You want to buy a property in Italy, but want to know if this is the right moment to do that.
Maybe you are waiting that the prices will fall, but they are growing at 4% pace year over year.
You tried to save money by waiting for a “crash.” But you are actually missing the opportunity to buy cheap.
The same could happen again in 2026—or not.
Because what happens next in Italy’s housing market depends on three forces moving right now.
CHAPTER 1: The 2025 Paradox — Prices Up, Sales Down
According to ISTAT’s House Price Index, Italian home prices rose +3.9% year-over-year in Q2 2025.
In Q1 they were up +4.4%.
At first glance, good news—prices are rising, the market is alive.
But according to OMI (Italy’s national real-estate observatory), residential transactions dropped −7.3% in the same period.
Prices up, sales down.
That combination is what economists call a pre-crisis signal.
It happened before the 2008 downturn: prices kept increasing even as sales slowed, until the market corrected and lost 20–25% in real terms between 2009 and 2014.
Are we about to see that again?
Maybe—but this time, the fundamentals are different.
CHAPTER 2: The Three Forces Moving the Market
1. Interest Rates — The Cost of Money
In Europe, the European Central Bank (ECB) plays the same role as the Federal Reserve in the U.S.
Between June 2022 and September 2023, it raised rates from 0% to 4.5%—a shock for anyone borrowing to buy.
As a result, the average Italian mortgage APR (TAEG) rose from 2.1% in 2021 to 4.8% in 2023.
That means a €200,000 loan (≈$215,000) over 25 years went from €850/month ($910) to €1,250/month ($1,340).
But since mid-2024, rates have fallen sharply.
By late 2025, the ECB’s deposit rate is 2.0%, and mortgage APRs average 3.5%.
Now that same mortgage costs around €1,050/month ($1,120)—more affordable than 2023, though still higher than pre-2022.
As financing becomes cheaper, foreign buyers are returning.
Requests for mortgages grew +18% in Q3 2025 year-over-year (MutuiSupermarket).
And more than 60% of home purchases in Italy are now made with a mortgage.
2. Housing Supply — Limited Inventory
Italy’s housing market is facing shrinking supply, especially in desirable cities like Florence, Rome, and Milan.
According to Idealista, the stock of homes for sale fell −4% in 2024 and continues to decline in 2025.
| Macro-Area | Stock 2023 | Stock 2024 | Var. % | Source |
|---|---|---|---|---|
| North-West | 285,000 | 272,000 | -4.6% | Idealista |
| North-East | 198,000 | 191,000 | -3.5% | Idealista |
| Center | 176,000 | 169,000 | -4.0% | Idealista |
| South | 142,000 | 138,000 | -2.8% | Idealista |
| Islands | 89,000 | 87,000 | -2.2% | Idealista |
| Total Italy | 890,000 | 857,000 | -3.7% | Idealista |
Fewer listings mean less negotiation power for buyers.
The average discount from asking price dropped from 10% in 2023 to 7.8% in 2025.
This is important for American investors:
Italy’s market has tight inventory, but much of it is “hidden”—properties withdrawn after sitting unsold because owners refuse to lower prices.
That creates an illusion of scarcity.
3. Affordability — Still Low, But Improving
Italy’s Affordability Index measures how easy it is for a family to buy, considering income, prices, and interest rates.
After hitting a low of 11.6% in 2023, it improved to 13.1% in early 2025 as mortgage rates declined.
In short:
Buying is easier than in 2023, but harder than before the rate hikes.
For U.S. buyers purchasing with cash—or with financing from abroad—this creates a strong advantage over local buyers.
CHAPTER 3: What’s Happening in the Cities
Milan — Italy’s Financial Capital
Prices up +22% since 2019, +3.2% in 2025, but transactions down −9.8%.
Milan remains Italy’s most expensive city, with one-bedroom apartments in central areas selling for €350,000–€400,000 ($375k–$430k).
Strong for long-term appreciation but limited cash flow due to high purchase prices.
Rome — Two Markets in One
Historic neighborhoods like Prati, Trastevere, and Monti still grow +2.5–3% per year, while peripheral zones are stable or slightly negative.
Rome offers long-term value, especially for buyers targeting central or tourist areas for short-term rental conversions.
Florence — Slowing but Still Solid
After +18% growth between 2019–2024, Florence cooled in 2025 due to new national rules on short-term rentals (mandatory registration, stricter guest-ID checks).
Still, foreign demand remains strong and cultural tourism supports values.
Bologna — High Rents, Steady Prices
University demand and relocation from northern Italy pushed rents up +8.2% in 2024.
Prices rose +3.8%, and demand from expats remains steady.
Bologna is considered one of the most resilient investment markets for 2026.
Naples — Southern Recovery
After years of stagnation, Naples prices rose +5.1% in 2024, with vibrant growth in coastal and historic districts.
Still significantly cheaper than Milan or Rome—ideal for investors seeking higher yields.
Lecce — The Hidden Gem
A growing market in southern Puglia.
Prices up +6.8% in 2024, transactions up +2.1%, driven by tourism and northern or international buyers.
Average prices around €1,900/m² ($190/sqft) make it one of the most affordable cities with excellent lifestyle potential.
| City | Average Price €/sqm | Price Change 2024 | Sales Change Q1 2025 | Source |
|---|---|---|---|---|
| Milan | €4,850/m² | +3.2% | -9.8% | Idealista + OMI |
| Rome | €3,200/m² | +1.5% | -7.1% | Reopla + OMI |
| Florence | €4,100/m² | +1.8% | -11.2% | Euromq + OMI |
| Bologna | €3,450/m² | +3.8% | -4.3% | OMI |
| Naples | €2,650/m² | +5.1% | -5.8% | Idealista + OMI |
| Lecce | €1,900/m² | +6.8% | +2.1% | Reopla |
CHAPTER 4: The Rental Market — The Silent Force
Long-Term Rentals: +6.6% in 2024
Nationwide, rents rose +6.6%, with Milan, Bologna, and Florence leading the increase.
The reason: fewer affordable homes to buy and a growing population of renters.
This trend directly benefits investors targeting long-term furnished rentals.
Short-Term Rentals: The Boom Is Slowing
Italy’s vacation-rental sector (Airbnb, Booking.com) faced a tough 2024:
- New national registration code (CIN) for all properties,
- Temporary ban on remote self-check-in,
- Rising public criticism of over-tourism.
Occupancy dropped from 78% to 70% nationwide (AirDNA), with Rome around 65%.
What This Means for You
For investors from the U.S., short-term rentals still offer high returns (6–8% net) but come with regulation risk.
Long-term rentals are increasingly appealing: less management, lower risk, and stable income.
Example — Bologna, one-bedroom apartment €200,000 (~$215,000):
| Strategy | Gross Income | Net Yield |
|---|---|---|
| Short-term rental | €24,000/yr (70% occupancy) | ~8.4% |
| Long-term rental | €12,000/yr | ~5.4% |
But the long-term option offers zero seasonal risk, stable tenants, and minimal management.
CHAPTER 5: 2026 Forecast — Three Scenarios
1. Soft Landing (most likely – 55% chance)
- ECB keeps cutting rates to 1.5–2% by end-2026
- Prices stabilize or slightly rise (+0.5%–1.5%)
- Transactions rebound (+2%–4%)
- Rents keep rising (+4%–5%)
✅ A balanced market. Good moment to buy before the next upswing.
2. New Boom (25% chance)
- Faster rate cuts trigger “fear of missing out”
- Prices rise +4%–6%, transactions +8%–12%
- Demand from international buyers accelerates
🔥 For Americans buying in euros, a strong dollar could magnify returns if euro remains weak.
3. Hard Correction (20% chance)
- Global slowdown or European recession
- Prices fall −3%–6%, transactions −10%–15%
💡 This would open major buying opportunities for cash investors.
CHAPTER 6: What To Do Now — If You’re Buying From Abroad
- Don’t wait for a 30% crash.
Italy’s market rarely collapses that way. Meanwhile, inflation and rent eat your liquidity. - Lock in while rates are low.
A 3.5% mortgage in euros is historically attractive.
U.S. buyers often have better credit access than locals—use it. - Negotiate based on real comps.
Good deals exist, especially on properties overpriced by 10–12%.
Work with a buyer’s agent (not the listing agent) who represents your interests. - Run full legal and technical checks.
Italy’s due diligence includes verifying urban planning compliance, title, and cadastral accuracy.
Our Real Estate Advisory (REA) service handles this end-to-end. - Think in both yield and lifestyle terms.
A Tuscan villa may not match a Milan rental yield, but it could deliver lifestyle value, capital growth, and euro diversification.
Final Takeaway
Prices are up, sales are down, interest rates are falling, and rents are rising.
2026 will likely be a year of normalization—a window of opportunity before the next cycle begins.
If you’re an American buyer or investor looking at Italy:
- Focus on Bologna, Milan, or Florence for stability and liquidity.
- Explore Lecce or Naples for higher yields.
- Favor long-term rentals or mixed-use strategies over pure short-term play.
At Valente Italian Properties, we help foreign buyers safely purchase, manage, and rent out properties in Italy—from due diligence to property management.
Visit valenteit.com or contact info@valenteit.com for tailored advisory on buying or investing in Italy.
