What does the Italian referendum mean for real estate?

The Italian referendum’s impact on Europe’s economy has been “exaggerated” and “blown up by the market”, according to Toscafund chief economist Savvas Savouri. Italian prime minister Matteo Renzi’s resignation following his failure to secure a majority in a referendum on constitutional reform saw the euro fall overnight to a 21-month low against the dollar of $2.10. However, this morning, the currency rallied to trade at $1.10. Savouri said: “My own belief is that the whole issue has been exaggerated. It was being blown up by the market as we call it, or the consensus, and the move has been less than I thought that it would be, actually along the lines of what I hoped it would be.” For real estate in Italy, he said the situation is uncertain because “it can’t be clear what the underlying asset values are”. He added: “What you’ve had essentially is aggressive quantitative easing at a displaced capital from what could be described as risk-free assets into riskier assets and create a false market. And it is that false market that we are all unclear about, as to how fictional is it?” Savouri does not expect the political shock to trigger distressed selling, but it will lead to a hiatus of buying. The vote has been seen by analysts as the latest in a global anti-establishment movement sending shockwaves through the political establishment. In Italy, populist, pro-European reform parties headed by the Five Star Movement, are now seen as contenders for the Italian leadership. All eyes will now be on the French election next year, which Savouri predicts will have a far larger economic impact than the Italian referendum. “We must not forget that although Italy is the third largest eurozone economy, the second largest is France, and that has elections looming next year, which will be of far bigger consequence than the referendum we saw in Italy,” he said. • To send feedback, e-mail louisa.clarence-smith@estatesgazette.com or tweet @LouisaClarence or @estatesgazette