Weak demand, mortgage difficulties: the Q3 2023 real estate market resembles 2014.
In the third quarter of 2023, demand in the real estate market remains weak and the difficulty in obtaining a mortgage loan to purchase a home is reaching levels not seen since late 2014. This is according to a joint study of the housing market in Italy, conducted by the Bank of Italy in collaboration with Tecnoborsa and Agenzia delle Entrate among 1,451 real estate agents from September 25 to May 25, 2023. Let's take a look at what the data from this survey shows.
The survey showed
that in the third quarter the saldo between estimates of growth and decline in real estate prices became even more negative, despite the prevalence of stability estimates. The selling time and average discount relative to initial bids remained stable. Rents are indicated to increase in the third quarter but remain stable for the current period. The outlook for the real estate market continues to deteriorate both locally and nationally.
Real estate prices
The survey found that the percentage of agents expressing an assessment of real estate price stability remains predominant in the third quarter of 2023 (61.3 percent, up from 63.0 in the previous survey), but the negative balance between assessments of price increases and decreases has increased. The percentage of agents who notice a decline in real estate prices is 28.6 percent (up from 25.5). In terms of territory, estimates are more negative in the south-central part of the country.
Transactions.The share of agencies that sold at least one home in the third quarter fell to 80.8 percent (down from 84.2 in the second quarter), the lowest value in the past 12 quarters; the share of those who sold only existing residences remains prevalent (82.0 percent, down from 81.7). Among those with at least one transaction, nearly one in two agents sold fewer homes than in the previous quarter.
Demand
The balance between estimates of growth and decline in the number of potential buyers became even more negative (-39.6 percentage points, up from -37.1 in the previous survey). At the same time, negative balances decreased for fulfillment orders (-25.2 percentage points, down from -26.5) and new sales orders (-32.5 percentage points, down from -32.9).
Average discount on prices and time of sale
The average discount on sale prices compared to the seller's initial requirements remains at a low level (8.5 percent); time to sell remains nearly stable, close to the lows recorded since the study began (5.9 months).
Mortgages
The percentage of agents who report difficulty obtaining a mortgage loan from buyers is 34.4 percent, the highest since late 2014.
26 October
Predictions
The negative balance between expectations of improvement and deterioration in the fourth quarter remains stable for the local market (-39.0 percentage points) and deteriorated significantly for the national market (-43.7, down from -42.9). Pessimism towards the national market also prevails on a two-year horizon. Expectations of a decline in new sales orders in the current quarter still dominate growth expectations, although to a lesser extent than in the previous survey (-14.3 percentage points, down from -29.3). However, the negative balance between expectations of higher and lower selling prices increased (-35.9 percentage points, up from -31.5). Agents' expectations for consumption inflation in Italy over the next 12 months continue to decline.
The impact of changes in bonuses
The operators believe that the regulatory changes in the 110% bonus adopted last spring (in particular the restrictions imposed on the transfer of credit) have had a negative impact in 2023 on both the number of potential buyers and the supply of real estate (respectively -27.2 and -14.8 percentage points). Agents also predict a negative impact on real estate market activity in 2024.
Rents and lettings
The percentage of operators who reported leasing at least one property in the third quarter decreased slightly (79.5 percent, down from 80.1). One in two agents report an increase in rents; the balance between those reporting an increase and those reporting a decrease has reached its highest level since early 2013 (46.5 percentage points, up from 43.5), this is more pronounced in the South and North East. Most operators are forecasting rent stability in the fourth quarter, but the balance between growth and decline remains unchanged at 32.4 percentage points. The average discount level relative to initial landlord requirements fell to 2.2 percent, a low by historical standards.
The proportion of agencies that reported an increase in rental orders
is still below the proportion who reported a decline, although to a lesser extent than in the previous survey (-36.6 percentage points, down from -39.2).
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