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Italian Real Estate Expecting Increased Investor Appetite

News Posted On: 08 October 2012

A 0.6 per cent increase is expected in commitments from institutional investors in Italy to real estate as figures rise from 6.9 per cent to 7.5 per cent. The latest research conducted by the EU Association for INREV (Investors in Non-Listed Real Estate Vehicles) suggests that half of the new investments will be allotted indirectly with around 10.7 billion Euros of these investments being forwarded to real estate funds that are not listed.

The research says that total property investments in Italy amount to almost 38.5 billion Euros or 6.9 per cent of the total real estate that can be invested in the Italian real estate universe. Investors find real estate investment as an easy way of attaining crucial diversification benefits as low volatility is offered compared to the other classes of assets, especially in times of financial crisis. 

Appeal of non-listed areas

While most of the real estate deals are still conducted directly, the Investor Universe Italy Survey suggests that appeal of the non-listed areas is growing due to the benefits they offer with regards to access to high-quality management expertise and diversification. Indirect investment in Italian real estate is worth an estimated 13.2 billion Euros or 34.4 per cent of the total investable land in the country.

Non-listed funds are the source of most of these investments. The research and information director of the survey, Casper Hesp says that a class of assets in Italian real estate is coming of age and investors are aware if the overall advantages they can benefit from. Investors also focus on the fund managers’ quality as well as the quality of underlying assets before investing in the non-listed division.  

Types of investors and their preferences

According to the survey, private pension funds and insurance companies dominate the property market in Italy. Insurance companies account for around 19 billion Euros in real estate transactions, which is almost 50 per cent of the country’s investment activity. Pension funds that already exist hold around 4.5 billion Euros of real estate, which accounts for 11.7 per cent, bank foundations own around 1.2 billion Euros (3.1 per cent) worth of real estate and private pension foundations invest 13.8 billion Euros (35.8 per cent).

Apart from holding a vast majority of the real estate, insurance companies in Italy are also the top buyers of institutional properties in non-listed property funds that accounts for around 58.8 per cent of the country’s total. Pre-existing pension foundations hold 7.3 per cent of the property, bank foundations hold 5.5 per cent and private pension funds account for 28 per cent. The Bank of Italy revealed that 39.7 billion Euros was the combined value of non-listed property funds last year, with 303 being the precise number of such funds.

Fund styles are split broadly as investors are opting for various different styles. All respondents of the survey expressed their interest in investment through core funds. 27 per cent of the investors deal with opportunity funds while 45 per cent favour value added funds.

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