Cycles and Evolution of Real Estate Market in Italy

Cycles and Evolution of Real Estate Market in Italy

Cicli e andamento del mercato immobiliare

Alberto M. Lunghini Reddys Group

[email protected]

March 2015

Cycles and Evolution of Real Estate Market in Italy2

Consumer Price Index (CPI) and Residential Property Price Index in Italy


4.000

5.000

6.000 (1963 - 2014, index 1969=100)

[email protected] - Alberto M. LunghiniSource: data processing by Reddys Group on data Istat, Reddys Group

0

1.000

2.000

3.000

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

CPI Residential Property Price Index

forecast


Residential property price index andaverage Italian employee purchasing power index in Italy

(1963 - 2014, both in real term, index 100=1963)

Residential property price index andaverage Italian employee purchasing power index in Italy

(1963 - 2014, both in real term, index 100=1963)

200

250

300

[email protected] - Alberto M. LunghiniSource: data processing by Reddys Group on data ISTAT, Reddys Group

0

50

100

150

63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Residential property prices Employee purchasing power


Residential property price cycles in Italy(1968 - 2014) excluding inflation and variation in purchasing power

of middle class Italian employees (real prices, index 1968=100)

Residential property price cycles in Italy(1968 - 2014) excluding inflation and variation in purchasing power


140

160

180

[email protected] - Alberto M. LunghiniSource: data processing by Reddys Group on data Istat, Reddys Group

60

80

100

120

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14


1968 421,000

1969 451,000

1970 526,000

1971 486,000

1972 536,000

1973 401,000

1974 421,000

1975 341,000

1976 466,000

1991 558,000

1992 467,000

1993 503,000

1994 497,000

1995 504,000

1996 483,000

1997 525,000

1998 578,000

1999 642,000

2000 690,476

Residential property transactions in Italy1968 - 2014


[email protected] - Alberto M. LunghiniSource: data processing by Reddys Group on data Censis, Agenzia delle Entrate

1976 466,000

1977 446,000

1978 496,000

1979 552,000

1980 617,000

1981 592,000

1982 431,000

1983 391,000

1984 366,000

1985 430,000

1986 464.000

1987 464,000

1988 494,000

1989 476,000

1990 519,000

1999 642,000

2000 690,476

2001 681,266

2002 761,520

2003 762,086

2004 804,126

2005 833,350

2006 845,051

2007 809,177

2008 686,587

2009 609,145

2010 611,878

2011 598,224

2012 444,018

2013 403,124

2014 417,524




700.000

800.000

900.000


300.000

400.000

500.000

600.000

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14


Honeycomb cycleTheoretical representation

(Real Estate Market)Honeycomb cycle

Theoretical representation (Real Estate Market)

Prices

[email protected] - Alberto M. Lunghini

Source: Research (1994) of NVM and Universities Amsterdam and NijmegenTransactions


Honeycomb cycle (Residential properties in Italy)

Honeycomb cycle (Residential properties in Italy)

9192 03

04

05

06

070809

1011

12

13240250

260

270

280

290

300

310

320

Real residential property prices


75 7677

78

79

8081

82

83

84 85 86

87

88

89

90

93

94

95

9697 98 99 2000

01 02

13

14

100

110

120

130

140

150

160

170

180

190

200

210

220

230

240

80 100 120 140 160 180 200 220

Transactions Index 1968=100



(index 1961=1)


(index 1961=1)

1961 1.0 1.01971 1.6 1.5 + 6.71981 13.0 6.4 + 103.11991 41.6 14.4 + 188.91992 44.8 15.2 + 194.72001 45.8 19.9 + 130.22002 51.5 20.3 + 153.7

Residential property price index CPI %(a) (b) (c = )a - b b


2002 51.5 20.3 + 153.72003 59.9 20.9 +186.62004 65.4 21.3 + 207.02005 71.1 21.7 + 228.32006 75.2 22.1 + 240.22007 79.2 22.5 + 252.52008 80.9 23.2 + 248.52009 79.3 23.4 + 239.72010 77.9 23.7 + 228.52011 76.8 24.2 +215.12012 73.4 25.1 +192.32013 69.7 25.4 +174.32014 67.6 25.5 +165.2N.B. Annual average variation of residential property prices was equal to 8.3% during last 53 years (1961-2014).

Annual average variation of CPI was equal to 6.3% during last 53 year.Therefore annual differential compound increase was equal to 1.9% during last 53 year.

Source: data processing by Reddys Group on data Reddys Group

max


Nominal and real variations of residential property prices in Italy

Nominal and real variations of residential property prices in Italy

713%

500%

600%

700%

800%

[email protected] - Alberto M. LunghiniSource: data processing by Reddys Group on data Reddys Group

60%

220%

10%48%

7%

90%

42%

-20%

15%

-100%

0%

100%

200%

300%

400%

1961-1970 1971-1980 1981-1990 1991-2000 2001-2014

nominal real


GDP in Italy(1971 - 2014)

GDP in Italy(1971 - 2014)

3%

4%

5%

6%

7%

8%

[email protected] - Alberto M. LunghiniSource: data processing by Reddys Group on data Istat

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14


14%

16%

18%

20%

22%

Inflation in ItalyInflation in Italy


-2%

0%

2%

4%

6%

8%

10%

12%

55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Source: data processing by Reddys Group on data Istat


140

160

180

Residential property price cycles in Italy(1968 - 2014, forecast 2015 - 2026) excluding inflation and variation in purchasing power


Residential property price cycles in Italy(1968 - 2014, forecast 2015 - 2026) excluding inflation and variation in purchasing power



60

80

100

120

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 265 5 6-7 8-9 7-9 10

Source: data processing by Reddys Group on data Istat, Reddys Group


Honeycomb cycle - forecast (Residential properties in Italy)

Honeycomb cycle - forecast (Residential properties in Italy)

9192

93

03

04

05

06

070809

1011

13240250

260

270

280

290

300

310

320

Real residential property prices

12

[email protected] - Alberto M. LunghiniSource: data processing by Reddys Group on data Censis, Agenzia delle Entrate * Forecast

75 7677

78

79

8081

82

83

84 85 86

87

88

89

90

93

94

95

9697 98 99 2000

0102

13

14

100

110

120

130

140

150

160

170

180

190

200

210

220

230

240

80 100 120 140 160 180 200 220

TransactionsIndex 1968=100

15*


Stock Price Percentage Total Return / Percentage Home Price

(Italy 1963-2013) real valueStock Price Percentage Total Return / Percentage Home Price

(Italy 1963-2013) real value

20

40

60

80

100

[email protected] - Alberto M. LunghiniSource: data processing by Reddys Group on data Mediobanca, Reddys Group

-100

-80

-60

-40

-20

0

20

63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Stock price percentage total return Percentage Home Price


S&P index: Percentage Total Return / Percentage Home Price

(US 1963-2014) real valueS&P index: Percentage Total Return / Percentage Home Price

(US 1963-2014) real value

10

20

30

40

[email protected] - Alberto M. LunghiniSource: data processing by Reddys Group on data Standard & Poors

-40

-30

-20

-10

0

63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

S&P index: Percentage Total Return Percentage Home Price

Documents

Cycles and Evolution of Real Estate Market in Italy