Italy's housing market is stagnating amid falling demand and weak economy
February 16, 2024
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However, this does not mean that ordinary buyers should avoid purchasing italian properties.
What has happened
Known for its historic cities, picturesque landscapes and Mediterranean climate, Italy has always attracted property buyers from all over the world. However, the country's housing market has been struggling in recent years.
The demand is declining:
Economic factors. Weak growth of Italian economy (+0.7% in 2023), high unemploymen trate (7.8% in 2023) and declining income of the households have a negative impact on the purchasing power.
Demographic factors. An aging population and a declining birth rate are leading to a reduction in demand for housing.
The change in preferences. Young people increasingly prefer renting to buying housing, which also affects the demand.
The prices are stagnating:
The national indicators. Nationwide, the latest figures from the National Institute of Statistics showed that the overall house price index rose by 1.8% during the year to Q3 2023, but fell by 3.6% when adjusted for inflation.
Regional differences. In major cities such as Rome, Milan, Bolzano and Venice, housing prices remain relatively high. For example, in Rome the average price per square meter is €3,017 per sq.m., and in Milan - €4,986 per sq.m.
Housing type. The Prices for new buildings are more stable than those for secondary properties. In 2023, prices for new housing increased by 8%, and for secondary housing - by only 0.5%.
All regions saw a decline in real estate sales
In the first quarter of 2023, sales of real estate units and other kinds of property transactions fell by 11% year over year.
The decline in demand is especially noticeable in the new buildings segment.
The prospects
The Italian Central Bank and other experts predict further stagnation of the housing market in 2024-2025.
What does it mean
Overall, the Italian housing market is stagnating. Declining demand, a weak economy, rising prices for building materials and tightening requirements for borrowers from banks have a negative impact on the market. The situation is not favorable to investors. However, this does not mean that ordinary property buyers should avoid acquisitions.
It is important to note that the situation on the housing market in different regions of Italy differs a lot. In large cities, housing prices remain relatively high, but in small towns and rural areas they may decline. Ivestors should take this fact into account when planning a transaction.
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