Italy's real estate market is collapsing under the weight of expensive mortgages.

The expected decline in the real estate market has now been confirmed by official data from the Italian Fiscal Surveillance Agency. In 2023, the Italian real estate market fell markedly: after a successful 2021 and 2022, the number of transactions in the residential real estate market fell to less than 710,000 last year, down 10% from the previous year.

The cause of the weakness

Behind this weak data is a sharp rise in the cost of mortgages. The sharp rise in the cost of money caused by the European Central Bank to the 4.5% mark has led to a threefold increase in the rates offered by banks on mortgages for families. By the end of December last year, average mortgage interest rates stood at 4.40%, three times the 1.45% in January 2022, the lowest level in recent years.

No significant recovery is expected for this year, although it is thought that lower mortgage payments should give the sector some breathing space. According to Tecnocasa's experts, "forecasts for this year point to a further decline in volumes, although our network reports greater confidence among those intending to buy property in early 2024 due to an improving credit situation."

Figures on sale and purchase transactions

Let's take a look at the details of the past year based on valuations. According to a report by the Italian Fiscal Surveillance Agency, the Italian real estate market showed negative trends in every quarter of 2023. In the fourth quarter, the decline in sales transactions, caused by the slowdown in mortgage values, stopped at 3.3%, having slowed considerably.

In anticipation of the start of ECB rate cuts, probably in June, Italians seemed to be heading into real estate only when absolutely necessary.

The purchase of real estate also continues to be dominated by premises of relatively small area, from 50 to 85 square meters, which account for almost a third of all sales transactions.

Figures of major cities

According to Tecnocasa, based on data from tax surveillance agencies, metropolitan communes close with 221,144 sales transactions, 10.7% less than in 2022, while non-metropolitan communes decrease by 9.2%, from 537,857 to 488,447, a slightly better result. Among the big cities, Naples shows the lowest decrease: -4.4%. The outsider is Bari with a decrease of 19.1%. If we restrict ourselves to analyzing the fourth quarter, Bari shows the most significant decrease with -15.7%, while Palermo marks only -1.6%.