Italy's real estate market stands out as one of the most distinctive and unparalleled globally. The country is renowned for its savers and individuals with substantial wealth, boasting an incredible percentage of homeowners.
According to official data from CENSIS, Italy's foremost center for social investment studies, a staggering 70.8% of Italians own the homes they live in, while 8.7% enjoy rent-free housing, leaving only 20.5% in rented accommodations. However, this seemingly robust real estate panorama is marred by an alarmingly high rate of mortgage debt defaults, primarily linked to property mortgages.
The Paradox of Italian Real Estate
This paradox becomes evident when considering the solid financial footing of Italian citizens alongside the significant prevalence of property-related foreclosure procedures and judicial sales.
While the majority of Italians possess valuable real estate assets, this wealth is significantly undermined by ongoing expropriation procedures and court-ordered property sales. These factors exert immense pressure on property values and, to a certain extent, challenge the very concept of a functioning real estate market in Italy.
Unveiling Non-Performing Loans (NPLs)
The heart of this challenge lies in non-performing loans (NPLs), often referred to as "crediti deteriorati" in Italian. NPLs represent those bank loans that debtors have failed to repay for an extended period.
According to the European Banking Authority, the NPL market in Europe has reached a staggering €720 billion. Italy, in particular, is expecting fresh waves of deteriorating credit, amounting to €82 billion, with a peak forecasted in 2023. The NPL market is expected to maintain high volumes in the coming year, with Non-Performing Exposures (NPEs) projected to reach €377 billion by the end of 2024.
Unlocking Opportunities in NPLs
Traditionally, NPLs have been an investment opportunity reserved for institutional investors. However, recent legislative reforms in Italy have made them an ideal investment solution for individuals and companies alike. These reforms are set to transform the market and create opportunities for those willing to explore the world of NPLs.
In fact, Italy recently introduced a reform known as the "Cartabia reform." Enacted on February 28, 2023, this reform promises to transform the national real estate market.
While its provisions for real estate auctions are set to take effect in June 2023, its primary objective is to bridge the gap and introduce mechanisms for direct sales within real estate foreclosure procedures.
Essentially, it aims to open the doors of the free market to bank mortgage debt, known as NPLs (Non- Performing Loans), where thousands of properties serve as collateral for unpaid bank loans.
This market segment, potentially valued at over €200 billion within the Italian banking system, includes thousands of real estate properties that could potentially be sold through Italian court channels. With this reform, Italy seeks to create synergy between the market for judicial sales and the open market.
This reform will incentivize greater advertising of sales, thereby stimulating competition among a larger audience of individuals and investors. This increased openness and competition will encourage banks to place their properties on the market to recover the substantial unpaid capital still locked within NPLs.
In practical terms, this means that the number of properties available to investors will continue to rise in the coming years. Therefore, it will become even more critical to navigate the numerous opportunities available.
Relying on real estate consultants experienced in both the open market and judicial sales market will be essential, as the boundary between these two worlds gradually blurs.
The Italian real estate market is a paradoxical landscape, offering both unique challenges and exceptional opportunities. While the country boasts a high rate of homeownership and solid wealth, the prevalence of NPLs exerts substantial pressure on property values.
Understanding this complex market requires navigating the intricacies of NPLs, which, despite traditionally being associated with institutional investors, are now accessible to a broader range of investors due to recent legislative changes.
In conclusion, investing in Italian real estate remains a promising endeavor, but it demands a profound understanding of the local market dynamics and regulations. As the Italian real estate landscape evolves, it presents a wealth of opportunities for those who are well-prepared and seek expert guidance.
(Attorney Andrea Mannocci is a highly experienced English-speaking attorney specializing in real estate and banking law and his office is based in Tuscany, Italy. With over a decade of expertise in Italian real estate and foreclosure procedures, He offers assistance as an independent consultant to individuals worldwide interested in investing in the Italian real estate market. He helps protect them from bureaucratic and linguistic challenges and provides support to investors and individuals looking to navigate the Italian real
estate and banking landscape. His office offers assistance as outlined on their website at
www.mannocci.law or through the WhatsApp Business account managed by the Front Office assistants, reachable at +39 351 6476379.)