Italian Property - Skid Row or Investment to Grow?
30 November 2011
The EU sovereign debt crisis still shows no signs of where a resolution will come from. A look at the Guardian's specialist page on the subject shows us that it is at the forefront of concern, and that Italy is the latest country to face the need for a bailout, but, with Italy the bailout fund at present doesn't even touch its debt so it faces not only a sovereign debt crisis but an insolvency crisis as well.
But, before we all run away screaming, or pack up our stuff to go "back to basics" living in caves and saying to hell with capitalism, we should read the predictions of Jones Lang la Salle.
Robert Stassen, Head of EMEA Capital Markets Research at Jones Lang LaSalle commented: "Italian real estate investment has been flat since 2007, with average quarterly investment volumes of €1 billion per quarter.
"There is the potential for considerable upside in 2012 and beyond as investors reconsider the next opportunity as country risk subsides. We may also see more international investment move into Italy as the euro zone crisis calms down."
Do they know something we don't? What evidence have they that the crisis will have "calmed down" by next year. Is it simply the blind faith that the international community will ultimately do whatever it takes to stop the Eurozone from crumbling, and that this will all happen in the next few months? In reality probably not. JLLS is one of the largest real estate companies in the world, and real estate is one of the world's biggest industries, giving capitalism's increasingly large role in global politics, it is entirely possible that JLLS knows something, or can at the very least make a more educated guess than you or I.
Patrick Parkinson, Managing Director, Head of Capital Markets Italy at Jones Lang LaSalle said: “Whilst Italian government bond yields have hit peaks similar to that of Greece and Portugal, prime yields on Italian real-estate remain strong and are 100 basis points higher than yields on similar French and Swedish property.
"Whilst investors are right to feel cautious, we expect more to dip their toe into the water and embrace these opportunities."
JLLS point out that, although they are spending less, Italians are some of the wealthiest people in the world, with assets averaging 8 times their disposable income, and also that Italy's 170% combined household and government debt is lower than that of the UK at 240%.
Robert Stassen added: “We have also seen strong numbers from shopping center REITS with assets in Italy. In addition, major shopping center developers such as Westfield and Eurocommercial are investing in Italian cities such as Milan and Turin.
"With this backdrop, we expect more newcomers to take a closer look at the region in the next few months, possibly as a counterbalance to a liquid Paris market and falling volumes in Spain."