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estate investments make up the most traditional forms of investments
with the end being financial gains and family savings.
the motives that have encouraged many Italians to concentrate a consistent
part of their savings on real estate investments is the progressive
increase in value that has gone hand in hand in the last decades,
consolidating it, the national economic growth. A growth which has
by now become part of the collective memory, becoming almost a given..
doesn't mean that what has happened in the past will necessarily repeat
itself in the future. Obviously though, we hope is this case.
But a prudent attitude
and a critical eye towards attitudes that are commonplace should encourage
every wise investor.
Even in Italy in
the last decades, in certain areas and for certain types of real estate
investments, even for long periods, there has been a decrease in prices
that, Japan's experience shouldn't be forgotten. This is a place where
for years there has been a serious crisis in the price of real estate,
which has had a huge negative effect on the entire Japanese economy.
The crisis in the Japanese real estate market can't be underestimates
on a global level, in as much as Japan makes up the second most powerful
economy with regard to GDP and is also, thanks to the savings accumulated
by Japanese families, the first credit lender world-wide. Beyond that,
Japan boats very high construction standards, uniformly, and important
urban areas. To be precise, Japan holds 128 million inhabitants in the
Greater Tokyo area, with 30 million residents, it's the largest metropolitan
area in the world.
of Japan should particularly worry Italy. There are many similarities
that exist among the economies of the two countries that up until a few
yeas ago, were often cited: citizen's high propensity to save, an aging
population accompanied by a shrinking birth-rate, and economies that
aren't very liberalized, especially in their banking systems. All of
similarities between the economies that for a while, in particular since
the Japanese railroad has shown signs of quickening that haven't been
the other side, the country that had the most dynamic European real
estate market last decade, Spain, with average prices practically doubling
in the last 6 years now shows sign of slowing sales and lowered prices.
particular, Re-Max International, the second largest US intermediary
real estate firm, has reduced the value of over 5 thousand Spanish
housing units, with lows of even 26 percent.
happened while RR de Acuna & Associates of Madrid, a Spanish real estate
agency was cutting 10 percent off of the price of vacation homes.
in Italy there is certain stagnation in sales and it's since 2005 that
"housing values have stopped growing".
is what Federico Oriana thinks, President of the National Real Estate
Companies' Association. According to Oriana, at the moment, Italy is
not on the verge of a housing market crash. "For a series of reasons,
I personally think this doesn't exist in Italy because: 1) the average
prices in real terms are not higher than those in 1991; 2) It's at
least one and a half years that prices have stopped growing; 3) the
demand for new housing, is still larger than their supply on the market;
4) we are amongst the European countries where the average (housing)
prices are lower and we are not amongst the countries where they have
grown more in the last 8 years"
continues to say, "There is no risk of a crash, then but of course
there is the danger of a prolonged stagnation caused by the government's
decision taken from 2006-2007. In Italy the rate of family home ownership
is one of the highest in the world ...so, a drop in prices would affect
almost the entire population. Thousands of real estate units in bankruptcy
would be immediately put on the market, triggering a domino effect,
construction activity would slow down as a result of the scarcity of
new investments, with a huge negative effect on GDP and the unemployment
rate. These are the question that the government ought to ask itself,
while there is still time, a real estate crisis here (in Italy) wouldn't
find adequate compensatory gains in other economic and productive areas".
these stances, which certainly have a "political" meaning,
but that can't be ignored, must be added other worrisome signals. This
study, for example, done in March 2007 by the real estate group Sarpi
Spa of Milan, with information that is particularly relevant to the
centre of Milan where, as a result of degrading situations (drug dealer,
prostitution etc.) in certain areas, the price of real estate has suffered
a heavy blow. Some streets specifically neighbouring: Buenos Aires
30%, Corso Como and Corso Garibaldi 25%, Viale Vittorio Veneto 15%
course these are particular situations but in many main cities, these
days prices frequently go the way of "leopard skin spots", affected
by factors like immigration and general degradation.
is not to devalue the hypothesis of a possible future depression of
real estate in Italy. Absolutely
no! We think and hope that, for motives that are typically attributed
to Italian characteristics, the value of real estate will go up just
at the moment of greatest stasis, but will maintain in the long run,
favour of our conviction is the scarce propensity for change in the
investment strategies of Italian families. In fact, Italian diffidence
towards financial investments is motivated beyond the scarce comprehension
of the dynamics that regulate such markets (and they have a point!)
but also by the concrete fact that many families still take for granted
the negative repercussions on their savings that would come from crises
in financial markets, maybe not recent ones but for sure some that
haven't altogether been absorbed. Both financially, most of all, but
also psychologically. This is just to keep in mind, for those who had
forgotten, the future in the economy, beyond forecasts, is unknown.
And that such a possibility cannot be excluded.
without overlooking all of the possible analyses of the actual market
and the entire hypothesis regarding future scenario, should practice
with humility that which is usually defined, in technical terms as "differentiation".
it is not scientifically possible to see into the future, an intelligent
differentiation of assets also leads to a differentiation of risk.
This protects savings from eventual events (which can hit only one
part of these investments). In the long run, it's not the reduced rent
off investments that cause damages that can be at times irreparable.
It is the destruction of initial capital (even somewhat) or of the
good that produces rent.
be precise, with this, we don't intend to give investment advice and
the table above is purely for reference.
world has changed a lot in the last century. Huge capital investments
are just a distant memory and collective memory is lacking in this
drama both human and economic, caused by the shift from an agricultural
to industrial society. And still we are (despite the resistance) transforming
into a post-industrial society, abandoning the very industrial economy
that seemed to many the final point of arrival. And the world around
us in changing quickly. Really quickly.
seem almost zeroed. The global economy (beyond all the demonizing of
it) is by this point a reality. Everyone can see this simply by watching
the container ships pull into the port of Miami. Huge, imposing containers
marked on the side: China. The scene is very impacting. Not just because
of the size but also because of the implied cultural exchanges that come
with these containers. The stretch of containers is impacting, gigantic
cranes unloading these containers from docked ships that then are moved
onto trains that carry the goods within across the country.
spectacle doesn't end here. The surprise continues when one takes a trip
around a shopping mall, the shops within of all types and sizes that
characterize Miami carry goods that come almost exclusively from abroad.
these ostentatious displays, the country of origin of the products is
labelled visibly unlike in Italy where the country of origin is hidden.
Where many important "labels" and "brands" only subject
their merchandise to "quality control" in Italy, occasionally
attaching a button and the
"made in Italy" tags to this very merchandise produces in India
or in Eastern Europe.
isn't possible to know if American companies and their mangers have
chosen the correct path by almost completely delocalising production activities
to third parties in other countries. The economic results in the next
decade will be the ones to say so. We know that these decision
were made completely independent of political or ideological conditioning,
in accordance with opportunities that were offered by the market
with the end goal being long term profits, in the long run, for their
are sovereign judged so, we will see in the next few years.
then, in these global scenarios, what is to be said then about the
that the real estate market, amongst the oldest markets known, exactly
follows ancient rules even within the context of big changes.
obviously speaking about the real estate market understood as "revenue
and investment" because those properties that are bought with personal
use of the good in mind don't have to necessarily respond to the requirements
which include for example: profitability of the investment, propensity
to appreciate within a certain timeframe estimated for the investment
or factors including the risky-ness of a country or it's currency.
the case in which one were to want to buy a house to live in, especially
in accordance to the habits of Italians that maintain ownership of
houses in which they reside for long periods (in the USA the average
window of ownership for a home is around 5 years) parameters for which
the buying price can scarcely be significant if compared to the arc
of time in which one will have ownership of said house, an arc which
could extend even for decades. The acquisition of a house in which
to live, in which the "use value" prevails, still is at the same time,
an investment and can become in time, especially if the deal was made
with a cautious eye, an excellent means of family savings.
acquisition of the classic second home for personal or occasional "mixed"
use, responds mostly to criteria linked to the perception of the level
of gratification derived from possession, beyond it's utility, even for
breve period, of the same good. Even in this case, one often proceeds
with the classic lines of reasoning: 1) I like it 2) I have the money
to buy it or I can have the money lent me because my income allows me
to pay interest on capital 3) I'll buy it.
the "investment" part in this case is more relevant, in as much
as personal use is, from the temporal point of view, more limited
than in the case of residential housing. The expected appreciation
of the real estate unit prevails in this case, rather than those
coming from revenue on the place. In this case too, we are talking
about an excellent vehicle in which to channel family savings.
The last case is the
one in which the investments is purely focused on both the revenue that
the property can generate as well as the prospective appreciation of the
property. Even in this case alongside financial instruments, this provides
and excellent outlet for the protection of personal or family savings.
the "investment" part would require greater "coldness" of mind in
the decision making phases. When people say that the future cannot
be foretold, they are no saying that calculated forecast can't e
made. Uncertainty of the
future is part of the risks businesses have. Therefore, each investment,
even real estate one, in as much as they are similar to the investments
company's make, requires a forecast analysis.
| Not just
that but, the tools with which to direct one's investments should be
placed next to this forecast calculation, this process takes the technical
term "asset allocation"..
synthesize, based on the actual political, economic and financial scenario,
decide the actual amounts of savings to direct toward financial products
the choices of certain sectors, and types, titles and obligations and
the currencies in which to invest) and that which to direct in real
estate (follow choices from sectors and types from geographical areas
and currencies and yields on hold). This is a criterion that should
be followed independent of financial availability or income. In practice
a little bit here, a little bit there. If there were just a little
to put away, maybe the less risky investment would be chosen. But,
one cannot leave out this analysis.
return to the real estate investment. In the case that enough savings
or income was available to be leveraged, and one decided to proceed
with a real estate investment, the acquisition of a property require
a series of passive voices and a series of active voices that are
passive voices consist essentially of that which can be called "financial
passivity", which are maintenance and building coasts, consultations
and taxes. Beyond what we can define as "immaterial passivity" made
up of the costs the investor incurs to bring himself up to date with
the socio-political norms of the country in which he has invested,
an investment which is rather immediate if that country in which he
is investing is also where he resides, more onerous if he has invested
abroad. In practice the management of what is referred to as "country
active voices instead, comprise the "financial assets" which include
everything from the rent made on rentals to the eventual re-evaluation
at the moment of sale, the "immaterial assets" which include the gratification
for use of the property and the possession of the good.
conclude, just like today there are tools available for financial investments
that allow for wide differentiation between "currency risk" and "country
making it so that consistent part of Italians' financial
investments has already been moved outside of Italy, also for real
estate investments, the reduced cost of long-distance flights together
the propensity to take long trips for vacations, has made commonplace,
always for a larger part of Italians travelling abroad and getting
to know new countries. These regular visit are encouraging an ever-increasing
number of Italians to invest in real estate abroad.
main motivations include: a family vacation home or study abroad
experiences for their children (especially in English-speaking
countries). In these last years, the number of Italians that have
real estate investments abroad for rent production has also grown.