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Italian Housing Market Survey

Italian Housing Market Survey Roberto Sabbatini – Bank of Italy (*) Fourth Joint EU-OECD Workshop on Business and Consumer Opinion Surveys Brussels 12-13 October 2009 (*) Based on joint work with Leandro D’Aurizio, Raffaele Tartaglia-Polcini and Francesco Zollino (Bank of Italy)

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Italian Housing Market Survey

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  1. Italian Housing Market Survey Roberto Sabbatini – Bank of Italy (*) Fourth Joint EU-OECD Workshop on Business and Consumer Opinion Surveys Brussels 12-13 October 2009 (*) Based on joint work with Leandro D’Aurizio, Raffaele Tartaglia-Polcini and Francesco Zollino (Bank of Italy)

  2. Outline • 1. Importance of investing in information on the housing market • 2. The statistical outlook in Italy • 3. The Bank of Italy-Tecnoborsa new survey: • a) Main characteristics • b) The questionnaire and the main results • c) Open issues and future developments

  3. 1. Importance of investing in information on the housing market • Developments in residential property prices are crucial in economic analysis: • changes in house prices affect the business cycle through their impact on • (a) households’ wealth and in turn on consumption behaviour • (b) residential investments; • 2) Sharp house price fluctuations impact on financial stability (credit quality). • 3) The recent global crisis suggests that financial innovation might have amplified the role of housing in the cycle (via the impact of rise/fall in house prices on the value of collateral) • 4) The functioning of the housing market affects labour mobility • Empirical analysis shows that housing market might contribute to the persistent propagation of shocks that hit the economy. Some evidence suggests that its role has increased over time • The recent crisis confirms the importance of investing in reliable, complete and (possibly) harmonized statistics on the housing market. • Information available in Italy (as well as in the euro area) is lacking. • This presentation focuses on a recent initiative undertaken in Italy to enhance a timely monitoring of the housing market (others regard house price indicators)

  4. 2. The statistical outlook in Italy • In Italy information on the housing market is: • released by many institutions/research centres (private and public); • not systematic, not timely, not available for a few important dimensions • a) Price statistics • Official (NSI) data on property transaction prices are not available yet. • Alternative sources (all pro and cons): • Nomisma:no breakdown in the series but limited geographical coverage • Il Consulente immobiliare (CI): long time series (1965) and broad territorial reach, but frequent changes in the reference sample (breakdown). • Osservatorio del mercato immobiliare (OMI). Broad territorial coverage, but lack of historical depth (since 2002) and data published with a delay of a few months. • All in all (Bank of Italy statistics • CI is the source that is best suited to analyzing medium-term developments. It is used in BI (Zollino, Muzzicato and Sabbatini, 2008) to compute an index since mid-1960s • OMI is important for the wealth of information provided and territorial coverage. It is used in BI (Cannari and Faiella, 2007) for estimating households’ wealth.

  5. (b) Non-price information • Statistics on building permits are released, but only at an annual frequency and with a delay of 1.5 years • Information on transactions is available (OMI), but with 3-4 months delay. Furthermore, data are semi-annual (quarterly data only on an experimental basis) • Information regarding how long it takes to sell a dwelling, the percentage of discount on the initial price and so on is not collected systematically. • (c) Qualitative (high-frequency) surveys • ISAE monthly surveys. (1) Question on the households’ intention to buy a dwelling (poor leading properties of the answers); (2) business climate of building firms (what about market transactions of residential dwellings?) • New initiative to fill the gap for the residential market • Early 2009 Bank of Italy and Tecnoborsa launched a new quarterly survey to collect (timely) information on the residential housing market.

  6. 3. Bank of Italy-Tecnoborsa survey /1. General characteristics a) Quarterly survey (since January 2009) that gathers opinions of real-estate agencies on the residential market through a questionnaire (short, simple, structured). b) Survey outsourced to an external company (Questlab Srl)c) The data are collected in the month following the end of the calendar quarter (Jan, Apr, July, Oct); d) The reference quarter is the last calendar quarter (answers must refer to it); the reference population consists of real-estate agencies (source: Istat)d) The sampling design is stratified, with a total of 34 strata representative of 4 national macro-areas (North-West; North-East; Centre; South and Islands). Purpose Qualitative data are useful to fill the informative gap for a set of variables, such as prices, transactions and time for selling, on which quantitative statistics are either available with a considerable lag or missing at all Main general characteristics

  7. Bank of Italy-Tecnoborsa survey / 2. The methodology a) Collection of the data • Initial contact by email; questionnaire filled in through the web (most used) or sent by fax • A leading Confederation of real-estate agents (FIAIP) provided the main list of agencies to extract the sample; strong cooperation to “contact” the agents (information, etc.) b) Sample design (34 strata) and reference population • 15 Italian towns with population of 250,000 or more • 15 areas around the towns at letter (a) forming the hinterland • 4 national macro-areas (North-West, North-East, centre, South and Island) excluding the 30 strata above. • Note: each stratum contains a minimum # of units; then, the sample size is large enough to ensure that s.e. are acceptable; the basic # of units per stratum is proportional to the number of transactions recorded in 2006. • Each real-estate agency in the sample is assigned a weight given by the number of firms in the stratum cell to number of firms in the sample c) Contacts/response rate Around 3,500 agencies are reached; target 1,500; actual participants around 1,000 (still relatively low response rate)

  8. Bank of Italy-Tecnoborsa survey / 3. The questionnaire (a) # of months to sell a dwelling; (b) unexecuted mandate to sell and new mandate;(c) main reasons not to renew a mandate; (e) percentage of sales financed by mortgages and their incidence on transaction prices In the first quarter of 2009 evidence of a slump in the housing market Section 1. The outlook for transactions Table 1

  9. Section 2. Prices (a) Price developments in the reference quarter (qualitative and quantitative);(b) Transaction price vis-à-vis offer price (percentage of discount) Table 2 Background issue: how to ask for prices in quantitative terms? y/y vs. q/q percentage changes? Intervals or number? Only quantitative, qualitative, both? Actual price vs. perceptions (answer tend to concentrate in classes 0, 5, 10, ..)

  10. Section 3. Short-term perspectives (a) Prices (next quarter); (b) Number of mandates to sell (next quarter); (c) General outlook of the residential market in the local market (next quarter) and the national market (next quarter and next 2 years) Table 3

  11. Bank of Italy-Tecnoborsa survey/ 4. Open issues and future developments Open issueDifficulty in increasing the response rate (real estate agencies are not used to answer questionnaire). The process of interviewing agencies takes too long (just less than 1 month)How to collect quantitative information? (prices and transaction) To be assessed: informative content of the answers, considering that the survey was launched in “exceptional times”“Competition” from real-estate organizations/groups which carry out their own surveys(they do not perceive yet this survey as something important for their activity)Future developmentsAd hoc section to investigate specific issues“Confidence indicator” (a few more observations are needed)

  12. Table 1 (per cent of real-estate agencies; reference quarter: January–March 2009) Main reasons for cancelling contract with agent Lack of offers due to “too-high asking prices” main reason for contract cancellation, followed by “offers dismissed as too low by sellers” and “buyer’s difficulty obtaining a mortgage” Selling times stable at around 7 months Approximately 70% of purchases financed with mortgages (stable) Ratio of mortgage to house price 71% Property selling times House purchases and mortgages (per cent; reference quarter: January–March 2009) Back

  13. Table 2 (per cent of real-estate agencies; reference quarter: January–March 2009) Property selling prices Evidence of more frequent reductions in prices (balance 59.9 compared to -54.8) ...also with respect to the seller’s asking price (average reduction increase) Prices 11.8% below the seller’s asking price (compared with 9.5%) Sign that prices might gradually decrease in the next months. Difference between selling price and seller’s first asking price (1) Back

  14. Table 3 (per cent of real-estate agencies; reference quarter: January–March 2009) Outlook for the housing market General situation of the housing market in Italy Estate agents are becoming lest pessimistic about the short-term outlook for the housing market, both locally and nationally. Their medium-term expectations for the market at national level show some improvement on the previous survey. Back

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