There is a growth in demand for rental homes and, for buying and selling, a greater demand for new construction. These trends have been gaining momentum in the Italian real estate sector for several months.
The choice of a rental home
“Renting in Italy is back in fashion,” Andrea Napoli, founder and CEO of Locare, explained to We Wealth, commenting on data from a company study, which highlighted a greater demand for rental housing solutions and – at the same time – an increase even in the provinces (as well as in the major cities and more generally in the regional capitals) of rents by an average of 8/10%, without distinction between North, Center, and South. “After two years in which the market was oriented toward buying and selling, accomplice to the high cost of mortgages and the difficulty of access to credit, more and more families have re-evaluated the rental mode. Rents that, accomplice to inflation, the cost of living, and the scarcity of housing, have seen a surge in rents, especially since the second half of 2022, when, having overcome the pandemic, tourism has restarted, and inflation has begun to soar, – explained Napoli.
And if before this phenomenon was a prerogative only of Milan and a few other cities, now, it is spreading nationwide. With different speeds: the cities that had moved earlier, that is, those where the residential rental market had already shown signs of recovery before the last 12 months, are now characterized by lower, albeit positive, average rent changes.
And in other smaller cities, how much does it cost to live for rent?
For rental trends in Milan, I refer to this article, “Record rents in April: Milan is the most expensive city in Italy. What about the others?”
If we focus on smaller cities, here is the ranking compiled by Locare on how much it costs to rent a house (from highest to lowest price).
In Parma, the second largest city in Emilia Romagna, the average rent charged is 137.1 euros/year per m2 (+12.5%).
In Prato, the average rental cost as of March 31, 2023, is 133.5 euros/year per m2 (+8%)
In Verona, the average asking rent is 130.8 euros per m2 per year (+3.8%).
Salerno requires an average of 121.4 euros/year per m2 (+2.5%) to rent.
Brescia, the second most populous city in Lombardy, marked an average asking rental price of 117.6 euros per m2 per year as of March 2023 (up about 6.2%).
La Spezia requires an average of 108 euros per m2/year (+8.4%).
In Novara, Piedmont, the average asking rent for a home at the end of March 2023 is 106.8 euros per m2 per year (up about 10% from the year before).
In Latina, Lazio’s second largest municipality by population, the current average rent is 105.5 euros/year per m2.
In Pordenone, Friuli Venezia-Giulia, the average rent reached 104 euros per m2 per year (+18.9%).
In Catania, the average rent as of March 2023 is around 98.4 euros/year per m2 (+3.5%).
In Matera, it is 94.4 euros/year per m2 (+5%).
Finally, the average rent in Sassari is 94.3 euros/year per m2 (+13.6%).
In L’Aquila, an average of 85.2 euros/year per m2 (+9.2%) is required to live in rent.
In Taranto, the average demand for rental living is 77.6 euros/year per m2 (up about 12 percent).
In Isernia, Molise, the average rent at the end of March was 74.5 euros/year per m2 (+12.5%).
Terni’s average rent was 73.6 euros/year per m2 (+7.5 percent).
Reggio Calabria, although not the regional capital, is the most populous city in Calabria. An average of 62.9 euros/year per m2 (+4.8%) is required to live here.
Conversely, Pesaro is among the few provincial capitals that have seen the average rent fall over the past year: down 5.5 percent to 116.2 euros/year per m2.
The complexity of the Italian real estate market: penalizing regulations
“An extremely complicated situation that, in the last year, has been further aggravated by the increase in housing intended for tourist rentals, which is therefore taken away from the traditional housing market,” explained Napoli, who then recalled that the market has changed, as have the needs of landlords and tenants. “It is, therefore, necessary to revise what is stipulated in Law 431 of 98 (which regulates the way leases are stipulated and the release of properties used for residential purposes) to make it adequate to the new housing needs,” concluded the founder and CEO of Locare.
The choice to buy a home: a dream that never fades
While renting may be preferable at certain times of life, the great love of Italians remains home ownership. “Housing in Italy accounts for more than 45 percent of Italians’ net wealth, amounting to about 5.2 trillion euros, and the passion for real estate investment remains unchanged, despite the turbulence we are experiencing in recent years,” said Giuseppe Crupi, CEO of Abitare Co. commenting on data from the “First observatory on future living” carried out by the company together with Scenari Immobiliari and presented on May 11 in Milan during the Forum dell’abitare futuro.
Indeed, young people, positively or negatively, are dictating the line of the future residential real estate market nationally and locally. “And for Millennials and Generation Z, home buying continues to be a dream, more or less achievable, despite the various structural and cyclical issues of an economic, real estate, social and demographic nature,” Crupi added.
New construction vs. used: emerging trends
In the residential sector of buying and selling, the market for new homes is growing steadily in Italy and is expected to fare better than that for used homes. This was learned within the study by Real Estate Scenarios and Abitare Co, which shows that if, in fact, in 2022, the buying and selling of new properties grew by 10 percent, by the end of 2023, a further increase of 2.7 percent is expected, while old houses will drop by 8 percent.
“The market for newly built houses started to rise in 2017, with an average annual growth over the last five years of 7.8%, following the trend of used transactions. By the end of 2022, there were about 74,000 transactions nationwide, an increase of about ten percentage points over 2021, a record year that had marked a 34 percent growth over 2020, partly due to the pandemic. Despite the difficulties triggered by the outbreak of war in Ukraine and galloping inflation that forced the ECB to raise the cost of money, the market has held up, especially in the first part of the year,” said Mario Breglia, president of Scenari Immobiliari, opening the Forum’s proceedings.
Prices for new construction are also on the rise. With an average increase of more than 3 percent over the past two years, values are expected to continue rising in 2023, where the increase is estimated at 4.6 percent. But supply is still low, hovering around 10 percent of the total in large cities.
The price gap between a new and used home
“The average gap between the price of a new and a used house for the 11 major capital municipalities analyzed in our study is 37.4 percent, with a difference of 1,800 euros per square meter: ‘new construction’ costs a third more than used, but because the houses are well made and meet the taste of buyers. Those who buy new houses can avoid facing the uncertainty of the time and cost of renovation. But the supply is still too low, against an average of nearly twenty percent of the total city supply in large European cities,” Breglia concluded.
