Is there a risk of real estate bubble in Italy?
We continue from the first part where we spoke of the risk of a housing bubble for the Italian market due to a number of critical issues that are expanding and with the adding to other problems that they can cause in the future, problematic situations for the market of the brick.
Housing bubble in Italy? The risk factors.
The reduction of the required of properties to purchase and consequently, a drastic reduction of the value of property in Italy, could be caused by the summation of several factors, including:
Less avaible income
One of the biggest problems in Italy, is the lower earning power and of spending by millions of individuals and families that affects the possibility of savings and to make investments, including real estate and to support mortgage loans in the future.
Credit Crunch.
The credit crunch that is much stronger now, no longer allows to a large part of households and businesses to access loans for the purchase of property.
Keep in mind that a good part of the property for industrial use as well as residential and commercial, are generally purchased with the help of bank loans and without this credit tool, most of the real estate purchases are postponed or canceled.
An increase housing supply over the demand.
An increase of the supply of real estate resulting from a greater number of properties sold on the market for following motivations:
Growth of taxes on real estate since 2012 and therefore, the properties will be less attractive as investment and more expensive to manage, with the consequence of causing the reduction of demand for real estate and also, find on the market many properties that are been put up for sale because of the difficulty to cope with new taxes by the owners.
In addition, there is always a risk of a further capital tax additional at the end of 2012 or 2013 that could be introduced to cope with budget problems of the country.
The increasing difficulty on the part of Italian families to pay the service charges (more than 20% is delayed or defaulted in payment) and therefore is increasing the risk of having to sell the property owned to meet these expenses.
Defaults in the payment of loans
The crisis and the difficulties that families and businesses can be found at this time, has increased the number of defaults in the payment of mortgages.
There are now hundreds of thousands the risky lending in the real estate sector.
In the event of insolvency, hundreds of thousands of properties, should be sold by banks, thus causing a further oversupply.
Debts of individuals and businesses.
At this time, there are millions of the tax debts in Italy and a large part of those, are relates to mortgages on properties and many of these debts, have high interest rates and growing and can not be honored and thus, will force property owners to put in sell the properties to cover debts.
Otherwise, the property will be seized and offered for sale by creditors in any case.
We continue this analysis in the next episode with the verification of other critical issues that affect the Italian property market.
Continue.
