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Talking Cityzen blog: creation of unsold stock in Italy by Alberto Celani

EMI invited Alberto Celani to write a blog about the problematic housing market in Italy Alberto Celani is born and lives in Milan, Lombardia. He is graduated in Logistics and Production Engineering, specialised in Building Environment Science and Technology Engineering. His thesis was about unsold stock of housing in Italy. He works as consultant in management and strategy, mainly in sport-related projects. He is a licensed journalist since 2007, he cooperated with the major media outlet ‘Observers of France24’ and with several other media outlets both national and international.

Foto Mendrisio

 

Alberto Celani: Italy is living the global crisis as a country which didn’t think its system was so modern and highly finance-connected to be affected by the financial collapse of the main US institutions in 2007. Globalization was just a question mark in Italy in 2005. The traditional Italian system was based on local banks, high levels of family savings, a strong industrial system based on small and medium firms ran by families since generations. According to ISTAT (the Italian national service of statistics) in 2008 7 families out of 10 (68.5% of the total) own the home in which they live, only 18,9% choose renting as solution. Some other research institutions like CENSIS (Social Investments Research Centre of Italy) reported that 87.1% of families own their home and 40% paid the total amount without any form of bank loan.Industrial districts have been the base for Italian economics for ages, being part of italian tradition based on high quality, small amount of pieces produced in the fields of textile, fashion and in furniture industries, mainly.

The Italian way in housing

The Italian way, based on 200 industrial districts, excellence for growth and competitiveness had the idea of  “agglomeration” as main spatial model. If we have a look on an Italy map representing districts we can see a polka-dot image demonstrating how strong has been the idea of “agglomerate” to serve the customer with a product “made by people inside the dot for customers outside the map”. A district is a socio-territorial entity based on the idea of network and community, values and norm: small local enterprises are located in the area manufacturing consumer goods. Flexible specialization of the worker, trust and reputation at any level are the basis of clustering for competitiveness. This model now is in crisis, globalization entered into each  dot of that map relocating production to the low-wage labour markets in Eastern Europe (in the first part of the process) and to  the Far East (in the second part).

 

Logistics replaced manufacturing and districts are suffering from a Detroit-like crisis. US people moved from Detroit, like they did from Wild West abandoned towns but it’s nearly impossible to leave your villa in the districts in Italy, for several reasons: first of all nobody will buy it. It was common to consider the district model as totally based on manufacturing jobs and on what is called “real economy” able to provide a high level of employment and the dream for each employee to run your own business one day and change your status, even buying a villa with a huge garden swapping your flat even earning money from the sell of it compared with the price you paid it years before because housing market . Housing market has been connected with the industrial development for many reasons, first of all having a secure salary from the firm you work in gives you enough confidence to buy a home as first step to improve your condition and your status; a homeowner worker is more keen to stay in the local community and keep the district alive.

About the region Brianza

Brianza is a zone outside Milan, some of us know it from the nearby F1 Grand Prix of Monza . Brianza is one of the richest areas of Italy and one of the most powerful industrial districts. Usually it’s considered as the example of urban concentration (only Naples is has a higher ratio in that field) and land consumption. Urban Sprawl means building new homes (and some industrial facilities) eroding the green field. This model of urbanization connected with districts growth carries a not sustainable development. New permits to build from local authorities enforced the link between development of districts and massive urbanization of the area around the main city. During the peak of the market (in 2006 and before) the main part of investments have been driven into real estate market, building or trading homes were more profitable than manufacturing goods, local banks followed the stream depriving traditional industry of cash feeding the trend of building homes to fulfill the desire of owning a housing solution by any Italian. Italians have been blocked by the model: if you own a flat your are less keen to live in another city moving with your family, mortgage is an higher reason to keep living in your suburb even if job security assured by the districts in a pre-crisis period no longer exists.

 

Unemployment followed this process because of the crisis of the districts and the lack of strategic investments in innovation by the past of the system and created a huge amount of unsold stock of housing. Prices don’t fall because it’s nearly impossible to know how many new homes are not matching the customer needs into the market nowadays in Italy. Some homes won’t meet the customer’s need at the price they are listed now, some solutions are not designed for the sustainable world (Energy class of buildings is one of the most rated price driver in the housing market according to potential buyers). Locating new homes in the urban sprawl, far from the city (maybe close to a far-to be deprived industrial area) was a choice of Urban Finance (changing land destination from Agricolture into Building area) to maximize investor’s profit, now it’s the main reason of the massive amount of unsold stock. Fuel in Italy is nearly 2 euros/litre, unemployment reaches his top, credit is frozen and spread increases every day. These factors cannot ease the erosion of the unsold stock around the Urban areas. Swapping your old home for a bigger one is no more a process of growth because it has been blocked by the factors analyzed before.

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