Claudio Pacella: Equity release growth in Italy will be led by funding availability
Claudio Pacella, CEO of 65Plus – Gruppo Mutuionline in Italy and an EPPARG Board Member, shares his outlook on the Italian equity release market, and highlights the key role of funding in further development of the market.
How would you describe the current market for equity release in Italy?
Equity release in Italy is split between Reverse Schemes (Nude Proprietà) and Equity Release Mortgages (Prestiti Vitalizi). Nude proprietà has existed for a long time in Italy and accounts for a volume of 20-25,000 transactions each year, while Prestiti Vitalizi (PIV) has only existed since 2006, with regulation being recently updated in 2015.
Equity Release Mortgages are expected to grow since they are offered by regulated players with strict transparency procedures and in line with a ‘best practice experience’ curve, while Nude Proprietà operates based on a P2P process without any guarantee or standard process: the transactions are left to an unregulated negotiation between the parties, where the elderly are often on the weaker side.
How have Italian equity release providers been adapting to the pandemic? Is your company 65Plus able to conduct its business using online instruments? What are some of the challenges?
The pandemic has reduced the volumes originated, due to a market based on in-branch contacts with potential clients. Current players did not adapt that much, in relation to Prestiti Vitalizi.
A full digital process will be available in the first half of 2021, except for underwriting that remains an on-site step, since in Italy this is performed with a public notary.
The main challenge in Italy is still funding availability; this bottleneck has also led to a lack of offers, which could be addressed more rapidly if the funding need was fixed.
Your company 65Plus has joined forces with Gruppo MutuiOnline. What can you tell us about this collaboration?
Within Gruppo MutuiOnline, 65Plus is currently creating a joint offer with Centro Finanziamenti, the financial arm of the Group. Centro Finanziamenti will originate the loans as a lending entity, while 65Plus (as the product specialist) will be contributing through product design, distributor support and servicing.
Given that MutuiOnline is the biggest Business Process Outsourcer in the Italian banking arena, this initiative can rely on a strong operational base, which will allow for fast growth.
Concerning distribution, many agreements with nationwide major players will be operative.
What opportunities do you see for new funders and investors to enter the Italian market?
Italy is an opportunity, both in terms of volumes and quality, for both national and international new funders. The potential market is huge, since real estate held by over 60s are worth over € 1,5 trillion, while 1.5 million families are actually “house rich and cash poor”; this leads to a potential market similar to what we see in the UK.
On the quality side, we can agree that Italy now has a rather stable real estate market, where periodic fluctuations indicate that we have now more upside then downside value.
This is a market that has been established over the last 14 years, with thousands of loans underwritten and no reputational or legal issues.
How do you assess prospects for growth in the equity release market in Italy for the year to come?
As mentioned, growth will be led by funding availability. Potential clients, distributions, operations and servicing are already available on the market. What we are seeing is a growing interest from institutional investors. For this reason, we are confident that 2021 will be a year of change, leading to a fast-growing market, with a view to closing the big gap that we have today with the UK market.
Politicians and institutions are also spotting the social and economic positive impact of greater development of Prestiti Vitalizi. We are confident after 14 years of careful seeding of the product.