction Investment International Profile Mortgages in Construction Trends Trends Milan Rome trends Glossary Contacts Country Profile 2000 2010 2018 • The Italian economy is ranked as the GDP (€bn) 1,239,266 1,604,515 1,765,421 According to the latest data based on the third largest economy in the Euro GDP per capita (€) 21,771 27,108 29,248 Bank of Italy’s forecasting models, Italy’s area and the eighth largest in the Population (m) 56.92 59.19 60.36 GDP appears to have stagnated in the Life expectancy 80 82 83 world. As a prominent country, it is a (years) third quarter of 2019. GDP seems to have founding member of the G7, G8, the been held back again by the industrial Euro zone and the OECD. In Q2 2019, GDP increased by 0.1% on sector, against a barely positive contribution a quarterly basis, decelerating a little from services and a modest recovery in • The country plays a significant role in compared with the winter months. the construction sector. The possibility the regional and global economy and remains that the weak cyclical conditions, it’s a leading country in world trade, Domestic demand was sustained by which have so far been more marked exports and tourism. household spending and above all by in manufacturing, will transfer to other investment in capital goods, which economic sectors to a greater extent then • Recently, it has suffered sharply from also benefited from the renewal of tax suggested by the data available so far. the financial crisis of 2007-08 and incentives (super-amortization scheme) in the subsequent European sovereign April; spending on construction, however, The cyclical weakness impacted real debt crisis. contracted. Once again, the changes in and expected inflation. The twelve- stocks made a negative contribution. month change in the harmonized index of consumer prices declined to 0.2% Net foreign demand was barely positive, in September; the seasonally adjusted owning to a greater increase in exports annualized three-month inflation rate than in imports. was -1.2%. Source: Bank of Italy, Economic Bulletin October 2019 Italian main economic drivers Economic Growth Tourism Population Migration • Italy has recovered from • Italy is the country with • The Italian population • During 2015, Italy the Financial crisis, but the 3rd highest number is expected to grow to received 280,100 legal it is growing slowly in of overnight stays in 60.3m in 2020 mainly immigrants. comparison with other the EU. due to immigration. • Some sources estimate comparable countries. • It is expected to suffer the number of illegal • It’s expected to grow at from population ageing immigrants at 200,000. an average of 0.4% per as with most developed • International migration year over the next 10 nations. will be key in future years. population demographics for Italy. 14.5% 14.5% 14.5% 14.5% 7.6% 7.6% 7.6% 7.6% 5.3% 5.3% 5.3% 5.3% 5.2% 5.2% 5.2% 5.2% 4.0% 4.0% 4.0% 4.0% 3.1% 3.1% 3.1% 3.1% 3.6% 3.6% 3.6% 3.6% 2.4% 2.4%2.4% 2.4%2.4% 2.4%2.4% 2.4% 2.1% 1.9%2.1%2.2%1.9%2.1% 2.2%1.9%2.1% 2.2%1.9% 2.2% 1.7% 1.7% 1.7% 1.7% 1.3% 1.6%1.3% 1.6%1.3%1.2% 1.6%1.3%1.2% 1.6%1.2% 1.2% -0.1%-0.2%-0.1% -0,2%-0.2%-0.1% -0,2%-0.2%-0.1% -0,2%-0.2% -0,2% -0.1% -0.1% -0.1% -0.1% -3.5% -5.5%-3.5% -5.8% -5.5%-3.5% -5.8% -5.5%-3.5% -5.8% -5.5% -5.8% GDP (%) Tourism Population Migration 6 | Italian Real Estate Market Overview Italian Country Residential Investments Transaction Investment International Profile Mortgages in Construction Trends Trends Milan Rome trends Glossary Contacts Gross value added by industry Destination of exports (goods) 2018 1.3% 4% 2% 4% Fertility rate 4% 5% (births per woman) 4% 21% 10% 5% 10% 00% - 0.2% 14% Annual population growth 20% 67% 14% 17% 301.3 Trade, transport, accomm., food services European Union Area (sq. km - Industry including energy Asia thousands) Public adm., defence, education, health Northern America Real estate Other Professional, scientific, support services Middle East Finance and insurance Construction 200.9 Other services Information, communication Population Density (people Agriculture, forestry, fishing per sq. km of land area) Source: PwC analysis on Italian National Statistical Institute (INSI) and World Bank data Public Debt Inflation Exports Unemployment • Italy has a very high • Italy has a similar trend • Recent years have seen • The unemployment rate level of public debt. It to the EU-28, however a recovery in exports, in 2018 in Italy is 2.2% will require significant the annual rate of price which have been a key above the Euro area effort, and political will, change has been lower. driver of Italian growth. states' average of 7.5%. to achieve only modest • Persistently low inflation • The main boost to overall • It is projected to remain reductions. would make it more export growth came below 10% over the next difficult to achieve the from the pharma, refined 5 years. deleveraging necessary. petroleum products, and clothing sectors. 14.5% 14.5% 14.5% 14.5% 7.6% 7.6% 7.6% 7.6% Unemployment rate 5.3% 5.3% 5.3% 5.3% 5.2% 5.2% 5.2% 5.2% 4.0% 4.0% 4.0% 4.0% (% to total labour force) 3.1% 3.1% 3.1% 3.1% 3.6% 3.6% 3.6% 3.6% 2.4% 2.4%2.4% 2.4%2.4% 2.4%2.4% 2.4% 2.1% 1.9%2.1% 2.2%1.9%2.1% 2.2%1.9%2.1% 2.2%1.9% 2.2% 1.7% 1.7% 1.7% 1.7% 1.3% 1.6%1.3% 1.6%1.3%1.2% 1.6%1.3%1.2% 1.6%1.2% 1.2% -0.1%-0.2%-0.1% -0,2%-0.2%-0.1% -0,2%-0.2%-0.1% -0,2%-0.2% -0,2% -0.1% -0.1% -0.1% -0.1% -3.5% -5.5%-3.5% -5.8% -5.5%-3.5% -5.8% -5.5%-3.5% -5.8% -5.5% -5.8% Public Debt Inflation Exports Var. % 2016/2015 Var. % 2017/2016 Var. % 2018/2017 Source: PwC analysis on World Bank data 7 8 | Italian Real Estate Market Overview 2. Residential Mortgages 9 Italian Country Residential Investments Transaction Investment International Profile Mortgages in Construction Trends Trends Milan Rome trends Glossary Contacts Residential Mortgages Volume trend in Italy 07 – Q3 19 Cash amount supplied by banks to households 2007 – Q3 2019 The cash amount supplied by banks to households from 60 2007-2019 according to NAB latest available data, has + 19% 50 C been recovering since 2013, although it has not returned 18vs13 to its historical peak. 2014 was the start of the recovery for 40 38.93 mortgages to households: the number of mortgages signed to 30 purchase a house in 2014 was 13% higher compared to 2013, on while 2015 recorded a substantial increase of 70.6% over 2014. 20 In 2016, mortgages for houses grew by 20.5% from 2015, 10 while in 2017 mortgages decreased for the first time in three 0 years. The growth rate during the first nine months of 2019 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 reports an increase of 6.4% compared to the same period of the previous year. Mortgage request by purpose 2007 – Q3 2019 At the end of 2019, the total volume supplied is expected to be 100 1% slightly lower than 2018. 90 These trends are important signs that show a renewed interest 80 of the financing industry in the real estate sector, although an 70 54% important share is represented by transfer loans (surroghe) and 60 loan refinancing. 50 2% The Bank of Italy provides data on new mortgages, transfer loans 40 5% and refinancing starting from the third quarter of 2014. In the 30 first nine months of 2019,45.6 % of the new supply actually 20 39% covered new mortgage contracts, for the acquisition of the 10 first house, the second house or a construction/ restructuring 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 operation, while transfers (surroghe) loans accounted 53.5% of the rt ou on ou truturn n Contruton Trnr Refinancing market, and refinancing accounted for only 0.9%. When comparing the first nine months of 2019 with the same Mortgage request by amount 07 – Q3 19 period of the previous year, there is a slight increase in transfer of 100 loans which in 2018 represented less than 47% of the market.