Italy house price crash: Italian property costs had yet to recover 2008 crash losses when cost-of-living crisis hit
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Loading... - Masika Khaled
- 27 Oct 2022
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Italy’s house price crashed in 2008 as the euro debt crisis took a toll on the country’s economy. More than a decade on, house prices in Italy remain the lowest among the European Union’s member states – although prices have started to recover from the Covid-19 related slump in 2020.
However, rising inflationary pressures stemming from the Russia-Ukraine war that has elevated energy prices and the European Union Central Bank’s late but hawkish rate hikes have clouded Italy’s housing market recovery.
Will Italy’s house price crash again this year and beyond?
What is a housing crash?
A housing market crash is explained as a sharp drop in house prices following a period of high prices.
A housing market crash often follows a housing bubble, which occurs when the average price of a home is significantly higher than its underlying value, typically due to rising demand and limited supply. Low mortgage rates, increased welfare, and easy access to bank loans are just a few of the factors that can drive up housing demand.
The bubble may burst if construction companies continue to build new homes even after demand has begun to dwindle and sales have slowed.
When a central bank raises its benchmark interest rate, it can make finding new buyers more difficult. Higher interest rates can lead to increased mortgage costs, causing financial hardship for current homeowners. Homeowners who are unable to pay their mortgages may face defaults and foreclosures, resulting in an increase in the number of homes on the market.
Economic downturns, particularly recessions, can result in job losses, decreased savings and fewer available jobs, all of which reduce demand for housing.
History of house crashes in Italy
According to the Global Property Guide, house prices in Italy fell 1.9% from the second half of 2008 to 2011 amid the global financial crisis caused by subprime mortgage defaults in the US. The decline in house prices worsened dramatically from 2011 to 2014 as the euro sovereign debt crisis affected Italy’s sluggish economy. Read More...
