Italy’s property market has been steadily on the up since 2020, for the first time in years – and the most up-to-date figures show that the trend continued in 2022.

In the second quarter of the year Italy’s Housing Price Index (HPI) grew by 2.3 percent compared to the previous quarter, and 5.2 percent on same period last year, according to provisional data from Italy’s national statistics office, Istat.

The HPI tracks the price changes of residential housing as a percentage change measured from a specific start date.

The growth was primarily driven by new builds, Istat’s numbers show; while the value of existing properties increased by 3.8 percent compared to the same period last year, new dwellings gained 12.1 percent in market value.

Italy’s real estate market suffered from several consecutive years of stagnation up to the end of 2019, weighed down by the high number of old, neglected properties on the market which proved difficult to sell.

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But the Covid pandemic brought an unexpected shake-up of the market, leading to the first major jump in Italian property values for years at the end of the first quarter of 2020.

A combination of government stimulus packages and a desire among second home hunters to escape cramped lockdown conditions created renewed interest in Italy’s property market in 2021 – a trend which has continued into 2022.

But with soaring inflation and a worsening cost of living crisis, what are experts predicting for 2023?

According to the latest forecast from the research institute Scenari Immobiliari (Real Estate Scenarios), Italy’s housing market is expected to experience modest growth next year, albeit at a slower rate than in 2022.

Factors putting the brakes on growth include the soaring cost of living eroding households’ purchasing power, rising mortgage interest rates, and a shrinking economy: Italy, along with Germany, is expected to slip into a recession next year.

Certain financial aid measures introduced under the previous Draghi government to promote home ownership – such as a bonus for first-time buyers under the age of 36 – will come to an end by the start of next year.

Italy’s ‘superbonus 110’, which offered a 110 percent tax deduction for home renovations, led to such high demand that it caused the building materials and construction costs to skyrocket and resulted in major project delays, ultimately discouraging buyers from investing in fixer-uppers.

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And the European Central Bank’s decision to raise interest rates means the Euribor, the rate tied to mortgages in Italy, has risen steeply, which will have knock on negative effects on housing demand and prices.

Despite all this, interest in Italy’s housing market has far from dissipated.

Demand from international buyers and hybrid workers who have negotiated remote working arrangements in the wake of the pandemic remains high.

A 2022 report by the global real estate consultancy Knight Frank found that in survey of over 1,000 global buyers, Italy was among the top five choices for second home destinations, with UK and US buyers ranking the country in their top two.

This means that industry professionals are cautiously optimistic about Italy’s property market performance in 2023.

Scenari Immobiliari anticipates that Italy’s real estate sales will amount to around 140 billion euros in 2022; a 10 percent increase on 2021.

In 2023, they predict that figure will rise to 148 billion, amounting to a 6.5 percent annual increase – not as high as 2022 forecasts, but still clear growth.

“The strength of demand is still robust,” said Scenari Immobilari’s president Mario Breglia, speaking at the institute’s 2023 European Outlook forum in September, “but external conditions are negative and are trying to make the market change direction”

“It is time for more difficult sailing, needing experienced skippers and care in choosing the right direction. But every storm is bound to blow over.”