2023 Real estate market: high prices and loans, complete crisis

The real estate market crisis in Italy continues into 2023. After declining about 2% in the last three months of last year compared to the same period in 2021, the first quarter of 2023 closed with an even larger decline of about 8%.

The real estate market in 2023

According to a study conducted by real estate intermediary Abitare Co. based on an analysis by the Revenue Agency's Real Estate Market Observatory, the largest declines are in metropolitan areas compared to other cities. From a territorial point of view, the largest decrease is in the North-West region (by about 12%), while the only positive indicator relating to non-metropolitan cities is in the islands (about +2%).

The most affected metropolitan areas are Bologna (down 24% in transactions) and Milan (down 23%). Other metropolitan areas such as Rome (approximately -10%), Florence (-9%), Turin and Naples (both -7%) are also negative.

The real estate sector is going through a period of great uncertainty with a 10% drop in forecasts for 2023. According to the Italian Notary Association, real estate will also undergo a significant decline this year: a reversal of the trend compared to previous years, when the sector showed strong growth.

Rent rents increasing

Rent payments rose by 2% over the month. Among the key factors is the rising cost of housing, which makes buying a home challenging for many people. Rents have been rising steadily, increasing about 2% month-over-month (May vs.

The impact of macroeconomic factors

The increase in interest rates, as well as new macroeconomic factors such as geopolitical instability and its impact on the global economy, the current inflationary trend and the fear of a possible recession, are slowing down the real estate market after years of continuous growth. The sharp increase in interest rates is having an impact on the declining purchasing power of Italian families. The purchasing power of families has been reduced by 20%.

According to certain calculations, new claimants on unchanged incomes now face a reduction in their purchasing power of more than 20%. In this situation, many families are forced to postpone buying a home. This is particularly true for the significant market segment of people under 36, who continue to reduce their share of total mortgage applicants.

Measures for demand recovery

According to Crif, new borrowers will need to find better terms to revive demand, which has fallen strongly by 23% in 2022 and 24% in the first quarter of 2023, especially in the context of economic growth and real estate and mortgage prices. In this context, the extension until 30.06.2023 of the concessional terms of the Consap First Home Guarantee Fund and the promotion of new mortgage offers offered by leading banks, specifically for young people with terms up to 40 years, represent the first stimulus to the overall recovery in demand.