By Gareth Horsfall
This article is published on: 10th November 2015
I admit it! I have been confused for years about the rendita catastale. I have never been sure about its role in the economy and how it benefited the individual or economy. Until now! (Care of Bloomberg online)
So, the story goes something like this:
The rendita catastale represents the amount of ‘theoretical rent’ that a householder pays him/herself as a measure of economic consumption.
In other words:
If a householder owns their house outright, i.e no mortgage or other debt, then that person is actually a ‘imputed’ consumer and investor of the ‘invisible’ rent money that they would have received should they be renting a similar house. This money is then assumed to be spent and go back into the economy.
And this is considered a growing financial benefit that property owners enjoy from not having to pay rent.
So, whilst the financial crisis shrank the economy more than 8 percent and unemployment doubled in the seven years of the crisis, property, proportionately, made up more of the gross domestic product. The weighting of property in Italian GDP jumped 2.1% from 2007 despite falls in property prices and transactions. (which gives you an idea of how big the falls were in other parts of the economy).
And given that the financial benefit from housing, i.e the rendita catastale, is taking up a larger proportion of a property owners income, then it comes as no surprise that Renzi has recently promised to abolish IMU on the prima casa from 2016. This also seems to imply that Renzi realises that Italians homeowner spending habits are more important than foreign buyers as a means to sustain property prices.
The Italian economy strongly relies on home ownership. Just by residing either in debt free housing or paying no rent (living in family houses) or a paying a below-market rent, Italians contribute to more than 8 percent of the nation’s GDP, up from about 7 percent in 2007. In a country where more than 73 percent of the population live in owned residences, this is a valuable contribution to economic growth.
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