This article was translated automatically from Italian.
Review and Outlook: The Italian Property Market in 2023-2024
An in-depth analysis of past trends and future forecasts
As we approach the end of 2023, it is time to reflect and take stock of the Italian property market, a sector that has seen considerable change and challenges over the course of the year. This end-of-year period offers an opportunity to analyse the data and the trends that have emerged, allowing us to draw a complete picture of market dynamics and to anticipate what 2024 may have in store for us.
2023 was a year of transition for the property market in Italy, marked by a series of economic and social factors that influenced both prices and transaction volumes. From high inflation to political uncertainty, by way of the changing interest rates on mortgages, several elements have helped to shape a complex and multifaceted landscape.
In this article, we will explore how these factors shaped the market in 2023, analysing regional variations and trends in the main Italian cities. We will also look to the future, trying to understand what the prospects for the property market might be in 2024. Will it be a year of recovery, or will we continue to navigate turbulent waters? These and other questions will be at the heart of our analysis, providing a detailed and informative view of a sector that is always on the move.
2023 was a year of significant change, with a slowdown that began in the second half of 2022 and intensified over the course of the year. According to Nomisma's Property Market Observatory 2023, which analysed the performance of the 13 main Italian markets, the Italian property sector is expected to close the year with a sharp downsizing compared with the two previous years.
The main cause of this slowdown was the erosion of the purchasing power of Italian households, accentuated by difficulties in accessing credit because of the rising cost of money. Despite high potential interest in the market, more cautious lending policies and the braking of demand had a negative impact, with a 29% fall in the volume of mortgages granted and a decrease in sales of around 13%.
In response to these difficulties, there was a notable shift in demand from the purchase market to the rental market. Over the last year, 7.3% of demand shifted from buying to renting, putting further pressure on an already saturated sector.
As regards residential sales, 2022 had already shown a slowdown in growth, and the first half of 2023 saw a year-on-year decline of 12.5%, for a total of 50,000 fewer transactions. The response of property values was varied, with price changes ranging from -1.3% for homes in excellent condition in Cagliari to +1.3% in Milan.
This context of slowdown, combined with high inflation and rising mortgage rates, has characterised the Italian property market in 2023, leading to a fall in transactions and a less favourable market for buyers. Forecasts for 2024 remain uncertain and will depend on the development of the economy and on market conditions.
Bologna and Milan, were the hardest hit The biggest fall affects the provincial capital municipalities compared with the other cities. By area, the largest decrease is recorded in the North West (around -12%), while the only positive sign, which relates instead to the non-capital municipalities, is seen in the Islands (+2%). The metropolitan cities hardest hit are Bologna (-24% in transactions) and Milan (-23%). The trend is also negative in the other metropolitan areas such as Rome (around -10%), Florence (-9%), Turin and Naples (both -7%)
Let us now look at what happened in the four quarters of 2023
- First Quarter 2023:
Start of the year marked by economic uncertainty.
Consumer and business confidence falling.
Slowdown in sales and possible reduction in prices. - Second Quarter 2023:
Slight improvement, but market still affected by inflation and interest rates.
Low property transactions, but with an increase in prices.
Slowdown in mortgage lending. - Third Quarter 2023:
Continuation of the trends of the previous quarters with a further decrease in sales.
Decline in the new-build homes sector.
Significant fall in transactions in the large Italian cities. - Fourth Quarter 2023
Stabilisation of the market, but an uncertain trend persists.
Mortgage situation still influencing the market.
Growth in the rental market, driven by the recovery of student and tourist lettings.
Influence of Inflation and Mortgage Rates in 2023
High inflation that has eroded the purchasing power of Italian households.
Increase in mortgage interest rates, limiting access to financing.
Decrease in applications for new mortgages, directly affecting the number of property sales.
Shift of 7.3% of demand from buying to renting, creating pressure on the rental market. - Forecasts for 2024
Potential continuation of the negative trend of 2023.
Market performance depending on economic developments and monetary policies.
Economic uncertainty and inflation that could continue to pose significant challenges.
In short, 2023 saw an Italian property market influenced by high inflation and rising mortgage rates, with a fall in transactions and a difficult market for buyers.
The outlook for 2024 remains uncertain and will be heavily dependent on economic developments and market conditions.
Alessandro Langella
Founder of Pavé, Milan
He knows Milan through years of hands-on market experience, properties visited and neighbourhoods watched as they changed.
