Real estate price push for Expo host cities
MILAN // At Expo exhibitions, strange things happen. The Shanghai edition in 2010 was the most heavily attended yet, with 73 million visitors. In the list of the top three most successful Expos in terms of visitors, the Chinese city is followed by Osaka, in Japan, that in 1970 attracted 64.2 million visitors. But to find the third one, Paris, with 50.9 million, we have to go back to the very beginning of the previous century, to 1900. In that time there were no airplanes, train lines were few and slow and people were mainly still riding horses but that edition, compared to the 18.1 million of the Hannover 2000 Expo, had almost three times the visitors - and it was the third time in less than 50 years that Paris had hosted an Expo. Yet the French government saw its chance to stage another huge exhibition in 1900, especially when rumours began to spread to the effect that Germany was planning an Expo, an event which might possibly rob France of the prestige of an end of the century exhibition, the Belgian academic Patrick De Groote wrote in a paper on the effects of World Fairs.
Now the world has changed, but not the assumption that, at the very least, Expos have an impact on real estate values: in his analysis of World Fairs between 1851 and 2005, De Groote reached the conclusion that “they do not increase resources while they necessitate expenditure and they have the unfortunate tendency to increase prices and to concentrate the national resources and receipts in just one town. However, for the hosting countries the Expos can play a catalytic role in various economic sectors, provided that regional and municipal structures can absorb this violent injection of activity and that they can sustain it.”
So what’s going in Milan, where in May Expo 2015 will open? Despite the Italian property market remaining weak, the number of transactions in Milan has been rising in recent quarters and, since 2007 when the economic crisis started, houses have lost only 22 per cent of their value compared to a national average of 32 per cent.
The problem now is that price growth is not spread across the whole city. In December last year homes in Milan were sold at an average of €3,460 per square metre, with a 4.35 per cent decrease year on year (according to data from Immobiliare.it, a real estate website). But there are areas, such as the central Garibaldi zone, where Qatar Holding has taken a 40 per cent stake in the €2 billion (Dh 8.49bn) Porta Nuova project (part of a major development in sight of the Expo); and while values have fallen elsewhere in the city, Porta Nuova values have increased by a total of 11 per cent after inflation since 2007.
In Milan “there’s an Expo effect but it’s only for central areas and for those connected by the underground”, said Mario Breglia, president of Scenari Immobiliari, an independent research company that has analysed data on Expos’ impact on the real estate market in Europe in previous editions. “And this year could also be a good year for the Italian economy,” Mr Breglia added. Well, if we then look at his data in this scenario of euro weakness and low oil prices, the outlook is not bad.
Considering only the residential market, in the 1992 Expo, Seville, the Spanish city, registered a 23 per cent increase in the five years before the exhibition and plus 15 per cent in the five years after. Lisbon, the Portuguese capital, in 1998, recorded an 18 per cent increase before and plus 60 per cent after. In 2000 in the German city of Hannover prices rose 12 per cent before and 40 per cent after. Saragozza, another Spanish town, is an exception: it made plus 50 per cent before but minus 65 per cent after, yet that was in 2008 when the crisis had started hitting Spain hard. The study, published a few months ago, forecasts for Milan a 3 per cent increase before Expo and plus 14 per cent after. Commercial properties follow similar paths, albeit often numbers tend to be lower in the five years after the exhibition. Something similar applies to the Dubai 2020 edition: “Prices and rentals in Dubai residential market were already increasing [ahead of the decision on Expo][. Expo could contribute to increased upward pressure, particularly in areas to the south of Dubai,” Jones Lang LaSalle has written. So strange things occur at Expos, but the perspective of real estate price increases, at least in the best areas, still seems a safe bet.
Jacopo Barigazzi is a former Newsweek contributor and Reuters journalist. Based in Milan, he is writing a monthly column for these pages on the build-up to Expo 2015.
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Updated: January 17, 2015 04:00 AM