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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 41.1, which is an impressive number.
Italy remains a stable country today due to its robust democratic institutions and membership in the European Union, which provide a framework for political and economic stability. Additionally, its diversified economy, which includes strong sectors such as manufacturing, agriculture, and tourism, helps buffer against economic volatility.
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 2024 with a growth rate of 0.7%, which is not much. As for 2025, the consensus estimate is 0.7%.
Unfortunately, an explosive growth is not on the horizon since Italy's economy is expected to increase by 2.9% during the next 5 years, resulting in an average GDP growth rate of 0.6%.
A minimal growth rate in Italy means the economy isn't expanding much, which can lead to stagnant property values and make it harder to see a good return on investment. Additionally, slow economic growth can result in fewer job opportunities and lower demand for housing, making it riskier to invest in property.
Let's now look at other metrics.
Italian business owners have a neutral outlook towards market conditions
Neutral
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 -1 for Italy. It is definitely a small score.
There hasn't been significant change, considering that the BCI score, 12 months ago, registered at -1.
Despite the Business Confidence Index (BCI) being at a minimal level in Italy, individuals should not be discouraged from considering property investments. A minimal score typically reflects a temporary phase of uncertainty or caution within the business sector, which is a normal aspect of economic cycles. Therefore, it's crucial to evaluate other metrics before determining if it's the right time to invest in 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.
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 2025.
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.
Everything you need to know is included in our Italy Property Pack
In Italy, inflation is expected to be minimal
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 1.0%, which gives us an average yearly increase of 0.2%.
This data is telling us that Italy will likely experience almost no inflation. If you buy a property now, you may experience lower appreciation potential and reduced returns on investment.
Is it a good time to buy real estate in Italy then?
Now it's time to draw our conclusions.
Italy is known for its rich history, stunning landscapes, and vibrant culture, making it an attractive destination for property buyers. Despite the country's economic challenges, Italy remains a stable nation, which is a crucial factor for anyone considering a property investment. Stability often translates to predictability, and in the world of real estate, knowing what to expect can be a significant advantage. While explosive economic growth isn't on the horizon, this stability can provide a sense of security for potential buyers looking to invest in a property in 2025.
The Italian economy is projected to grow at a modest rate of 2.9% over the next five years, averaging a GDP growth rate of 0.6% annually. This minimal growth suggests that the economy isn't expanding rapidly, which can lead to stagnant property values. While this might sound like a downside, it actually presents an opportunity for buyers. With property values not skyrocketing, there could be more room for negotiation and better deals available, making it a potentially good time to buy.
Moreover, the Italian housing market is showing signs of stagnation, which can be advantageous for buyers. When the market isn't overly competitive, there's less pressure to rush into a purchase, allowing buyers to take their time and make more informed decisions. Additionally, with Italy's population gradually becoming wealthier, there could be a slow but steady increase in demand for housing, which might eventually lead to a rise in property values over the long term.
Another factor to consider is the rental market in Italy. According to Numbeo, rental properties in Italy offer gross rental yields ranging from 2.6% to 5.3%. This means that even if property values remain stagnant, there is still potential for generating income through rentals. Coupled with the expectation of minimal inflation, the cost of maintaining a property might not increase significantly, making it a potentially lucrative investment. All these factors combined suggest that 2025 could be a favorable time to consider buying property 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.
-Will real estate prices go up 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.