Istituto Superiore sui Sistemi Territoriali per l’Innovazione

1. EMERGING TRENDS IN THE ITALIAN HOUSING MARKETFirst attempts to analyse the current Real Estate crisis impact on the Italian context.Which oncoming market expectations? arch. Stefania SABATINO (PRESENTER) arch. Luisa INGARAMO dott. Luca D’ACCI STOCKHOLM 26 JUNE 2009 SESSION 5-F Istituto Superiore sui Sistemi Territoriali per l’Innovazione EMERGING TRENDS IN THE ITALIAN HOUSING MARKET

2. MAIN QUESTION Contrary to the current uncertain situation, we want to know if in the Italian housing market there are particular locations in which it is still possible to make an appropriate investment in Real Estate. RELATED ISSUES • URBAN RANK • GEOGRAPHICAL POSITION • INNER DISTRICT AREA • OTHER INDEXES: demographic and yield dynamics THE ANALYSIS • The current uncertain situation • The current cycle reversal • The Italian housing market Study n.1:Emerging Trends divided by location and urban position Study n.2:Trend of the spatial uniformity of the real estate value RESULTS and CONCLUSIONS

3. ANALYSIS The current uncertain situation • The Real Estate partecipation in the financial markets greatly increased since 2003 (up to 5,25% in USA) • The mortgage crisis has been contracting the liquid assets • The risk inclination of the investors’ profile has been progressively reducing INTERNATIONAL FRAMEWORK SHORT TERM FORECASTS* A DEEP STRUCTURAL CRISIS IN THE INTERNATIONAL ECONOMY The Real Estate MIB Index from 2007 to 2009: has been facing a 3-monthly negative variation since the trend reversed in May 2007 ITALIAN CONTEXT • Northern Italy: a growing demand for high quality Real Estate • Small towns: a probable expansion of the housing demand • A preference for investments able to increase the operational revenues • The Real Estate partecipation in the financial markets remained below 4% (UE average level) • the onerous tax system protected our markets • The risk inclination of Italian investors’ has never been high • Different levels in the economic development, depending on “geographical position” and “urban rank” *Sources: www.scenari-immobiliari.it www.nomisma.it www.ubh.it www.gabetti.it A CONJUNCTURAL AND CYCLIC SLOW DOWN

4. ANALYSIS The current cycle reversal Minor cities (same Regions) • Turin excluded, all major cities reached their price peaks in 1973, 1981, 1990 and 2007 • Turin and Rome excluded, the metropolitan areas are facing the reversal earlier than the others • Turin, in particular, shows a 2 – 3 year delay in comparison with the national average trend • the smaller cities do not clearly evidence the four Real Estate cycles Major cities 2005: a first slow down

5. ANALYSIS The Italian housing market • 1° Trend Period : 1967 – 2008(always positive) • It is useful to compare the residential quotations (inflation rate-free) over a long period; • It is enables to identify, for each city, 4 Real Estate market cycles; • It allows us to understand how the national and international macroeconomic factors have impacted on the Real Estate market • It permits to find out which urban areas have local and specific dynamics • It shows the last 8 year trend (inflation rate-free); • It shows the final ascending stretch of the last Real Estate cycle; • It allows us to evaluate where the effects of recent urban policies have speeded up the rise in pricing. • It shows the effects produced by the present Real Estate crisis in the Italian context; • values are considered “constant”. 2° Trend Period: 2000 – 2008(predominantly positive) 3° Period: 2007 – 2008 % variation in price quotations (decreasing)

6. Top 20 ranking Maximum average increase during last 42 years Study n.1:Emerging Trends divided by location and urban position • ANALYSIS BY GEOGRAPHICAL POSITION: Northern and Central regions show a huge increase during last 42 years; • ANALYSIS BY URBAN RANK: • Venice is the unique city showing a high price level, a good yield performance, and a constant increase in prices for all the three time periods and urban areas. • Milan, Florence and Naples present a negative market performance The % variation between 2007 – 2008 is almost staeady or decreasing The yield performance index during last few years is almost negative

7. Top 20 ranking Maximum yield performance during last few years Study n.1:Emerging Trends divided by location and urban position • Turin excluded,only medium or minor cities show high yield performances • Venice is the only city showing: an high price level, a good yield performance, and a constant increase in prices for all the three time periods and urban areas.

8. Study n.1:Emerging Trends divided by location and urban position THE MAJOR CITIES DECLINE TURIN: Venue of 2006 Olimpic Winter Games • In brief, the positive mantaining drivers are: • the absoluteprofitability level (3-4%); • a high price level (huge increase over the last 40 years); • The standstill or the decline in performance • can be attributed to the following: • the metropolitan areas are exposed more than the others • to the international markets; • the major cities reached before than the others the • saturation in the current cycle of the Real Estate market; • Exceptions: • Rome which registers still growing values (+9% since 2007), • and the best performance in the semi-central • areas (+13%); • Turinwhich records the best combined performances • The city holds an advantage regarding the trend dynamics: • in all the three periods analysed in this study, • centre, mid-centre and suburb locations have been • constantly increasing. • Venice which has an outstanding performance • both in the dynamic yield (+22% since 2002) and in • price levels (on average up to 8,500 €/sq m). ROME: Real Estate values still growing MILAN: the current slowdown waiting for 2015 EXPO challenge Genoa: the current drop following 1992 EXPO

9. MINOR CITIES GROWING IN APPEAL Study n.1:Emerging Trends divided by location and urban position MESSINA: Old Housing Stock and a Strategic Harbour • Some minor cities show a combined good performance in: • dynamic profitability, mostly emerging in the Central and Southern Regions (Perugia, scoring a +79% since 2002, gains the first position, followed by Catanzaro, Cuneo, Siracusa, Trieste, Cremona, Foggia, Piacenza, Bologna, Ragusa, Messina, Padua); • demographic attractiveness, confirming a good performance in Central and Southern Regions for cities that do not exceed the 150,000 inhabitants (Cremona, Latina, Pescara, Pistoia, Ravenna, Rieti, Viterbo, Vicenza); • Some historical Towns combining: • Heritage & Amenities • (Lecce, Matera, Siena, Caserta, Lucca, Pisa, Ferrara, Parma, Verona, Vicenza, Modena, Perugia, Ravenna, Ragusa and Siracusa); • branches of Main universities (Milan and Turin Polytechnic, Università Cattolica, etc. as in Piacenza, Cremona, Perugia…). CREMONA: Historical city centre hosting an important university branch PIACENZA: Historical city centre hosting an important university branch

10. Study n.2:Trend of the spatial uniformity of the Real Estate value The spatial uniformity of the Real Estate value is studied by means of two coefficients: a. Relative Gap = ratio of the difference between the maximum and the minimum value, and the average value among the maximum, the medium and the minimum one b. Dispersion = ratio between the standard deviation of the values in each area and the average value of every area a. Relative Gap [RG] Only Turin shows a strong negative RG

11. Study n.2:Trend of the spatial uniformity of the Real Estate value b. Dispersion increase/decrease between 1997/2005: - Roma=+9%, - Milano=-16%, - Napoli=-10%, - Torino=-30%, - Genova=-20%, - Bologna=+68%, - Firenze=-19%, - Bari=21%.

12. CONCLUSIONS AND EXPECTATIONS MAIN QUESTION MAIN QUESTION Contrary to the current uncertain situation, we want to know if in the Italian housing market there are particular locations in which it is still possible to make an appropriate investment in Real Estate. • Even if it is quite difficult to indicate which cities are expressing at the moment the best performances in the housing Real Estate market we can conclude that: • Minor cities present new and topic opportunities to exploit; • Major cities don’t present a local growth mechanism, are declining and might be re-launched through “great events” as Turin in 2006 or Milan in 2015; • The “Great Event” opportunity (for Major cities) is a risky variable due to the “heavy heritage” fall out effect: see the Genoa decline following the 1992 – Columbus Year Celebration. Genoa: the current drop following the 1992 Columbus Discovery Anniversary

13. Many thanks for your attention! CONTACTS: Study n. 1 PRESENTER AND CO-AUTHOR: stefania.sabatino@polito.it CO-AUTHOR: luisa.ingaramo@polito.it Study n. 2 AUTHOR: lucadacci@gmail.com