Italy’s real estate market is gaining momentum as Europe seeks to consolidate its recovery. But there is one variable that could change the picture: interest rates. Today, the property market is demonstrating a resilience that, according to Mario Breglia, president of Scenari Immobiliari, extends beyond geopolitical, financial and energy-related turbulence. However, if the cost of borrowing were to rise significantly, the impact on transactions could be substantial. This is the stress test for a market that, at present, continues to grow. Scenari Immobiliari’s European Outlook 2027, presented at the 34th Forum in Rapallo, portrays a European real estate market in recovery, with particularly positive prospects for the countries of Southern Europe. Italy is among them, growing at a faster pace than the major established markets of Northern Europe.
Italy’s real estate market is growing faster than europe’s major markets
The European real estate market is expected to reach a turnover of €1.36 trillion in 2027. Across the five main European countries, real estate transaction volumes are expected to rise from almost €987 billion in 2025 to more than €1.03 trillion in 2026 and above €1.086 trillion in 2027, representing increases of 4.6% and 5.6%, respectively. The picture, however, is not uniform. The strongest prospects are concentrated in Southern Europe: Spain is recording the fastest growth, followed by Italy, while Germany and France, despite retaining a central role thanks to their size and market strength, are showing more moderate growth rates. The United Kingdom is also among the markets growing more slowly than those in Southern Europe.
“The image chosen for this Outlook is that of a candle in the wind, like the Elton John song,” Breglia says. “The geopolitical, financial and energy currents are strong, but they cannot put it out. On the contrary, real estate is gradually regaining strength as a tool for investment, wealth protection and the transformation of cities.” In Italy, real estate turnover is expected to increase from €162.7 billion in 2025 to €194.1 billion in 2027, following projected growth of 8.7% in 2026 and 9.8% in 2027. Over five years, Italian real estate turnover has increased by one third and, with the performance expected for 2027, Italy ranks second in Europe in terms of growth.
Residential prices and transactions
Overall, the trajectory of residential prices remains positive. According to the report, the value index for Italy’s residential property sector is expected to rise from 110.8 in 2025 to 121 in 2027, with annual increases of more than 4%. Growth is affecting both metropolitan markets and a number of provincial capitals characterised by moderate levels of housing pressure. On the transaction front, after reaching a low of 710,000 transactions in 2023, the market has gradually returned to growth and is expected to reach 840,000 residential transactions in 2027. For the next two years, Scenari Immobiliari forecasts annual growth of between 4% and 5%, supported by both demand from final users and that of investors. Too optimistic? “Compared with international studies, we are actually more pessimistic: they are even more optimistic,” Breglia replies.
Housing and employment: demand for 840,000 Homes
Residential demand is also linked to the transformation of the labour market. The fourth edition of the report La casa per la città del futuro (“Housing for the City of the Future”), produced by Scenari Immobiliari in collaboration with Investire SGR, estimates a need for 840,000 homes in Italian areas experiencing strong employment dynamics. More than 25 million workers live in these areas and, in order to meet the estimated housing demand, more than 70 million square metres of new residential space would be required, along with investments of approximately €235 billion. The report highlights how the availability of affordable housing is increasingly linked to an area’s ability to attract and retain workers, talent and labour. Demand is concentrated particularly in local labour markets with a predominantly service-based, tourism and industrial profile.
“The real estate market must be able to consider the affordable living segment as an infrastructure investment,” says Michele Beolchini, Head of Product Development & Fundraising at Investire SGR. “Institutional, private and public capital needs to be available to invest significantly in this segment, in order to enable the development of a housing supply that is consistent with the structural needs of Italian workers,” he comments. The issue of housing supply is therefore part of the broader transformation of the residential market, shaped by growing demand, a shortage of new construction and the need to regenerate the existing housing stock.
Real estate investment: Italy sets a new record
The return of capital is another confirmation of the strength of the recovery. In the first half of 2026, real estate investment in Italy exceeded €7 billion, setting a new record and recording year-on-year growth of more than 30%. Italy also continues to rank among the world’s top 10 destinations for international capital, supported by growing interest in Southern Europe. The most attractive prospects identified by the Outlook concern logistics, living and data centres. However, the positive picture extends to virtually all major segments of the market.
“All asset classes are performing well,” Breglia explains. “Residential is certainly doing well, but offices have also recovered almost everywhere: investors are coming back. Then there is hospitality: we had a year of pause in 2025, while 2026 and the outlook for 2027 are very positive. And logistics, which everyone expected to remain on hold for two or three years, has instead recovered very strongly.”
Logistics, hotels and offices: a more diversified market
The logistics sector has reached a new record, with €5.3 billion in turnover, up 6% in one year. According to Scenari Immobiliari, development activity has begun shifting towards Southern Italy, where there is significant room for further growth. The hospitality sector is also recovering strongly, with a growing presence of Italian and international institutional investors and demand concentrated particularly in Rome and the country’s main tourist areas. The office sector, meanwhile, is recording a slight increase, but with increasingly selective demand. Investors are focusing primarily on Class A buildings and properties characterised by high levels of energy performance. The issue of asset quality is therefore set to become increasingly important. As Breglia points out, the new phase of the market will not reward all properties equally, but will particularly favour high-quality, efficient and well-located assets capable of responding to demographic, logistical, digital and climate-related transformations.
New-Build housing remains scarce, but demand is strong
The residential market also presents a paradox: new-build properties still represent a very small share of transactions, but they are also the product facing the strongest demand.
“New-build properties are always in short supply: out of 800,000 transactions, only 60,000 involve new homes, but they are the most sought-after,” Breglia says. “The absorption rate for new-build properties is now 100%, because the price is fixed. When you have a home that needs to be renovated, the amount of time involved becomes a nightmare.” The shortage of new-build properties and growing attention to building efficiency are therefore making the quality of housing supply an increasingly important issue.
Three million homes drive Italy’s real estate economy every year
But the picture of Italy’s real estate market does not end with sales transactions. According to Breglia, almost 10% of Italy’s residential housing stock is involved in market activity every year.
“We have one million homes for sale, just under one million homes for rent and one million homes available for short-term rental. So we are talking about three million homes driving the market. Italy’s residential housing stock is estimated at around 33–34 million homes. In other words, just under 10% of the housing stock changes hands or is placed on the market every year through sales, rentals and short-term lets,” says the president of Scenari Immobiliari. He adds that this represents a change that goes beyond the traditional sales market: “An economy is emerging that is no longer based solely on buying and selling, as it once was, but on management, services, innovation and maintenance. An economy has grown around the home that previously revolved exclusively around buying and selling,” he explains.
Interest rates remain the key variable
And this is precisely where the initial question returns: how resilient is this new real estate economy if the cost of borrowing were to rise again? According to Breglia, a rise in interest rates from 3% to 4–5% would not have any significant impact on the real estate market. The scenario would change at much higher levels: at 8%, he estimates that transactions could fall by 10%, while at 10%, the contraction could reach 30%. For now, however, the figures tell a different story. The European market continues to consolidate its post-Covid recovery, while Italy is recording sustained growth in turnover, transactions and, above all, investment.
The real estate “candle”, therefore, continues to burn despite the wind. The key question for the coming years will be how long it can remain lit if financial currents become significantly stronger.
