Green shoots in Italy’s hous­ing mar­ket in­di­cate a very grad­ual re­cov­ery

Financial Mirror (Cyprus) - - FRONT PAGE -

Italy’s hous­ing mar­ket is in the nascent stages of a re­cov­ery, Moody’s In­vestors Ser­vice said in a spe­cial re­port. Mildly pos­i­tive macro con­di­tions, low in­ter­est rates and low house­hold debt lever­age will help sta­bilise credit trends for se­cu­ri­ties backed by res­i­den­tial mort­gages into 2016.

“Some signs of re­cov­ery are emerg­ing, but its pace will be muted: New mort­gage ap­pli­ca­tions soared by 42.5% year-on-year. House prices have fallen by 19% since their peak in 2008, but trends sug­gest that they are slowly sta­bil­is­ing,” said Ca­role Bernard, a se­nior an­a­lyst at Moody’s.

“In the longer term, a slower pop­u­la­tion in­crease, muted eco­nomic growth and high un­em­ploy­ment will weigh on hous­ing de­mand. This points to house prices stay­ing rel­a­tively stable in 2016, which holds back a more pro­nounced re­cov­ery for the mar­ket,” she added.

Moody’s said that dur­ing the debt build-up in the boom years, the Ital­ian hous­ing mar­ket was more re­strained than Spain and Ire­land. Pri­vate house sales were up 6.2% year-on-year in Q2 2015. Lend­ing is also on the rise, and un­der­writ­ing stan­dards have re­mained strong, with loan-to-value ra­tios for new mort­gage loans in 2014 av­er­ag­ing 67%. House­hold debt 62.6% as of Q4 2014.

The rat­ing agency’s re­search shows im­proved mort­gage af­ford­abil­ity is driv­ing signs of re­cov­ery. Fall­ing house prices post-cri­sis and low in­ter­est rates have trans­lated into i mproved debt af­ford­abil­ity for new buy­ers. In turn, mort­gage ap­pli­ca­tions have risen and the trend in to­tal gross mort­gage lend­ing for the sec­tor has im­proved.

Moody’s an­tic­i­pates a mod­er­ate im­prove­ment in ar­rears in 2016. Over


to the past 12 months, data in­di­cate that Ital­ian res­i­den­tial mort­gage-backed se­cu­ri­ties (RMBS) lagged be­hind other Euro­pean coun­tries. Over­all, Ital­ian RMBS have ex­hib­ited stable to mildly de­te­ri­o­rat­ing per­for­mance on av­er­age, with a few out­liers still show­ing in­creas­ing delin­quen­cies and de­faults. In con­trast, RMBS coun­tries in other pe­riph­eral mar­kets like Spain and Ire­land, which de­te­ri­o­rated most in the cri­sis, showed strong im­prove­ment over the same pe­riod.

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