European models of home ownership: so how do they do it in Italy?
Even the Italian obsession with bricks and mortar has fallen foul of the market, writes Paddy Agnew
When we arrived in Italy more than 30 years ago, one of the first things that struck us was the national passion for il mattone, otherwise known as "the brick" or housing. For investment purposes, every nationality loves the property market, of course, but what seemed remarkable about Italians was the extent to which they appeared to value property investments above all other investments.
One of the first pieces of useless information that the newly arrived, would-be Rome correspondent accrued was the remarkable consideration that the Italian property market had remained stable from the 1930s all the way through World War II. Even if the world was literally falling about your ears, il mattone still held its value.
However, now, for the first time in long living memory, Italian residential property has begun to lose value. Where Hitler and Mussolini failed to have an impact, global recession and a struggling Italian economy have struck with a vengeance. Between 2010 and 2017, the value of Italian real estate has, on average, dropped by up to 20pc.
The net result is that the value of the total Italian real estate market has declined from €5.3bn to €4.5bn in the years 2007 to 2016. All of this is in sharp contrast to Italy's EU partners which, according to Eurostat, have all returned plus figures for the last year with France registering a 3.5pc hike, Germany +3.7pc, Holland +7.3pc, Czech Republic +14pc, not to mention Ireland on +10.6pc.
This is all in sharp contrast to 30 years ago. For someone who had just emigrated from the economically-challenged environment of the pre-Celtic Tiger Ireland of the early 1980s, the Italian property market was mesmerising. Italians, like the Irish then and now, laid a huge emphasis on home ownership. (Currently, 70.3pc of Italians own their own home, compared to 69.8pc of the Irish).
The difference for us back then, though, was that people seemed to have so many "homes", stretching from a second house by the sea in Sabaudia to a third one in the quiet of the Umbrian countryside and including, of course, a little flat in Trentino for the winter skiing. In today's affluent Ireland, holiday "homes" in places ranging from the Alps to the Algarve and from Montpelier to Malaga are hardly a novelty but back in those days, second, third and fourth houses struck us as very benestante (well-off).
That aspect of the Italian market still holds good today with at least 18pc of Italians owning second (and third and fourth) dwellings in Italy's 34-million strong property market. Furthermore, OECD calculations suggest that Italians have up to 18 times as much invested in real estate as in securities of all kinds. (By comparison, the ratio in the USA would be two to one).
One of the first observations we made about our new-found homeland was that, unlike the Irish, Italians let nothing go, sold off nothing. Even if the years of the Italian post-World War II economic miracle of the 1950s and early 1960s had seen a serious migration of workers from the rural south to the industrialised north and from the jobless countryside to expanding cities, no one willingly let go of the old family property in the Abruzzo, Le Marche, Tuscany or wherever.
Time and again, you would meet colleagues who always seemed to have "family" olive oil, wine and heaps of fruit and vegetables thanks to the family property where maybe an old uncle, a grandfather or a cousin continued to work the land. There was no Irish-style rejection of the inhospitable, stony ground. No shutting the door and walking away, never to return.
Then, too, the manner in which the determined, hard-working post-World War II generation opted to provide for their children came as a surprise. From the day a baby was born, parents would start saving in order to buy apartments for their children for the day when they would eventually marry. In the 1980s, few Italians took out, or had to take out, a mortgage. Mammy and daddy provided.
In our village, Trevignano Romano, just north of Rome, mammy and daddy still provide. The other day, I met Giovanni in his father's grocery shop. He has been working in Peru for the last two years and has come home with a soon-to-be Peruvian wife. Mammy and daddy have an apartment all set up waiting for them.
Or there is our old friend, Maria. I tend to see her lakeside family home as an ongoing work in progress, a place that keeps growing like a mushroom. First, she converted her garden garage into a now very successful restaurant, then she added on a whole new "extension" cum extra apartment and then she moved out of the place entirely, leaving the family home divided between her two daughters. All done with the sweat of her brow and not a mortgage in sight.
Of course, Maria is the exception rather than the rule, benefiting from the value of living in a rural reality close to the Eternal City which guarantees a constant clientele for her restaurant and beach business. Trevignano is obviously a classic spot for "second" weekend houses. If I look to my left, to my right and straight ahead, I see houses that are used for maybe 10 days in the year. This is good for my peace and quiet but not necessarily good for those struggling to get onto the property ladder.
For others in today's Italy, mortgages, or the difficulty in obtaining one, have become a very sore point. With an economy that has been "sluggish" for the last 20 years, with unemployment at 11pc and with youth unemployment at 35pc-50pc (or higher depending on the region), the property market is inevitably in difficulty. Mammy and daddy have been overtaken by the cost of living in a standardised Eurolandia economy where the only thing not to have gone up is their salary. Many can no longer provide for their children in the way their parents provided for them.
Their children, denied the security of the old posto fisso (permanent and pensionable job, preferably in a state entity where the salary was modest but certain), today have to apply for mortgages.
The problem is that Italian banks will not grant mortgages to freelance, contract professionals, but only to those on a contratto indeterminato (permanent and pensionable). Even when a bank agrees to grant a mortgage, it will almost never be higher than 80pc of the property's value.
The "subprime" mentality never caught on around here. This is an obvious Catch 22 situation which sees more than nine million people blocked from getting that infamous first foot on the property ladder.
Another result, not surprisingly, is that 50pc of Italians aged 25-34 find themselves, often reluctantly, living with their parents. By contrast, 3.7pc of Danes and 10.1pc of French people from the same age bracket live in the parental home. Not surprisingly, too, only 9pc of the under-35s are house owners.
The Italian real estate market gives expression to a number of anomalies. Even if there are approximately seven million empty dwellings on the market, Italy still continues to build at the rate of 30 hectares of cimentification per day.
Environmentalist movements such as Legambiente argue that this is a mistake, while a popular slogan recites: "Too many houses without people, too many people without houses."
Then, too, many of these seven million houses are not owned by private individuals but rather by banks, investment funds and business syndicates. Housing activists argue that such property owners should be obliged to rent their buildings at tiered prices. This is a sort of rent control that recalls the old days of equo canone, when rents were very affordable.
The activists may have been influenced by the example of Barcelona mayor Ada Colau, who has instigated a system whereby dwellings that remain uninhabited for more than two years may be subject to a €315,000 fine.
Ironically, in the meantime, abusivo building - that is, without planning permission - blasts ahead. Environmentalists estimate that 66pc of buildings on the Calabrian coast and 50pc of buildings on the Campania and Sicily coasts are illegal.
As Italy heads into the second half of 2018, it would be hard to be optimistic about the property market. For the first time ever, the number of Italians looking for a house to rent outweighs the number looking to buy. The Nomisma Osservatorio points out that while in 2010, 77.8pc of Italian families owned their houses, today that number has declined to 70.3pc.
It is not that il mattone has lost its old, all-embracing appeal. Rather, the property market simply reflects the socio-economic reality of modern Italy, a western industrial power in relative decline.
To use the words of U2, Italy is "stuck in a moment" and "can't get out of it".