If you thought 2024 was a tough year for the Italian real estate market, wait until you see what’s coming in 2025…
Hello! I’m Jacopo Tartaglia, and as I do every year around this time, I’m here with a fresh analysis of the real estate market over the past months, along with predictions for the upcoming year. We’ll also look at strategies for navigating an ever-changing market.
Starting with the latest data, I’ll explain what to expect in 2025 and how to position yourself against the ongoing real estate slowdown—which I think, by now, is no surprise to anyone.
The information I’m using is from reliable sources like the Bank of Italy, ISTAT, the Italian Revenue Agency, and Eurostat. And to better understand the cause-effect relationship and analyze potential scenarios, I’ve also used AI tools. These resources provide far more insight than anything available on Google and have helped me compile essential charts and projections for the coming year.
Before we dive in, a quick reminder: my company, Valente Italian Properties, specializes in property sales, acquisitions, and management. Feel free to contact us if we can be of assistance to you.
Economic Context
Consumer confidence, as reported by ISTAT, has been declining, as has business confidence. When people feel less optimistic about the future, they naturally tend to hold back on big purchases and become more conservative with their investments.
When people have less confidence in the future, they tend to make fewer investments and adopt a more conservative approach. Think about it on a personal level: if you foresee growth and improvement in your financial situation, you might consider buying a new car or home. But with poor economic prospects, you’ll likely cut back on spending and focus on saving. This collective mindset, applied across millions of people, is exactly what the consumer confidence index measures: the higher the confidence, the more likely people are to spend and invest.
At the same time, employment rates have inched up by about 1% compared to 2023. But we are also emerging from a period of high inflation and interest rate hikes, on top of the lingering effects of the global pandemic—creating a challenging landscape for both buyers and sellers.
Property Prices: Up or Down?
In 2023, property prices rose just over 1%. But looking at the data, I saw something chilling. In the latter half of the year, while prices continued to rise, the number of sales declined sharply. The last time we saw this combination was around 2007-2008, right before the housing bubble burst. When prices rise while sales fall, it’s not typically a positive sign.
So what happened in 2024? At the beginning of the year, prices were still growing, showing a 1.7% increase compared to 2023. However, sales transactions continued to decrease, dropping by over 7%. Higher prices alongside falling sales create a potentially risky situation.
Interestingly, in Europe, property prices have already seen some declines and are now slowly stabilizing.
Will There Be a Crisis? Let’s See What Real Estate Agents Think
According to a survey conducted by the Bank of Italy, 67% of agents reported that the market was stable, with neither falling nor rising prices. On average, homes took about 5.7 months to sell in 2024, and most agents expect conditions to remain steady for the near term.
However, one key factor driving potential crises is the gap between what buyers are willing to pay and what sellers expect to receive. Many properties remain unsold because sellers are reluctant to lower prices to match current market values, and buyers aren’t willing to meet the asking prices.
Sales Volume as an Indicator
In 2023, the number of transactions fell by 9.7%, totaling 709,591. This trend continued into early 2024, with transactions declining by an additional 7.3%.
The slowdown was not uniform across Italy: larger cities in central and northern Italy were hit hardest, while southern regions and the islands were less affected.
Major cities like Rome and Genoa even saw some increases in sales volumes, while cities like Milan and Florence experienced significant declines, with volume down by over 7%.
Supply and Demand Dynamics in Real Estate
In 2024, the total number of properties for sale decreased by 4% compared to the previous year, while demand started to pick up slightly thanks to lower interest rates. Over 61% of real estate purchases were financed with a mortgage in 2024, up from 41.8% the previous year. With supply down and demand up, this is positive news for pricing stability.
The Affordability Index
The affordability index—a measure considering inflation, income levels, and interest rates—fell to 11.6% in 2023, primarily due to higher interest rates. However, we’ve seen signs of improvement in the first months of 2024, as mortgage rates have come down slightly.
How to Navigate the Real Estate Market Right Now
Based on recent data, here are three macro-trends to consider when making real estate decisions:
- Falling Interest Rates: This offers a more favorable borrowing environment.
- Higher Rental Yields Relative to Property Values: Renting could become a viable alternative or an additional income stream.
- Positive Demand-Supply Balance: This shift could support price increases if trends hold steady.
Personally, I bought a property in 2024, and I’ve shared details of this investment in another video. While I didn’t specifically wait for this exact moment to invest, I feel it’s been a favorable time, with real prices relatively low and rental yields on the rise. I currently rent out part of the property at a steady rate, and I’m planning to renovate the upper level for short-term rentals.
Final Thoughts and Looking Ahead
As always, trends can shift, but with lower interest rates, a rising affordability index, and a balanced supply-demand ratio, the timing could be right to buy or continue holding property. I even had the opportunity to discuss these ideas with UBS experts during a podcast, and they confirmed that a new positive cycle in real estate assets could be on the horizon.
For those interested in investing, follow along as I continue to share data-driven insights and tips to make informed decisions.
Sources:
RESIDENZIALE – STATISTICHE SECONDO TRIMESTRE 2024
Tassi mutui 2023: andamento BCE, Euribor e IRS – MutuiSupermarket
Rapporto Immobiliare 2024 – settore residenziale
Forte calo dell’offerta abitativa in Italia: -7% nel III trim 2024,-4% in un anno — idealista/news
