Never more than today do I wish that this popular saying was just a meaningless rumor....
The coup de grace to the already struggling economy of our beautiful country was dealt in the very month that identifies this proverb, the only month in which a day can be added--February of the 2020 leap year, indeed.
The blockade caused by this invisible enemy COVID - 19 ( net of all the controversy about where, how and from whom it comes) is having and will have very significant repercussions not only for our economy but, for the world economy. The consequences of the Chinese engine stop had already been felt for Western businesses, but now the problem is at home.
All stopped until further notice.
What should we expect in the coming months (years?).
Economic forecasting is a bit like the weather, you can analyze data and have a history but its reliability decreases proportionally as the time interval over which you want to make the forecast expands.
Today I will present an analysis prepared by theNomisma real estate observatory, (downloadable at the end of the article) that presents us with forecast data for the next 2 years, with two scenarios:
The first "soft"
The second "hard"
I will then conclude this article with some personal "local" reflections.
The year 2019 ended with just over 600,000 purchases and sales, according to data provided by the Internal Revenue Service. A figure that confirmed the recovery of transactions, which had plummeted in 2013 to below390.000 which, since then, had seen a positive trend until this cursed leap year.
According to Nomisma estimates, 2020 was expected to end with a slight increase in transactions(613,000), which would go close to the "average" number of transactions for our nation, or 650,000 annual residential purchases and sales .
Far from the peak of nearly 850,00 transactions in 2007.
What are the forecasts of the well-known body for the next two years then?
These months of paralysis will result in a sharp slowdown in buying and selling, brought about by the natural economic uncertainty that has resulted from this crisis and the relative decrease in household spending capacity(Table 1)
For Nomisma, the most optimistic scenario predicts an end of the year with 564,000 buys and sells, while in the worst case scenario we may fall below 500.000. The year 2021 will not bring good news as the forecast is for 532,000 transactionsin the "soft" e 407.000for the "hard" ( we go back to 2015 values) barring political-financial upheavals, we should not fall below the barrier of 400,000 purchases and sales in 2013.
From 2022 onward, the curve may have a stable trend with an upward trend.(Fig1)
Even worse are the forecasts for the corporate sector unfortunately. While investments of more than 12 billion euros had been recorded in 2019, Nomisma predicts a "collapse" of more than 50% for 2020 in the worst case scenario or a stop at 8.2 Billion in the most optimistic one.(Fig.2)
According to statements made by Administrator Dondi in light of recent developments, his analysts have decided to aggravate the negative GDP figure (already -5.2 percent on the 2019), making it go as high as -8% over 2019. (min 5.18 of video)
Not to mention real estate values that statistically follow the trend of buying and selling, so they will decline, according to the CEO by about 3 percent for this year. ( min 10 of video )
We now come to a personal analysis of a small operator in the Veronese reality.
The immediate effect of this emergency emerged as early as March:
the hotel and non-hotel sector has been heavily affected with cancellations, for the time being, reaching as late as July.
The repercussions were also immediate for the residential real estate sector.
The eldorado of tourist rentals for big cities has proved to be a giant with feet of clay. The exorbitant rents that managers of vacation homes, air B&b, rooming houses etc. were willing to pay in order to obtain a source of income, immediately fell to zero. Many landlords ran for cover by converting units to medium (how medium?) term leases, at significantly lower rents.
The global pandemic has affected not only our nation but all states and ,as Luca Dondi confirmed, tourism demand for italy will remain a mirage for these months.
The effects of this global shut-down will have a long tail ( not to mention the fact that the virus is not waiting for the end of the decrees to stop proliferating, but that's another matter) a rental market will become apparent in which the needle of "bargaining power" will shift back to the tenant's quadrant....More supply of real estate and, by the law of the market, a gradual (perhaps sudden?) lowering of rents.
The decrease in profitability of real estate is related to the value of real estate
If something makes less....IT'S WORTH LESS!
Should we look forward to a decline in prices? From Nomisma they are cautious, in my opinion the reduction will be there is it will be greater than 3 percent
Less sudden than the values for leases, but still no less felt.
A large contribution to lower prices may also come from another factor.
Italy's economic fabric is (for better or worse) made up of small to medium-sized businesses, often family-run.
Italians: People of lovers, navigators but above all... SAVERS!
Most of the businesses that are at a standstill today because of this damn virus will come back to open in dire need of liquidity.
And where are the savings of Italians?
In real estate my lords.
Unable (or unwilling?) to rely on banks, I do not rule out that many entrepreneurs will sell their real estate assets to make up for the lack of lifeblood for their businesses and families. Again, anabundance of supply can bring what?
Falling prices.
Also, this money will be needed immediately, so?
I sell for less but I sell faster!
It will be interesting to see the reactions of markets that have always been drivers such as Milan or Rome. Territories that have always withstood any financial "shake-up," today find themselves facing a real and concrete impact with a total freeze of activity (Milan especially as the epicenter of the disease).
Already many businesses have closed or abandoned business premises with stratospheric rents due to the lack of job prospects in the near future.
Oh I forgot. What aboutEurope?
I do not want to get into political circles (of which I have no expertise or information) but certainly this global crisis has severely strained the already fragile relationship with an institution made up of many different states with different priorities and strategies.
Where a common enemy could have united us for an easier victory, it has divided us even more , leaving a management autonomy that will not produce positive effects.
North and South.
Rich and poor.
Organized and disorganized.
Should the already existing health and economic crisis be compounded by a POLITICAL crisis at the community level....Well, then all of the above predictions are extra soft ultra dry! God forbid.
As a wise old man said:
It could be worse....POTREAD IT WOULD RAIN!!!
Let us at least enjoy spring in all its glory and with less pollution 😉
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4/27/20 ATTENTION!!! THE APRIL UPDATE HAS BEEN RELEASED. GO TO THIS ARTICLE TO DOWNLOAD IT
