'A downturn in the real estate market due to high home prices and rising mortgage rates.'

The residential real estate market in Italy continues to show a negative trend. After a 2.1% year-on-year contraction in the fourth quarter of 2022, the first quarter of 2023 recorded an even greater drop of 8.3%, with a total of 166,745 transactions, 15,000 fewer transactions.

According to an analysis by Abitare Co. a real estate brokerage and services company, based on data from the Revenue Agency's Real Estate Market Survey (OMI), metropolitan cities (-10.6%) saw the largest decline compared to non-metropolitan cities (-7.4%). In terms of territorial breakdown, the most pronounced decline is in metropolitan cities''impact on this situation, the main one of which is undoubtedly the rising cost of housing, making access to homes difficult for many people.

Cities with the biggest reduction in transactions

Analyzing the main Italian cities, there is a significant decrease in transactions in the first quarter of 2023 compared to the same period of the previous year. The most affected metropolises are Bologna (-23.9% with 1,264 deals) and Milan (-22.9% with 5,920 deals). In other metropolitan areas the trend is also negative, although to a lesser extent: Rome marks a 10.3% decrease (8274 deals), Florence a 9.4% decrease (1208 deals), Turin a 7.1% decrease (3552 deals), Naples a 7.0% decrease (1952 deals), Genoa a 5.5% decrease (2034 deals) and Palermo a 4.4% decrease (1598 deals).

"Residency trend'. 'transactions in Italy in the first quarter of this year confirms the predictions made at the end of last year, with 2023 becoming a year of stagnant transaction growth, perhaps for its entire duration,' says Alessandro Ghisolfi, head of the Abitare Co. research center. "The increase in mortgage rates is affecting families' decision to buy, and it seems that the post-pandemic 'boom' in the search for spaciousness is over. In fact, there has been a decline in apartment purchases in general, especially those with more than 100 square meters. If there are reflections on sale prices, we are likely to see a reduction only in the second half of the year, especially in older and in need of renovation houses. "

The most expensive cities in Italy

Besides downsizing''0.6% in the last month. Second place is occupied by Bolzano with prices approaching 4770 euros per square meter, but with a monthly price drop of about 1%.

Bologna, in addition to its superiority in rent compared to Rome, also becomes the fourth most expensive city in Italy in terms of sale prices. The average price per square meter in Bologna is 3,356 euros, while Rome stays at 3,341 euros, with price stability over the last month.

Among the other Italian cities with prices above 3,000 euros per square meter are Venice and Trento, both slightly above this threshold, around 3,005 euros/m2. Just behind them''followed by the Tuscan city of Siena, while in the top 10 are Naples and Rimini, both around the mark of 2725 euros per square meter. It is worth noting the cases of Biella and Caltanissetta, the only provincial capitals where the sale price is below 800 euros per square meter. Biella stops at an average cost of 716 euros/m2, while Caltanissetta reaches only 704 euros/m2.

The problem of mortgages: up to 65%

Mortgages are another important problem. According to research, mortgage interest rates in June 2023 could be a serious problem for Italian families who have opted for variable interest rates and have to pay the mortgage for many years. Phenomena such as inflation and stagflation are reaching ever higher interest rates''and significantly impact the real estate market.

The predictions for the next two years are exciting, especially as variable interest rates on mortgages in June 2023 are extremely high. While fixed rates have saved many Italian families, the same cannot be said for variable rates. The situation became critical several years ago.

For example, if we consider a mortgage loan with a fixed rate of around 5% on a €200,000 loan for 25 years, the current monthly payment would be around €1,218. If the rate were variable, the monthly payment would increase by at least 65% in June 2023.

This monthly payment would actually be too high for most Italians, given the average''wages. The ECB has already released estimates, with interest rates approaching the current zero level and possibly exceeding 4%.

For those with variable mortgage rates in June 2023, the likelihood of a bailout is extremely slim. However, some possible alternatives may be spawned, such as refinancing the mortgage, if contractually required, or renegotiating the mortgage to convert the variable rate to a fixed rate.