The real estate market: Nomisma's forecasts until 2026

The economic situation in Italy and in the world

In analyzing the economic situation, Lucio Poma, chief economist of Nomisma, says he is moderately optimistic regarding the ability of Italian companies to bet on the future, despite a situation in which the International Monetary Fund's growth forecasts for our country have been reduced by a few tenths of a point, but remain positive, at +0.7% per year for 2023 (against the +1.1% predicted last July).

The inflation situation, at a global level but in particular with regard to the USA and the EU, shows a "core" component that is unable to reduce, despite the fact that the volatile component mainly determined by energy goods is in sharp decline. Which will probably determine, according to Poma, not only a brake but also, sooner or later, a cut in interest rates, especially in the USA, where the economy is driven especially by the demand for consumer goods, damaged by inflation.

In this scenario, business and consumer confidence in Italy is decreasing; in fact, despite industrial production showing encouraging signs, the gap between inflation and wages remains, growing by 5.5% against +3.2%, which also reflects the even greater gap of the past months.

Even the employment situation, which has never been better than this with unemployment at 7.4%, is a double-edged situation: the large number of inactive people, who are neither looking for work nor studying, decreases the supply of available human resources, at a time when there would be a great need for them for the relaunch of businesses.

Add to this the so-called "demographic winter": the number of families increased in 2021, but in 33% of cases these are single-member families, compared to 32 percent of families with children. An overtaking that occurs for the first time in history and which will influence future economic choices.

Home, Italians' purchasing intentions

The above has its role in defining the intentions to purchase a house on the part of Italians, which appear to be in sharp decline in 2023. In the fourth quarter, an increase in purchasing intentions is expected, but only in their unrealistic component, which goes from 2 percent in the third quarter to 5.5 percent. However, the share of Italians who actually buy a house remains low, from 0.5 percent to 0.7 percent from the third to the fourth quarter.

As for families who intend to take out a mortgage, in the 12 months the component that will do so is 43 percent of the total, compared to 35 percent who are likely to do so and 22 percent who certainly will not.

However, the decline that occurred during the year testifies to the erosion of the purchasing power of Italian families which, combined with difficulties in accessing credit, ended up penalizing the prospects of the real estate sector. In fact, if during the year it was not the interest in potential demand that decreased, which in Italy remains at extraordinarily high levels, "The sudden lack of oxygen in the Italian real estate market is due to the lack of indexation of incomes and the increased difficulty in accessing credit resulting from the surge in the cost of money", as stated in the Nomisma Report.

Real estate sales and forecasts up to 2026

More prudent credit policies together with the slowdown in demand have repercussions on the volumes of mortgages disbursed, which record a decline of -29% in the current year, with a consequent decrease in sales of the order of -13%, in step with the increase in interest rates on mortgages, particularly at variable rates.

Considering residential sales, if in 2022 there was a slowdown in growth (+4.7% per year), the six-month trend decline (first half of 2023/first half of 2022) stood at -12.5% ​​for a total of 50 thousand fewer trades. In particular, the year is expected to end with 684 thousand sales (compared to 780 thousand in 2022), with a drop of 16 percent in the fourth quarter alone, while 624 thousand sales are estimated for 2024, 602 thousand for 2025 and 608 thousand for 2026.

Residential prices in Italy, four-year forecasts

Residential property prices in Italy show a lazy growth trend, with an average of 1.4 percent in the 13 Italian cities, ranging from +3.3 percent in Milan to -1.3 percent in Catania.

In particular, in the second half of 2023 the half-yearly change in prices stood between the lower extreme of homes in excellent condition in Cagliari (-1.3%) and the upper one represented by Milan (+1.3%). In general, on the average of the main Italian markets analyzed by Nomisma, it is homes in excellent condition that show a modest negative change (-0.1% on a half-yearly basis), while the growth in prices of homes in good condition stops (+0.5%).

At a national level, price forecasts are expected to grow by 1.5% in nominal terms (-4.3% in real terms, net of inflation) in 2023; by +0.6% nominal (-1.5% real) in 2024; of +0.5 percent nominal (-1.5% real) in 2025 and finally of +0.6% nominal (-1.4% real) in 2026.

Forecasts on the rental market in Italy

The difficulties encountered by families in finalizing the purchase of a house are increasing interest in the rental market. In the last year - Nomisma specifies - 7.3% of demand has shifted from purchase to rental, accentuating the pressure on an already saturated sector.

In fact, university, tourist and other demand is added to housing demand, resulting in a lack of supply and fueling the spiral of rent increases.

Which increase by 3.8% per year, going from 8.9% in Bologna to 1.6 percent in Palermo. In the second half of the year, the partial shift of interest towards the rental market led to a real rise in rents (+2.1%). Analyzing the individual cities, we note increases of between 3-4% in Milan, Florence and Turin, up to +5% in Bologna.

“The lack of supply, - specifies Luca Dondi, CEO of Nomisma, - is certainly not determined by the physical lack of houses”.

In fact, there are 3.5 million multi-owner families of which in 2023 only 24% rent the second home, while 51% keep it available to family or friends and relatives, 11% leave it unused and 33% use it as a holiday home. In Milan alone, there are 700,586 occupied houses, 86.5% of the total, while unoccupied ones are 109,404, 13.5% of the total.

Short-term rentals and increased rents, Nomisma's position

“If houses are scarce, - continues Dondi, - it is because in the presence of a situation in which the risks of renting a house are many, the owners legitimately tend to distance themselves from traditional forms of rent, moving towards other forms of rent, such as short-term rent, or alternatively leaving it vacant.

Short-term rentals have their charm, - specifies the CEO of Nomisma, - and influence the market, not so much because numerically the share of houses in short-term rentals is significant, because it isn't, but because the risk/return prospects are certainly more interesting". In fact, we are talking about a yield gap between the free market and short-term rentals which in Milan goes from 4.8% to 8.9%, but which in Venice even goes from 4.4% to 14.2%, or in Rome from 5.7% to 11.7%. “I believe that discussions on short-term rentals cannot be effective on their own in reorienting the uses of residential buildings. The problems to be addressed are rather different, taking into account that renting today is increasingly a choice, but there is a lack of commitment from operators specialized in managing every problem, from investments to management. We need to think about the availability of houses in Italy and decide whether the social housing interventions for which Milan is admired as a model should remain a model to be admired or be concretely applied to other cities too", concludes Dondi.