Real estate decline: access to mortgages has become more difficult

The level of real estate in Italy continues to decline, and this time it is reported by the Revenue Agency, which recorded a drop in the volume of transactions in the third quarter of 2023. The decline in purchases was evident throughout the year.

The first nine months of 2023 saw 157,000 residential sales. Compared to the same period in 2022, this is a decrease of 10.4%, or a total of 18,000 fewer properties. The real estate market is shrinking across the country. The pace of transactions is still being impacted by mortgage interest rates that are too high. But let's elaborate on that.

The real estate market is contracting

According to the Revenue Agency in its latest report, the real estate market is on track to contract in the third quarter of 2023. As for the residential sector, a decrease in the volume of transactions was registered. A total of 157,000 dwellings were sold across Italy, 18,000 fewer than in the same period in 2022.

The decrease is noticeable in all Italian regions without exception. In big cities, residential real estate transactions are shrinking: Florence and Rome show the largest declines, with 17.9% and 13% respectively.

According to the Revenue Agency, the decline in purchases has affected all categories of residential properties, although it is more pronounced as the area of the properties increases.

In the third quarter, individuals made 95% of all property purchase transactions, amounting to 150,000 transactions. Of these, 62% were purchased as a primary residence, compared to 65% at the same time in 2022. Only 41% of transactions were made using a mortgage loan, compared to 50% in the same period in 2022.

8% of all transactions were for new build properties. Share declines this quarter.

Mortgage, a major factor

The slowdown in transactions is also made known by Nomisma's Third Real Estate Market Watch 2023, which examined the results of thirteen major Italian markets: Bari, Bologna, Cagliari, Catania, Florence, Genoa, Milan, Naples, Padua, Palermo, Rome, Turin and Venice.

The main factors affecting the real estate market are the gradual decline in the purchasing power of Italian families, as well as more difficult access to credit. The sudden shortage in the Italian real estate market is caused, according to the Nomisma report, by insufficient income indexation and increasing difficulties in accessing credit due to the rising cost of money. More prudent lending policies coupled with lower demand are reflected in the volume of mortgages issued, which fell by 29% this year, consequently causing a 13% drop in transactions.

According to Nomisma, the increased difficulty faced by families in buying a home is increasing interest in the rental market. Over the past year, 7.3% of demand has shifted to rentals, adding pressure to an already oversaturated market.