After several years of uncertainty, Italy’s residential property market is regaining momentum. A combination of favourable macroeconomic conditions, including falling interest rates, contained inflation, and renewed household confidence in property as a safe investment, is driving this resurgence. These insights come from the latest “G Market Pulse” report by Patrigest – Gabetti Group’s Research & Data Intelligence division, which highlights a sector returning to robust growth in 2025.
Strong recovery backed by expanding credit
The European Central Bank’s accommodative monetary policy, with interest rates reduced to 2.15%, has breathed new life into the market, while inflation remains stable at 1.6%, easing household budgets. The result is a 9.5% rise in residential property transactions in the first half of 2025 compared with 2024. Growth in Italy’s ten largest cities reached 6.9%, continuing the positive trend from 2024.
Mortgage lending is driving this recovery, posting increases of 32.8% in Q1 and 19.9% in Q2, while purchases without a mortgage remain largely stable or slightly down. The average mortgage now stands at €141,500, rising by around €9,000 annually compared with 2023 and 2024.
High-value loans over €100,000 now account for more than 70% of mortgage applications, with 38.5% in the €100,001–€150,000 range, 20.5% between €150,001 and €200,000, and 12.8% exceeding €200,000. Mortgages under €100,000 have fallen to 28.3% of the total.
Average mortgage terms are lengthening: 63.2% now run 25–30 years, up 9.5% on 2024. Fixed-rate mortgages dominate, chosen by 98.8% of households in 2025, compared with 75.2% in 2023, reflecting a strong preference for security and predictability. First-time buyers remain the main driver of demand (87.1%), while interest in second homes is growing (from 1.7% to 2.8%).
“The return of bank credit is the real engine of this recovery,” explains Luca Dondi dall’Orologio, CEO of Patrigest. “The property market remains highly sensitive to financial conditions. Without stable bank support, Italian households’ purchasing power is too weak to sustain current prices.”
Prices on the rise and renewed buyer confidence
After a slowdown in 2023–2024, housing demand is increasing decisively. Purchase intentions climbed from 2.2% in Q1 to 3.8% in Q3 2025. The national average property price is €1,705 per sqm, expected to rise 1.8% by year-end, before stabilising in 2026 (+0.5%). Average property sizes are also increasing, reaching 108 sqm, signalling renewed buyer confidence.
However, supply-demand imbalances persist. Three-room apartments make up 37% of buyer requests, followed by two-room units (21%), yet the market is dominated by four-room properties (37%) and larger homes, highlighting the ongoing mismatch between what buyers want and what’s available.
New build market: Northern Italy leads
The new-build sector is geographically uneven. Northern Italy hosts most active construction sites, while central regions are slower, and the South remains relatively static. Three-room apartments dominate demand (41.5%), followed by two-room units (27.3%), though supply struggles to keep pace.
In the first half of 2025, new-build sales fell in major cities: -47% in Florence and -31% in Milan, which still recorded 970 transactions, second only to Rome (1,318). Genoa stands out thanks to Waterfront urban regeneration, while Palermo is also seeing renewed interest.
Rental market shows signs of stabilisation
The rental market in Italy continues to grow but at a slower pace. New rental contracts rose by 2.3% in 2024 (762,539 units) but slowed to 1.2% in H1 2025. Long-term rentals account for 41% of the market but fell 2%, while short-term (+3.1%) and agreed-rent contracts (+3.3%) grew.
After sharp increases between 2023 and 2024 (+25%), rents in 2025 are easing, with a -1.8% drop in Q3 across the ten largest cities—a sign of market stabilisation following rapid price growth, driven by limited supply and the boom in short-term lettings.
“The rental market is not yet a genuine alternative to buying,” notes Dondi. “Property scarcity, owners’ reluctance to offer long-term contracts, and cautious institutional investors are holding the sector back. Without structural support, renting will remain a necessity rather than a choice.”
Investment and outlook for 2026
Total real estate investment in Italy reached €7.7 billion in the first nine months of 2025 (+16.7% on 2024). The residential sector, including both traditional and new housing formats, accounted for €450 million, or 6% of the total, in line with the ten-year average.
Geographical polarisation remains: a dynamic, leading North contrasts with a weaker South, although some urban markets show encouraging signs of recovery. Looking ahead to 2026, the market is expected to consolidate at pre-pandemic levels, supported by strong residential demand and gradual price stabilisation.
“The future of Italy’s property market lies in urban regeneration and innovative housing solutions,” concludes Dondi. “Policies that promote affordability and sustainability are essential to meet the evolving needs of Italian households for flexibility and modern living.”