The real estate sector closed the first week of the year with a sharp decline, discounting the rise in Treasury yields to new records and the prospects of a more prudent policy by the Federal Reserve. Europe will also be faced with difficult decisions, in the dual attempt to revitalize growth and contain inflationary pressures. All factors that weigh on the real estate market.
ECB and Fed shift focus to prices
Also the ECB monthly bulletin drew attention to theincrease in government bond yields of the Eurozone, which widened the spread compared to Treasuries, after the US elections, including the German Bund, which moved into positive territory. A trend that discounts a more unbalanced fiscal policy of the new Trump administration, which will take office on January 20th.
Meanwhile, Eurozone inflation has widenedsettling at +2.4%, after the +2.2% recorded in the previous month, but is in line with analysts’ expectations.
As for the Fedthe minutes of the latest monetary policy meeting have strengthened the expectation of a flare-up in inflation, due to trade and immigration policies. To such a point, that the FOMC judged it “advisable to slow down the pace of monetary policy easing” and “continue to move gradually towards a more neutral policy position over time”. An approach endorsed by strong data on the labor market released on Friday (+256 thousand jobs created), which caused Treasury yields and the dollar to skyrocket.
Signs of slowdown in the real estate market
On the macro data front for the week, note the release, on Tuesday morning, of theHalifax housing market index in the United Kingdom, which recorded annual growth of 3.3% in December, lower than the 4.7% of the previous month.
From the USA, only the weekly statistics on the mortgage market real estate, which still show a decline of 3.7% after the -12.6% of the previous week, against a further growth in thirty-year mortgage rates to a new record of 6.99% from 6.97%. A raise which followed that of Treasurieswhich have reached new records: according to T. Rowe Price analysts it will also be possible to see the 10-year yield rise first to 5% within the first quarter and then to a peak of 6%, on the prospect of a more prudent attitude from the Fed .
Looking at sector studies, a recent report on the real estate market by Pwc indicates that 2024 is the year of recoverywith a value of the real estate market that has risen to 635 billion dollars, driven by residentialwhich dominates the industry with over $516 billion. A recovery that is also reflected in Italy, where there was a 41% increase in transaction volumes compared to 2023, the highest growth among European nations, at 8 billion euros.
According to the latest Istat report, in the third quarter of 2024, there was a cyclical increase in both the number of homes (+2.2%) and the usable habitable surface area (+2.4%). Non-residential construction, however, recorded a decline of 6.3% compared to the previous quarter.
The performance of the sector on the stock exchange
The real estate sector experienced a negative week at European level, where the index Stoxx 600 Real Estate it lost around 4% on a weekly basis.
A similar performance was achieved by Italy, where the index FTSE Italia All Share Real Estate suffered a loss of over 2%, in contrast to the FTSE MIB market index which recorded an increase of almost 3%.
Among the real estate companies listed on Piazza Affari, the best performance is still that of Remediation which makes a balance of around 7% on a weekly basis. They also shine in the sector Gabetti (+2%) e Living In (-1.6%), while on the negative side they are notable Brioschi (-1.4%) e Aedes (-0.6%).
