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EXPLAINED: What will happen with property prices in Italy in 2023?

Housing prices in Italy have risen over the past couple of years - but will the trend continue into 2023? The Local takes a look at what the experts are predicting.

Will property prices in Italy continue to rise in 2023?
Will property prices in Italy continue to rise in 2023? Photo by MARCO BERTORELLO / AFP.

Italy’s property market has been steadily on the up since 2020, and the most up-to-date figures for 2022 are no exception.

According to provisional data from Italy’s National Statistics Office (ISTAT), in the second quarter of this 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.

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 were proving difficult to sell.

But the Covid pandemic caused 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.

READ ALSO: Everything you need to know about having a second home in Italy

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.

READ ALSO: Is Italy’s cheap homes frenzy coming to an end?

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.”

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Where in Italy are house prices rising fastest?

Property values are expected to continue rising overall in Italy in 2023, but the situation looks much better in some cities than others. Here's how average prices compare.

Where in Italy are house prices rising fastest?

Until 2020 Italy’s real estate market had long suffered stagnation, weighed down by a large number of old, neglected properties which were proving difficult to sell.

But the pandemic turned Italy’s property market on its head, leading to the first increase in house prices for years at the end of the first quarter of 2020.

This trend has held up since, and industry experts cautiously predict further price growth in 2023 – albeit more modest than previously hoped.

Factors putting the brakes on growth include the soaring cost of living eroding households’ purchasing power, rising mortgage interest rates, the soaring cost of building materials, and a shrinking economy.

REVEALED: Where in Europe have house prices and rent costs increased the most?

Mortgages are also expected to become more difficult to obtain in 2023, meaning fewer people able to make a purchase.

But despite the gloomy picture overall, the outlook varies significantly around the country and some cities are expected to see a significant rise in prices this year.

Milan remains by far the most expensive major Italian city for a property purchase, but prices are rising faster elsewhere. Photo by Ron Dylewski on Unsplash

A recent report from Idealista Insights, the property search portal’s research team, looked at changes in the average prices per square metre in property listings in Italy’s biggest cities.

In 2022, the price per square metre “generally increased throughout the country, with ‘exclusive’ neighbourhoods becoming even more inaccessible to the average buyer,” the report found.

But, while bigger northern cities saw rising prices across the board, most southern cities were struggling with “stagnation”, it said.

Based on Idealista’s data, here are the ten most expensive cities to buy property in Italy, in order of the rate at which prices are rising.

  1. Genoa: the Ligurian capital is Italy’s tenth-most expensive city to live in – but prices here are rising faster than anywhere else on average, according to Idealista. An increase of 4.5 percent is forecast for Genoa in 2023, meaning the price per square metre will go from 1,602 to 1,674 euros.
  2. Bologna: Bologna records the second-highest price increase in Italy compared to 2022. The citywide average price per square metre will rise by an estimated 3.9 percent, reaching 3,419 euros.
  3. Verona: in seventh place we find the city of Romeo and Juliet, where the increase in prices is substantial, equal to 3.2 percent. The average cost will rise by around 80 euros per square metre, going from 2,483 to 2,563 euros per square metre.
  4. Milan: Italy’s economic capital will easily remain the most expensive city for property purchases, with prices set to rise by 2.9 percent compared to 2022. The average price per square metre is expected to exceed 5,300 euros, 150 more than now, with significant price variation between city districts.
  5. Bari: The capital of Puglia in the south-east is set to record an price increase of 2.8 percent, with the citywide average price per square metre going from 1,909 euros to 1,962 – making it the ninth most expensive Italian city in which to buy property and the only southern city to record a significant increase. 
  6. Turin: The northwestern city can expect an overall price increase of 1.5 percent, equal to around 30 euros more per square metre for a final price of 1,979 euros on average. 
  7. Florence: The Tuscan capital still has the second-highest prices, and can expect an average price increase of 1.4 percent, with the cost per square metre to rise from 4,128 to 4,184 euros .
  8. Rome: The capital may have some highly sought-after and expensive districts, but overall average prices will remain at around 3,336 euros, up slightly from 3,360 in 2022. This is equal to an increase of just 0.76 percent.
  9. Venice: La Serenissima remains the fifth-most expensive city to buy property again this year as the average price will remain almost unchanged with a reduction of -0.3 percent, meaning the cost per square metre will be around 3,090 euros.
  10. Naples: The southern capital is set to go against the trend, with a -1.5 percent drop in house prices expected. This means the average price per square metre will go from 2,737 to 2,696 euros, a difference of 41 euros.