Dynamics in the Italian Real Estate Market

The present paper deals with the progressive approaching which has been taking place in Italy in the last few years between the interests of real estate investments and the interests of financial investments. The creation of a portfolio made up of a multiplicity of investments represents a complex procedure implying the adoption of some portfolio management techniques, as already happens with the investments in the stock market and in the bond market. In the case of real estates, there is a further obstacle, that is a lack in transparency due to the limitation of the available data. The characteristics typical of real estate markets have encouraged the spread of some portfolio management methods based on the choice of single estates rather than on procedures linked to mathematical optimisation or to quantitative analysis. In this kind of approach, the portfolio is created investment after investment ñ the single real estates are selected according to parameters which are deemed as optimal (localisation, typology, kind and validity of the lease agreement) and apart from the analysis of the possible interrelations among the goods. In particular, while defining the risk factors which can affect the single real estate markets, it is important to make a distinction between systematic risk components (which cannot be reduced through the diversification process) and non-systematic risk components (which can be controlled by means of a suitable investmentsí diversification). The non-systematic risk applies to the single real estate typologies and/or to the single geographic area. In that way, it is possible to reduce the risk considerably by combining the different real estate investments in an appropriate way. The present paper is aimed at presenting the first results of a work concerning the study of the dynamics in the Italian real estate market which has been carried out analysing the historical series of the data collected by the Osservatorio Immobiliare di Nomisma (Nomisma Real Estate Observatory). The aim of the analysis has been that of singling out the non-systematic risk linked to use destination and localisation (main Italian urban areas).