The real estate business is one of the most profitable businesses around the globe. It deals with the selling, buying, and management of real estate properties. With the growth of more urban centers, the real estate business’s growth has been on the rise in the recent past. It has also been boosted by the migration of people to towns searching for jobs and other opportunities.
The outbreak of the covid-19 pandemic has affected various businesses around the world. The real estate industry has not been unaffected either. The pandemic has made most people lose their jobs and other sources of income. This situation has made it difficult for them to raise enough money for their rent and other expenses. In Italy, for example, the COVID-19 pandemic hit hard, forcing the government to lock down the country for an extended period.
This article highlights the current economic situation as well as the forecast of the real estate market in Italy. It also explains the impact of the COVID-19 pandemic on the real estate market in Italy.
Real estate market in 2021
The Central bank policy and capital flows have offered their commitment to supporting Italy’s real estate market. This strategy aims to help in creating a favorable environment for the business. Capital will more likely focus on residential sectors, alternative segments, and logistics.
Impact of the Covid-19 pandemic on the growth of the real estate market
The outbreak of the COVID-19 pandemic has made most people in Italy, and the world rethinks their lives. Recent research in the United States reveals that many people worldwide and even in Italy are now escaping from densely populated cities in search of spacious places. This trend is more likely to benefit the countryside areas in Italy and other smaller towns. The shift to live outside the cities will also lead to alternative demand.
Visits to real estate properties have undergone a significant decline following the lockdown and other strict measures imposed in the country by the government to reduce the spread of the virus. This strategy has led to an increase in property owners who want to sell their properties. On the other hand, the pandemic has posed a threat to those who want to buy homes because of the difficult times.
Why more people in Italy are now living in their own houses
Most of the people in Italy are now occupants of their own homes. A survey carried out in 2019 by Eurostat shows that various owners occupied about 72% of the total households in the country. As of 1980, only 59% of Italy’s total households were owner-occupiers.
There are various reasons for the increase in ownership of homes in Italy. Some of them include;
- Rise of the living standards despite the slow economic growth.
- A new housing demand that is destined exclusively for ownership of the home.
- Availability of ownership tax breaks and mortgage relief.
E-commerce and working for the future
Most people are now considering how and where they should live. They are also thinking of how they can shop as well as how they can work. This situation has accelerated the crucial changes in the real estate market before the outbreak of the coronavirus pandemic. The growth of e-commerce services has helped in transforming most of the purchasing habits.
The advancement in technology has made things simpler for most people in Italy to work from home, especially during the lockdown imposed after the pandemic outbreak. This condition has posed a severe threat to the essence of the office in the working environment. Thus, it is more likely that most offices in the city will resume depending on infrastructure and local demographics.
Resilient assets will replace the obsolete real estate assets
In a recovery process after a crisis or any pandemic, some assets prosper as others become obsolete. This notion also applies to the real estate market in Italy after the pandemic. Investors will be forced to reassess the assets’ life cycle because of the pandemic’s risks. They will also put into consideration the long-term changes such as technology, sustainability, and demographics.
Experts have said that the recovery in Italy and the world is going to be ”K-shaped”. Some of the asset classes’ incomes and values, especially in the retail and hotel sector, will decline. They will also increase for other various assets. This new reality will be enhanced by alternative assets like personal storage, medical practices, data centers, and life sciences.
Big cities and towns to continue struggling in 2021
The outbreak of the pandemic made many cities and towns in Italy lose their population. Millions of residents left their urban centers, most congested, to avoid being infected with the coronavirus. This situation outcome was to leave many cities in Italy with struggling economies, high vacancy rates, and plummeting rents.
The coming of the vaccines has brought back hope to most of the struggling cities and towns. However, it is more likely that the rents will be bouncing back very soon in the urban areas. Most people will still consider keeping safe by staying away from densely populated places such as cities until the situation will be brought back to normalcy. Most cities and towns in Italy will therefore continue to struggle in 2021.
Rental rates have declined since the outbreak of the pandemic. The pandemic made most people lose their jobs and other sources of income. Some residents have been evicted from their rental homes for failing to raise the required amount of money. Experts have predicted a further increase in eviction until normalcy will resume in the whole country. This means that rental investors are more likely to face a harder, challenging period in the coming months.
Experts have also predicted that rental rates will be on the increase after the pandemic. More people will require housing facilities in towns and cities hence an increase in rental rates. This state will make investors channel more resources towards the real estate market. It is thus likely that the real estate market in Italy will grow again after the pandemic.