What’s going to happen to the real estate market in Italy this year? That’s what everyone wants to know. Political instability and economic difficulties open up a rather uncertain scenario for the country in 2019, but we try to understand and forecast what will happen to the Italian housing market in terms of prices, number of transactions and mortgage interest rates.
At the end of 2018, the Italian housing market saw a slightly less negative balance sheet than the year before, with prices falling by 3.7%, compared to 4% in 2017. However, 2019 looks set to show a contrasting trend in the market, characterised by devaluations in the cities of the central and southern provinces where demand is slow, and the revival of large cities in the centre-north, with a knock-on effect on prices. If there are no shocks then we should still see a moderate growth in transactions (between 580 and 600 thousand units), while prices will tend to stabilise in an increasing number of areas.
In line with the economic recovery, rents and yields on housing have risen because the economic conditions of Italian society and the labour market have increased the number of people renting their main residences. In 2019, housing demand will be increasingly oriented towards rentals by young people and those who want more flexible living and working conditions, including mobility, services and cost reduction.
These conditions will make certain Italian cities particularly attractive for real estate investment, mainly Turin, Bologna, Naples and especially Milan, with a focus on areas previously considered marginal.
Mortgage interest rate forecasts 2019
As far as the credit market is concerned, although the era of quantitative easing in Italy is now over, the European Central Bank's decision to leave monetary values unchanged should also keep mortgage rates low. As for the benchmark for variable-rate mortgages, the Euribor, it will most likely remain in negative territory for a long time. However, a significant shift could occur in the Euribor in the first half of 2019, moving above zero only in 2020 (which in any case means very low rates), reaching 0.5% in 2021 and 1% in 2022. With regard to fixed-rate loans, Interest Rate Swaps with maturities of 20, 25 and 30 years will fluctuate between 1.34 and 1.54. The increases could even be faster and more substantial than those of Euribor, which provides food for thought for the year.