The Italian real estate market: rising mortgages and low incomes threaten disaster

The crisis in the real estate market is driven by several factors, starting with data on mortgages and incomes. Italian families have a lower level of debt compared to the European average, but they face higher expenses compared to key EU partners. The Italian real estate market has potentially high demand, but it is not being met due to a lack of new construction and insufficient levels of apartment renovation. Foreign investors require hostels and modern, affordable rental housing; otherwise, they prefer to look elsewhere, such as Spain, rather than Italy. These are some of the conclusions drawn from the Italian housing review by Savills, published in Sole 24 Ore.

Mortgages in Italy: record growth over the year

In July 2023, the average Italian mortgage rate for purchasing a home was 4.19%, which is 204 basis points higher than in July 2022. This is the highest level in the last 10 years, while the average rate was only 2.24% before. A 20-year mortgage now costs 22% more than it did a year ago.

The Italian real estate market and its comparison with Europe

The disposable income in Italy is €48,180, which is 6% lower than the eurozone average: only Spain, Portugal, and Poland show worse results among the top 15 markets. Moreover, it is expected that over the next 10 years, disposable income will grow by 7% in real terms in the eurozone and only by 2% in Italy.

The report also includes a comparison of 15 European cities, including Milan and Rome, which have competitive prices. The average cost of purchasing a two-bedroom apartment outside the city center in these cities is around 320,000 euros: from 170,000 euros in Madrid to 590,000 euros in London. The ratio of housing costs to the available income of families needed to make a purchase shows the highest level in Paris and Monaco (8 years required) and the lowest in Madrid (3 years). Brussels and Dublin are at 4 years, Rome at 4.4 years, and Milan at 5.3 years. This is approximately the average across Europe.