Amidst the 'invisible' recession, the tug-of-war between inflation and wage immobility, geopolitical uncertainty and monetary policies that are not always effective, the property market in Italy has been slow to see that drop in buying and selling and in prices that was supposed to have occurred in the pandemic years. But, according to Nomisma, the downturn is not far off: the scenario has become adverse again for purchasing conditions and the ever-increasing dependence on mortgages for home purchases makes the possibility of buying a home more remote than a few years ago. In its Observatory on the Real Estate Market, Nomisma takes a snapshot of the situation in Italy's main cities and makes market forecasts up to 2025. Here are the ones.
- Home buying forecasts in Italy 2023
- Real estate prices, trends and forecasts in Italy
- Rental market, forecasts 2023-2025
- Wage gap and mortgage market in Italy in 2023
- Real estate agents' opinions for 2023
- Imbalance between rental and purchase supply and demand
- Supply and demand dynamics
- Tenant profiles
- Motivations for buying a home
- Origin of demand for home purchases
Home buying forecasts in Italy 2023
The years after the pandemic saw an expansion of the real estate market in Italy that was out of the forecasts, but which, on balance, was favoured by the desire to improve housing conditions, the greater presence of savings in Italian households' coffers and the very low cost of credit that favoured the mortgage market. However, this situation has changed, so the future scenario, according to Luca Dondi, Nomisma's CEO, is destined to come to a halt.
According to the study centre's forecasts, therefore, if 2022 closed with 784 thousand sales, 2023 will close with 670 thousand (down 14.6 per cent), 2024 with 643 thousand and 2025 with 669 thousand. The declining situation in buying and selling became evident already in the last months of 2022, which saw a 2.1 per cent drop in buying and selling, and particularly in the Milan market, which has been negative for two quarters.
What has created the unfavourable scenario is not so much the recession, which according to Nomisma economist Lucio Poma should have been there and wasn't, nor energy costs, which have dropped considerably also 'thanks' to global warming. The cause must be sought in inflation, on which the restrictive monetary policy is having no effect because it is not intervening on its structural component, which has remained stable if not increasing, but on the volatile one. This situation is not being compensated for by wage adjustment and the resulting support for purchasing power.
Real estate prices, trends and forecasts in Italy
As far as real estate prices are concerned, according to Nomisma, values are still positive but tend towards stability. If in nominal terms housing prices in 2023 will see a +1 per cent (compared to +3.1 per cent in 2022), in reality this will translate into a decline of 4.8 per cent when adjusted for inflation. Ditto for the following years, when in nominal values we will see an increase of 0.2 per cent and 0.5 per cent in 2024 and 2025, which adjusted for inflation will result in -2.5 per cent and -1.4 per cent, respectively.
In addition to inflation, another determinant for price dynamics is the low supply of new houses in Italy, which is an expression of the increase in commodity prices on the real estate market; this means that the dynamics of real estate prices will not fully reflect inflation.
Rental market, forecasts 2023-2025
Against the slowdown in buying and selling, according to Nomisma, there will instead be growth in the rental market, driven by the recovery of student and tourist rentals after the pandemic. In addition to the long-term stable demand, there is also that temporarily unable to access property. This results in 'upward pressure on rents of a greater magnitude than price dynamics'.
An increase of 3.6 per cent in residential rents (nominal increase of 2 per cent) was seen in 2022, with the non-residential sector straddling parity. Yields remain stable, averaging 5.5 per cent in residential. Considering the average time to rent a home, these stand at 1.5 months, while gross rental yields are in the region of 5.5 per cent.
Wage gap and mortgage market in Italy in 2023
The gap between wages and inflation, according to Nomisma's calculations, was -9.6 per cent at the end of 2022 and will not narrow in 2023, causing greater difficulties in repaying mortgages by Italian households and worsening the climate of confidence and consequent purchase intentions.
In fact, according to the Nomisma report, Italian households are still heavily dependent on mortgages to buy homes, with only 17 per cent of Italian households not considering a purchase with a mortgage. However, mortgage applications have fallen as families perceive themselves to be more financially fragile and, as a result, approach credit institutions more rarely, knowing that they are more likely to be turned down.
This situation is reflected in the tightening of credit conditions by banks. Which, despite the decline in non-performing loans, especially in severe non-performing loans, do not feel that they should abandon the path of prudence due to monetary policies and the resulting interest rate increases, which could in the long run lead to an increase in insolvencies.
After a 2022 characterised by substantial stability in disbursem*nts (+1%), associated with a marked decrease in mortgage transfers and replacements (-70%), Nomisma therefore forecasts for 2023 a double-digit decrease, both in new mortgages (-18% per year) and in mortgage transfers and replacements (-47%).
Real estate agents' opinions for 2023
Finally, the Nomisma report analysed the sentiment of real estate agents for the market in 2023 in the main Italian cities according to various aspects. These are.
Imbalance between rental and purchase supply and demand
A general imbalance emerges between housing supply and demand, which becomes more pronounced as regards the rental market. If, in fact, for purchases and sales, the gap unravelled between an increase in demand for purchase of around 20 per cent and a drop in supply of 30 per cent, for rentals we are talking about a demand for rent increasing by 80 per cent against a drop in supply of 60 per cent.
Supply and demand dynamics
Among the demand and supply dynamics of housing that are taking place, agents identify the exit of demand segments from the market (69 per cent), the reduction of the spending budget (87 per cent), and the shift towards renting (60 per cent). On the supply side, 72 per cent of the agents find downward revisions of asking prices.
Tenant profiles
The profile of the renter, according to the agents, is young (workers on the move, young couples, single-parent families, students, singles), while families moving from another municipality are decreasing. Housing preferences still go to new or renovated homes, close to public transport and services such as schools, healthcare, etc.
Motivations for buying a home
According to agents, the demand for home purchase is mainly related to investment (14 per cent), replacement (29 per cent) and above all main homes (45 per cent). The purchase of holiday homes fell by 28 per cent and the purchase of a home for a family member fell by 6 per cent.
Origin of demand for home purchases
According to agents, homebuyers are mainly from provincial capital municipalities and are looking for a home in another area of the same municipality (25 per cent) or live in the outskirts and want to live in the capital (23 per cent). The exodus from the provincial capitals towards the province is slowing down, with a 1 per cent drop in this type of housing demand.
