LCAR Unit 20 - Appraising Real Estate - 14th Edition Revised
Meeting FIMIT SGR 2010 - Massimo Caputi FIMIT SGR
1. CROSS-BORDER REAL ESTATE INVESTMENTS IN ITALY:
recent market trends, current situation and perspectives
2. Italian Real Estate market evolution
Throughout Europe and the rest of the world, the 1997-2007 decade was one of enormous
growth of the Real Estate market.
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Average housing prices in the main Italian cities (1991-2009)
During this period, Italy too went through an extraordinary moment with the
domestic Real Estate market being transformed quickly as ever before
Source: Nomisma processing of data from Consulente Immobiliare.
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Italian Real Estate market evolution 2/3
During these years several innovations took place in financial instruments, magnifying
investment opportunities and raising foreign investors’ interest:
Italian banks went through mortgages’ securitization;
the professional management of corporate portfolios and state-owned properties
became more and more important;
an increasing number of real estate assets’ spin-offs took place to retain a core
business;
new forms of retail business were found;
abandoned urban areas were upgraded;
alliances and JV between foreign and domestic Investors/operators were set up;
the first Real Estate funds under Italian law were launched.
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Real Estate funds have been one of the instruments that mostly contributed to the
development of the Italian real estate market whilst increasing market transparency.
Their success and quick diffusion was mainly related to their status of tax efficient
vehicle, as well as of a financial instrument subject to a well defined regulatory frame.
Italian Real Estate market evolution 3/3
NAV trends of real estate funds in the major European countries (2000=100)
Source: Nomisma processing
of Scenari Immobiliari data.
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Over the 2000–2010 period Italian Real Estate funds have shown (and are still
showing) an interesting trend with a compound annual growth rate of ca. 31%
5. Cross-border investments in the
Italian Real Estate market
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Source: Jones Lang LaSalle.
Transparency score trend of the Italian real estate market
This market trend evolution, together with the introduction of the Euro, was both the cause
and effect of the opening of the domestic market to foreign investments, rendering the
Italian market less provincial.
Over the last decade, the country has risen its competitiveness in several factors and
the Italian property market has grown much more transparent in terms of activities,
players in the market and financial instruments used
6. Cross-border investments in the
Italian Real Estate market
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In this context the Italian Real Estate market has been gradually clearing the ground for
the arrival of cross-border investors, granting the expansion of new players such as
merchant banks, investment funds, pension funds, specialist finance companies,
securitizers, developers and asset managers, improving the sector and its overall
transparency.
Italy cross-border investments by purchaser origin (%)
Source: DTZ (2008).
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The main foreign players operating in Italy are primarily represented by Middle-
Asian investors, followed by France Real Estate funds and German Open funds
7. Cross-border investments in the
Italian Real Estate market
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Italy cross-border investments by sector (€ bn)
Source: CB Richard Ellis (2009).
Cross-border Investors remain focused on high quality assets, mainly in the retail sector
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8. Italian Real Estate market during the crisis phase
After the global financial melt-down of 2007/2008, strengthening in Q1 2009,
markets changed quickly.
Over 2008, Real Estate investments in Europe slowed out of lack of finance and
due to the dependence of the sector on leverage. By the end 2008, the total volume
of investments in Europe was drastically down and in 2 years (2008-2009)
investments dropped to about a quarter of the peak period.
European Investment Turnover (€ mn)
Source: CB Richard Ellis.
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-70%
9. Italian Real Estate market during the crisis phase
Italian Investment Turnover (€ mn)
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-51%
Source: DTZ.
In Italy the situation is less dramatic than in other countries
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The main reasons that have been driving the different shortfall of the crisis on the Italian
Real Estate market, contributing to its greater resilience, are the following:
Italian Real Estate market has not been experiencing an unsustainable growth
rate during the past cycle…
Italian Real Estate market during the crisis phase
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1997-2007 change in house prices in leading markets (%)
Source: Economist.
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2008 – 2009 investments volume (%)
Italian Real Estate market during the crisis phase
2008 2009
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… the decrease in investment volumes, registered during 2009, was primarily driven
by a reduction in cross-border investments, while domestic equity Investors, less
affected by the economic crisis, haven’t stop their investment activity.
Source: DTZ.
12. Perspectives for the Italian Real Estate market
By the end of 2009 and moving into 2010 (after about 2 years of falling
investments), the global economy and the real estate market seems to have
passed its worst moments.
In this context, a general review of the approach of the major investors has
occurred, focusing on a “back to basics” approach.
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13. Perspectives for the Italian Real Estate market
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Solidity of the real estate
market
Substantial defensive trend of Italy compared to
other foreign countries
Transparency Italian market has been reaching top rankings
New credit available Credit institutions starting back to grant financing
New investment
opportunities
Public real estate assets disposal
Distressed-property opportunities
New spin-offs from companies evaluating assets
disposal
Real estate funds industry’s increase
Retail and tourist assets
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Considering the current market trend, the Italian real estate cross-border investments could
be driven by the following factors:
