In the short term, mortgage rates in Italy are unlikely to drop much further. The European Central Bank (ECB) has said it is already “in a good position” in its fight against inflation, which leaves room for just one, maybe two more rate cuts before year-end.
But when it comes to home prices, the outlook is very different: growth is picking up pace, and some indicators point to the strongest property market heat-up since 2021. That’s the signal coming from rising transaction volumes in 2024 and from Bank of Italy surveys conducted among real estate professionals.
For prospective homebuyers — especially those needing a mortgage — waiting may no longer make sense. The hoped-for savings on monthly payments might not materialize, while asking prices for homes are already on the rise.
Mortgage Rates: Fixed vs. Variable
Let’s start with the mortgage front.
For fixed-rate mortgages, as We Wealth reported months ago, there has been little room for further reductions — even with rate cuts in the pipeline. Without getting too technical, the cost of hedging a 30-year variable rate (the IRS 30-year swap rate) has climbed back to its highest level since November 2023, at 2.72%. Banks usually add a markup to this benchmark when offering fixed-rate loans to borrowers.
Variable-rate mortgages, on the other hand, have become cheaper, as they are more directly influenced by ECB policy (if Frankfurt cuts rates, monthly installments decrease) and currently cost less than fixed-rate loans. However, Italian borrowers remain cautious, reluctant to expose themselves to potential future rate hikes.
Bottom line: unless an economic crisis hits the Eurozone and forces the ECB into deeper-than-expected cuts — a scenario not currently on the horizon — mortgage costs are unlikely to drop much further.
Housing Prices: Signs of Acceleration
According to the third Osservatorio sull’Abitare, published by Scenari Immobiliari and Abitare Co., after a 2.2% price increase in 2024, growth could accelerate to as much as +5% in 2025.
This trend is echoed by the Bank of Italy’s latest survey, conducted between April 4 and May 7, 2025: several indicators show some of the most pronounced expectations for price increases in recent years. “The average discount from the seller’s initial asking price (7%) and the average time on market (five months) have both dropped to their lowest levels since data collection began in 2010,” the Bank noted.
Moreover, the share of real estate agents reporting a decline in new listings continues to far outweigh those seeing an increase, signaling a shrinking supply in the face of rising demand.
According to Bank of Italy, the rise of short-term rentals is seen as further reducing the supply of homes for sale, pushing up both sale prices and long-term rental rates.
In short, for the second consecutive quarter, expectations for rising prices “continue to outweigh” those for price declines.
What the Realtors Are Seeing
Beyond the rate cuts, there’s a “psychological factor” fueling Italy’s property price gains, says Gian Battista Baccarini, president of FIAIP (the Italian Federation of Professional Real Estate Agents), speaking to We Wealth: “Confidence.”
“Two years ago, everyone was talking about price increases; now, the sentiment has flipped. That fuels confidence and stimulates the market,” he explains. “In 2024, residential transactions increased by 1.3–1.5% compared to 2023, with a 5% rise in first-home purchases. After three years of decline, that’s an important signal. First-home mortgages are up 10%. Credit access is key.”
Looking ahead, the upward trend in home prices seems hard to deny: “When demand grows faster than supply — and we’ve had a shortage of quality housing for years — prices go up.”
Notably, top-tier properties — those with high energy ratings, newly built or fully renovated — are already scarce and command premium prices. Older, unrenovated homes, meanwhile, may soon feel the impact of gradually fading renovation tax incentives, potentially widening the gap between new builds and fixer-uppers.
“Future prices will depend greatly on the type of property,” Baccarini says. “Homes needing full renovation will struggle more. New or recently refurbished homes will hold their value, as they’re rarer. There’s also the segment of ‘good used’ homes — those renovated 10–15 years ago, move-in ready. Those will also be in high demand.”
The Best Investment? Energy-Efficient Homes
“If buyers have the means, it’s better to purchase a new or recently renovated home, ideally with an energy class rating of A, B, C, or D,” advises Baccarini. “By May 2026, Italy must implement the EU’s ‘Green Homes Directive,’ and anyone buying a home that already meets these standards will preserve the property’s value. They cost more upfront, but they hold value, and the mortgage terms are often more favorable.”
So — Is 2025 a Good Time to Buy?
For those with the financial capacity and intent to purchase, waiting may no longer pay off. Rising demand reflects the perception that the proverbial “good moment” has arrived (with rate cuts nearly done and price increases accelerating).
However, the lack of supply is becoming a social challenge, threatening to make even a bullish real estate market less accessible — both for would-be owners and long-term renters.
Italy’s Hidden Housing Problem
“The real issue is the scarcity of homes on the market. We need a national Housing Plan. This cannot be treated as an emergency anymore,” Baccarini warns. “Italy has no shortage of homes: there are 35 million residential units, of which 9.5 million are vacant. Even discounting uninhabitable or second homes, there are still at least 6 million potentially available.”
But many owners are holding back.
“Short-term rentals are not the real issue,” according to FIAIP. “They account for less than 2% of the national market, around 5–6% in cities like Florence, Milan, and Venice. The real problem is that long-term rentals are unattractive: low returns, rigid contracts, and fear of tenant insolvency.” What’s needed are stronger protections for landlords, tax incentives for long-term leases (so far, policymakers have only raised taxes on short-term rentals), and an extension of flexible, transitional rental contracts to residents, Baccarini concludes.
