ITALY Trends and Developments Contributed by: Gabriele Capecchi, Giovanni Manno and Giuliana Serra, Legance
Based on these actions, experts are confident that the trajectory of the interest rate reduction is now definitely set. However, the President of the European Central Bank urges caution and underlines that, at some point, the decline in interest rates will need to halt. These decisions have already and will con - tinue to influence the Italian economy in general and the Italian real estate market in particular, with this latter now surrounded by cautious opti - mism. At the same time, the Italian real estate market is also expected to grow significantly due to a considerable increase in foreign investments and the recovery of the tourism, manufacturing, and export sectors. These factors will support demand in the real estate market, especially in urban areas, which remain the most attractive for international investments and tourists. Alongside these macroeconomic factors, the Italian government has confirmed initiatives for 2025 that were introduced in previous years to stimulate the housing market, which will be dis - cussed further below. Residential Market: Trends and Dynamics Both regional disparities and a consistent increase in interest in urban properties have traditionally characterised the Italian residential market. These trends were evident in all quarters of 2024 and, according to current predictions, will be confirmed in 2025 as well. Indeed, espe - cially in the second half of 2024, demand for residential properties increased by 37% as more national and international persons and entities decided to invest in the Italian real estate market. Since the reflections of the uncertainties brought by the pandemic have been definitely overcome, an increase in supply has been registered as
well, but solely of 4%. The different paces in the increase of respective demand and supply led to an overall rise in real estate prices, a trend that is likely to continue throughout the upcoming months of 2025. It is also important to note that each property’s growing emphasis on energy efficiency is playing a key role in the overall increase of unit prices in these first few months of 2025. Indeed, the aver - age unit price of properties with lower energy efficiency increased by only 1.4% in the past year, significantly less than the average increase observed across Italian properties. Experts pre - dict that this trend will surely persist in the cur - rent year as buyers are becoming increasingly more aware of environmental issues and their impact on society as a whole. The most significant price increases in residen - tial properties per square meter are recorded in Milan, Rome, and Florence, where prop - erty value is heavily influenced by international demand and the ongoing trend toward urbanisa - tion. Data regarding the general increase in price per square meter in 2024 aligns with what was recorded in previous years and matches expec - tations for 2025. Thus, affordability remains a challenge, especial - ly for younger generations and first-time buyers. Many Italians, particularly in northern regions, continue to struggle to afford a house due to rising property prices and stagnant wages. This issue was exacerbated by the rise in interest rates caused by the pandemic, which has not yet been fully mitigated by the European Cen - tral Bank’s policies. However, the overall trend is improving compared to previous years. Shifting the focus to local markets, while Milan and Rome have traditionally been the main driv -
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