The real estate market in Italy: transactions decreased by 9.7%

The Italian real estate market is showing further signs of weakening. According to the first Real Estate Market Review compiled by Nomisma, the gradual rise in interest rates, along with the newly regained selectivity of the banking sector, has sharply interrupted the mechanism that seemed to be gradually boosting even the most fragile ambitions.

The effects of credit tightening on the Italian real estate market

According to a study by Nomisma, which analyzes the current state of the industry with a focus on 13 intermediate markets (Ancona, Bergamo, Brescia, Livorno, Messina, Modena, Novara, Parma, Perugia, Salerno, Taranto, Trieste, and Verona), the construction of apartments will be determined by the credit component, which is now considered essential, especially during periods of cyclical weakness. The high cost of money has led to a reduction in the share of transactions accompanied by mortgages, from 48.4% in 2022 to 39.9% of total purchases in 2023. Access issues to transactions in the real estate sales market have contributed to a potential shift in demand interest towards rentals, which have increased by 3 percentage points compared to last year. In other words, in 2023, 48,000 families opted for renting instead of buying a home. In this context, the rigidity of real estate prices, historically characterized in Italy by phases of cyclical change, inevitably leads to an increase in the gaps between supply and demand expectations, contributing to further slowing of transactions. In 2023, transactions decreased by about 10%, with nearly 710,000 residential properties changing hands in the market.

Prospects for 2024

According to Nomisma, a more friendly approach from the European Central Bank will not be sufficient for an immediate recovery of transactions, but a normalization period will be needed to facilitate the restoration of more favorable conditions for demand. "Uncertainty regarding prospects is a factor that inevitably delays decision-making, especially for those involving significant capital investments, such as purchasing a home," comments Luca Dondi, CEO of Nomisma. "It is not surprising that over the past year, demand for real estate purchases has decreased compared to 2022 levels, when euphoria increased the number of people wanting to become homeowners. It is not so much the potential interest, which is structurally excessive in our country, that has disappeared, but rather the willingness of the banking sector to support the path of potential borrowers." According to Dondi, many uncertainties lie ahead for the Italian real estate market in 2024, although the main one is related to the orientation of financial institutions at all levels. "A possible return to more favorable conditions, including in terms of willingness to issue loans and the cost of credit, will help avoid reflecting the decline in demand and transactions in prices. If the orientation in the first half of the year already seems unchanged, a change in course can be expected in the second half, with effects that, at least initially, will be quite weak," added the CEO of Nomisma.

According to Elena Molinioni, head of real estate at Nomisma, participants in the real estate market anticipate a further decline in transaction volumes (47.5% of respondents) or, at best, a percentage that will remain at last year's level (44.3%). "Only 8.2% of those surveyed expect an increase in transactions due to more accessible credit, the availability of new homes for sale, and an increased willingness to buy, also supported by rental prices."