Italian real estate market trends: Detailed analysis of cities

In the first quarter of 2023, IRS statistics on real estate purchases and sales show weakness, but a closer look at the data reveals additional trends in the Italian real estate market. Gabetti's research department highlights data by city, showing that the trend in real estate has actually been confirmed positively over the past ten years.

Data on real estate purchases and sales from the Internal Revenue Service

The IRS data for the first quarter of 2023 shows a decline in residential real estate compared to the first quarter of 2022. Nationally, there were 166,745 residential real estate transactions in the first 3 months of 2023, a decrease of -8.3% compared to the same period in 2022.

Buying homes by city

The top eight cities also saw a negative annualized change of -13%. If we compare the data with the same period in 2022, the results for all cities are negative: Bologna -23.9%, Milan -22.9%, Rome -10.3%, Florence -9.4%, Turin -7.1%, Naples -7.0%, Genoa -5.5%, Palermo -4.4%. The cities with the largest price increases in 2022 were the more serious brakes. In these cities, such as Milan and Bologna, high prices and rising interest rates have effectively ruled out many potential buyers who have shifted their buying search to the outskirts of cities or small towns.

Historical trend in real estate purchases and sales

But when you look at the first quarter trend over the past 10 years, things change significantly. Compared to the average purchase data over the last decade of 128,029 transactions, the first quarter of 2023 with 166,745 transactions represents a +30% increase and is the second best first quarter in the last 10 years, just behind the record quarter of 2022. Even compared to the first quarter of 2021, when the residential real estate market resumed after a suspension in 2020, and thanks to external factors caused by the pandemic itself (increase in private household savings, low interest rates, demand for open spaces, de-urbanization), the first quarter of 2023 shows a positive change of +2.8%.

2023 is the beginning of a new cycle in the real estate market

2023 marks the end of the 2020-2022 pandemic mini-cycle and the beginning of a new "normalized" cycle. This new cycle will no longer be characterized by historically low interest rates like the previous one, but will be driven by new factors such as energy efficiency and public investment in infrastructure and urbanization that will increase property values in some parts of the country. Comparing Q1 2023 to Q1 2019 (the best first quarter of the pre-pandemic real estate cycle) means comparing two periods operating within two different real estate market cycles, albeit normalized compared to the euphoria-anomaly of 2021-2022.

Factually, comparing the annual change between these two quarters provides an additional signal about the future direction of the real estate market: compared to Q1 2019, which was 138,641 transactions, Q1 2023 shows a positive change of +20.3%. This indicates that rising interest rates, the main reason that has actually held back real estate buying and selling activity compared to 2022, is being offset by real estate demand, which remains quite strong.