Italian Economy Analysis In The Light Of Crisis

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Italy was called the Sick Man of Europe because its economy was growing really slowly. It was only the start, though, of the catastrophic commercial situation that the country faces today. But the housing market isn’t among the most significant reasons of its feeble economy like in Portugal. Italian real-estate stock is still weak, but it does not suffer as much as the other sectors of Italian economy touched by the hard measures.

Economy: Very Bad Numbers

Italy’s economy has been one of the weakest in the Eurozone since the monetary crisis boomed. In 2008, its GDP growth was negative and the third lowest among OECD nations. In 2010, the GDP ultimately grew, but remained among the lowest (7th in OECD). Italy’s debt is 120 per cent of its GDP, the fifth highest in the world, and its govt deficiency is 5.1 % of its GDP. All of these numbers have caused investors to worry and frozen the Italian market, leading to bond yields going up and exchanges going down.

Though the European Central Bank has helped Italians by buying large quantities of their bonds, the economy is still bleeding. Italy’s bankruptcy is the EU’s nightmare: its economy is 4 times larger than Greece and Ireland’s economies combined. While the ECU can help Portugal, Greece, and Ireland by rescue loan, it can’t find enough bucks to help Italy’s great economy. S&P’s has downgraded Italy latterly, causing another day of turmoil in Western european markets.

“The point here is that all of the news out of Europe is horrible these days and this is but another in what shall be a long line of ratings cuts for the PIIGS, one at a time,” said Dennis Gartman, editor of The Gartman Daily Letter.

Italians base their hopes on the undeniable fact that the Italian crisis differs from Greece because a lot of the debt is owned by Italians, which allows for more suppleness. The most recent government measures should shave more than 54 billion Euro Bucks off Italy’s deficiency over three years thru spending cuts, tax walks (including raising the sales tax from 20 % to 21 percent), and accelerating the reform of the states high-priced allowance system.

Foreigners buy houses in Italy more than in other PIIGS states, and not only as the Italian market is so huge. Italian housing is also very enticing because it’s a well-developed country with pretty landscapes, a rich history, and fascinating cultural specifics. Italy has the eighth highest standard of living and is the 23rd most developed country, so world investments in property are another driver of the housing market. However , the current situation has brought doubt into Italian markets, and backers are scared of investing in such a dangerous country.

The ECU permits retired folks to retain many state benefits regardless of where they live in the Union. This has made retiring to a warmer climate a chance for many Europeans, so many buyers of Italian property are retired folk from other ECU states.

Housing Stock: Deficiencies

Housing stock faced heavy issues in Italy even before the debt crisis. These included poor quality, about one quarter of housing requiring major modernising, an absence of investment emphasis on the maintenance and rebuilding of existing property, and rental limitations leading to speculation.

Non-public leasing isn’t popular in Italy. Due to rent controls, the rental market yielded poor returns. The controls were cancelled in 1978, but thirty years on, only 20 % of the Italian home market was rental. Today, hire costs can only be increased yearly by 75 % of the price of living index if an owner issues the standard four-year contract. These restrictions cause most landlords to like to ‘ front-load ‘ long rental contracts. Rents are high, and voters prefer purchasing to renting.

Curiously the Italian mortgage market is littler than those in other European countries: at below 20 per cent of the GDP in 2008, seriously lower than the EU’s average of 50% of GDP. The main reason for this figure is the length and cost of the loan recovery process in Italy.

Italian Housing Today: Start of Slow Recovery?

After growing more than 70 % from 1998 to 2008, Italy didn’t experience pointed house price falls with the global financial crisis. Italian house prices fell by. 1.5 percent in 2010 and 1.2 % a year before. The latest report by Nomisma, a well known Italian business research institute, shows that the residential market is tentatively recovering and leaving the cycle of decreasing home prices behind. The volume of sales grew by 3.4 percent in 2010, and the expansion is also anticipated in the second half of 2011. This tends to imply the beginning of recovery, but while the economy is in difficulty, the home market is in peril as well.

David Tsegai is Calgary real estate broker and Calgary condos pro

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