Buying real estate in Italy?

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Is it a good time to buy a property in Italy in 2024?

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property market Italy

Everything you need to know is included in our Italy Property Pack

Are you thinking of investing in property in the land of Art and Romance? Are you pondering if the prices are at the desired level?

Each person has their own stance on market timing. Your Italian acquaintance might suggest that now is the opportune time to buy property, whereas your spouse, who is originally from Rome, might have a different view and recommend waiting for more stability.

At Investropa, when we create articles or update our pack of documents related to the real estate market in Italy, we make decisions based on evidence and trustworthy data rather than subjective opinions or hearsay.

We've done extensive research on official reports and government website statistics, resulting in a comprehensive database. Here's what we've learned, which can provide valuable insights for your decision-making process regarding real estate purchase in Italy.

Enjoy your reading!

How is the property market in Italy these days?

Italy remains, today, a very stable country

Positive

Stability is a necessary condition when investing in real estate because it attracts sustainable development and investor confidence. It is an information you need as a foreigner who might buy a property in Italy.

You most likely already know that Italy is widely known for its remarkable stability. The last Fragile State Index reported for this country is 43.4, which is an impressive number.

Italy has a strong and unified government, as well as a long history of political stability, which has helped it maintain a steady and consistent path over the years. Additionally, the Italian economy has remained relatively strong despite the global economic downturn, which has further contributed to the country's stability.

Stability check done. Now, it's time to review the economic forecast.

Italy will face challenges in its growth

Neutral

Before diving into real estate investment, the initial step is to consider the country's economic well-being.

Based on the IMF's outlook, Italy will end 2023 with a growth rate of 0.7%, which is not much. Concerning 2024, the consensus estimate is 0.8%.

Unfortunately, an explosive growth is not on the horizon since Italy's economy is expected to increase by 4.8% during the next 5 years, resulting in an average GDP growth rate of 1%.

The forecasted minimal growth rate in Italy can make it difficult for investors to make a profit from their property investments. This is because the minimal growth rate may not be enough to cover the costs of holding the property, such as taxes, maintenance, and repairs.

Let's now look at other metrics.Italy gdp growth

Italian business owners still don't express confidence in current market conditions

Negative

How do Italians perceive the state of their economy? The GDP forecast alone may not capture their sentiments. Luckily, in Italy there is an official metric that is frequently communicated. This doesn't apply to every country, so we're in luck.

The Business Consumer Index (BCI) is a measurement used to gauge the confidence of business leaders in the present and future economic conditions. Surveys and assessments play a crucial role in its calculation.

According to the National Institute of Statistics's data, the latest Business Confidence Index value is 2 for Italy. It is definitely a small score.

Unfortunately, we're on a descending trend. The score, 12 months ago, was at 6.

Even if the Business Confidence Index (BCI) score is low in Italy, it shouldn't deter individuals from exploring property investments. A low score often indicates a temporary period of uncertainty or caution in the business sector, which is a natural part of economic cycles.

Therefore, it's important to consider other metrics before deciding whether it's the right time to buy property in Italy.

Italian housing market shows signs of stagnation

Neutral

Italy's home prices have increased by 8.2% in 5 years according to eurostat.

It means that if you had bought a farmhouse in Tuscany for $875,000 five years ago, then it would now be worth around $947,000.

Recently, there has been a noticeable trend of slow growth in the Italian housing market, with modest increases in property values and limited market activity.

If you absolutely want to make A LOT of money when you sell your Italian property in a couple of years, then it's a bad sign. But if you're looking for a safe place to invest your money, it's a good sign.

You can find a more detailed analysis of the real estate prices in our property pack for Italy.Italy housing prices real estate

Everything you need to know is included in our Italy Property Pack

Italy's population is getting (a bit) richer

Positive

It's vital to take population growth and GDP per capita into account before purchasing real estate because:

  • a growing population means more people needing homes
  • a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)

In Italy, the average GDP per capita has changed by 4.1% over the last 5 years. The growth, although minimal, is still present.

This means that, if you purchase a charming villa in Tuscany and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.

If you're considering purchasing and renting it out, this trend is a good thing. Then, the rental demand might increase in Italian cities like Rome, Milan, or Florence in 2024.

Rental yields are not crazy in Italy

Neutral

Turning our focus to the rental yield, let's investigate further.

It's the annual rental income of a property divided by its price. For example, if an Italian property is purchased for €500,000 and generates €20,000 in annual rental income, the rental yield would be 4%.

According to Numbeo, rental properties in Italy offer gross rental yields ranging from 2.6% and 5.3%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in Italy.

It means that the income potential from a real estate investment is relatively moderate.

Italy rental yields

Everything you need to know is included in our Italy Property Pack

In Italy, inflation is projected to remain moderate

Neutral

In two words, inflation is when values inflate.

It's when your go-to slice of pizza in Rome costs 4 euros instead of 3 euros a couple of years ago.

If you're contemplating investing in a property, high inflation can offer several advantages:

  • Property values have a tendency to increase over time, potentially leading to capital appreciation.
  • Inflation can result in higher rental rates, thereby increasing the cash flow from the property.
  • Inflation reduces the real value of debt, making mortgage payments more affordable.
  • Real estate can act as a hedge against inflation, effectively preserving the value of the investment.
  • Diversifying into real estate provides stability during inflationary periods.

As per the IMF's forecasts, over the next 5 years, Italy will have an inflation rate of 12.6%, which gives us an average yearly increase of 2.5%.

This data is telling us that Italy might experience inflation soon, so it's worth thinking about buying property now.

Is it a good time to buy real estate in Italy then?

Now it's time to draw our conclusions.

Considering the available indicators, 2024 might not be the most optimal time for property investment in Italy, given a range of factors that warrant cautious consideration. While Italy's stability and increasing population wealth are advantages, other concerning signals suggest potential challenges for property investors.

Italy's projected growth challenges and a housing market that shows signs of stagnation indicate potential hurdles for the property market. These factors could impact the demand for and appreciation of properties, affecting the potential returns on investment.

Although rental yields are not exceptionally high, they are in line with the moderate inflation projection. However, these factors alone might not outweigh the broader challenges that the Italian property market might face in the near term.

Most notably, the lack of confidence expressed by Italian business owners in current market conditions is a key negative signal. Business sentiment can often reflect underlying economic uncertainties that could impact the investment environment, making it prudent for investors to exercise caution in 2024 when considering property investment in Italy.

We genuinely hope this article has been helpful and informative to you!. If you need to know more, you can check our our pack of documents related to the real estate market in Italy.

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.

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