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Siena is for renters, Biella is a town for buyers

by Vito Lops

The state of health of the real estate market in Italy can be measured based on house prices. Or by the trend in rents. Or, even better, looking at both numbers. By correlating these two figures, you can calculate the “housing market dynamism index” in a certain geographical area.

The simulation carried out by the real estate portal “Idealista” which looks at this flexibility index in 22 cities, shows that the most difficult situation is in Siena: in the Tuscan province, 29 years-worth of rent is needed to buy your own house (in Milan it’s 16.6 years)

Why do you need almost double the time in Siena, in terms of rent, to buy a house?
“The figure is in no way random,” said Vincenzo de Tommaso, head of the research office at Idealista. “Siena has suffered the repercussions of the banking crisis linked to Monte dei Paschi’s difficulties. The loss in job posts has been reflected in a general fall in attractiveness of the city, penalizing the development of rents. The dynamism of Milan, on the other hand, thanks also to the positive legacy of the Expo fair, pushed up the price of rents, making the relationship with the price of houses more balanced, which is showing a certain resilience.”

How should this special index be read therefore? The higher it is, the more it signifies that something is broken in the subtle balance between the value of rents and the value of houses. The index however should be analyzed case by case, seeing as every city is a unique case.

For example, the position of the town of Biella in Piedmont, northwestern Italy, at the top of the rankings with a relationship of 12.1 should not mislead. A relationship that is too low can signal the opposite problem to Siena’s, or that faced with stable or slightly lower rents there has been a very sharp drop in the price of houses. In the Piedmont province, the value of houses has fallen on average under €800 per square meter. For that reason, less years than elsewhere, in terms of rent, are needed to purchase a house. But that does not mean that we are facing a dynamic and profitable real estate market from the investment perspective.

Naples in southern Italy also does not come out well in the rankings, with a reading above 24. “The problem of the Campania capital is linked not so much to house prices, which are holding up, but to the fall in rents due to uncertainty caused by the high number of tenants who do not pay, which has an impact on rent levels,” said De Tommaso.

In the comparison between the big cities, Rome loses to Milan because in the capital, 20 years of rent is needed to buy the same house. Rome has seen a bigger fall in house prices over the last 10 years of crisis, seeing as a real bubble had developed.