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EXPLAINED: What will happen with property prices in Italy in 2023?

Housing prices in Italy have risen over the past couple of years - but will the trend continue into 2023? The Local takes a look at what the experts are predicting.

Will property prices in Italy continue to rise in 2023?
Will property prices in Italy continue to rise in 2023? Photo by MARCO BERTORELLO / AFP.

Italy’s property market has been steadily on the up since 2020, and the most up-to-date figures for 2022 are no exception.

According to provisional data from Italy’s National Statistics Office (ISTAT), in the second quarter of this year Italy’s Housing Price Index (HPI) grew by 2.3 percent compared to the previous quarter, and 5.2 percent on same period last year.

The HPI tracks the price changes of residential housing as a percentage change measured from a specific start date.

The growth was primarily driven by new builds, ISTAT’s numbers show; while the value of existing properties increased by 3.8 percent compared to the same period last year, new dwellings gained 12.1 percent in market value.

Italy’s real estate market suffered from several consecutive years of stagnation up to the end of 2019, weighed down by the high number of old, neglected properties on the market which were proving difficult to sell.

But the Covid pandemic caused an unexpected shake up of the market, leading to the first major jump in Italian property values for years at the end of the first quarter of 2020.

A combination of government stimulus packages and a desire among second home hunters to escape cramped lockdown conditions created renewed interest in Italy’s property market in 2021 – a trend which has continued into 2022.

READ ALSO: Everything you need to know about having a second home in Italy

But with soaring inflation and a worsening cost of living crisis, what are experts predicting for 2023?

According to the latest forecast from the research institute Scenari Immobiliari (Real Estate Scenarios), Italy’s housing market is expected to experience modest growth next year, albeit at a slower rate than in 2022.

Factors putting the brakes on growth include the soaring cost of living eroding households’ purchasing power, rising mortgage interest rates, and a shrinking economy: Italy, along with Germany, is expected to slip into a recession next year.

Certain financial aid measures introduced under the previous Draghi government to promote home ownership – such as a bonus for first-time buyers under the age of 36 – will come to an end by the start of next year.

Italy’s ‘superbonus 110’, which offered a 110 percent tax deduction for home renovations, led to such high demand that it caused the building materials and construction costs to skyrocket and resulted in major project delays, ultimately discouraging buyers from investing in fixer-uppers.

READ ALSO: Is Italy’s cheap homes frenzy coming to an end?

And the European Central Bank’s decision to raise interest rates means the Euribor, the rate tied to mortgages in Italy, has risen steeply, which will have knock on negative effects on housing demand and prices.

Despite all this, interest in Italy’s housing market has far from dissipated.

Demand from international buyers and hybrid workers who have negotiated remote working arrangements in the wake of the pandemic remains high.

A 2022 report by the global real estate consultancy Knight Frank found that in survey of over 1,000 global buyers, Italy was among the top five choices for second home destinations, with UK and US buyers ranking the country in their top two.

This means that industry professionals are cautiously optimistic about Italy’s property market performance in 2023.

Scenari Immobiliari anticipates that Italy’s real estate sales will amount to around 140 billion euros in 2022; a 10 percent increase on 2021.

In 2023, they predict that figure will rise to 148 billion, amounting to a 6.5 percent annual increase – not as high as 2022 forecasts, but still clear growth.

“The strength of demand is still robust,” said Scenari Immobilari’s president Mario Breglia, speaking at the institute’s 2023 European Outlook forum in September, “but external conditions are negative and are trying to make the market change direction”

“It is time for more difficult sailing, needing experienced skippers and care in choosing the right direction. But every storm is bound to blow over.”

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PROPERTY

PROPERTY: Should you hire a renovation agency for your Italian home?

If you're renovating a home in Italy, will you need to pay a middleman to cut through the red tape and language barriers? Silvia Marchetti looks at the pros and cons.

PROPERTY: Should you hire a renovation agency for your Italian home?

The idea of snapping up a cheap, crumbling house in a picturesque Italian village may sound appealing – but doing so always comes with tedious paperwork and the hassle of renovation.

For this reason, a growing number of professional agencies have sprung up in Italy to cater to foreign buyers snapping up cheap homes amid the property frenzy.

In many of the Italian towns selling one-euro or cheap homes, there are now ‘restyle experts’ and agencies that offer renovation services handling everything that could become a nightmare: from dealing with the paperwork and fiscal issues to finding a notary for the deed, contracting an architect, surveyor, a building team and the right suppliers for the furniture.

They also handle the sometimes tricky task of reactivating utilities in properties that have been abandoned for decades.

I’ve travelled to many of these villages and looked at this side of the business, too. Hiring these ‘middle people’ comes with pros and cons, though the positive aspects can certainly outweigh the negatives – provided you’re careful to pick the right professionals. 

READ ALSO: Why Italians aren’t snatching up their country’s one-euro homes

These intermediaries are usually locals who have expertise in real estate and a good list of suppliers’ contacts. This allows them to deliver turnkey homes that were once just heaps of decaying rubble, sparing buyers time and money – particularly those living abroad, who then aren’t forced to fly over to Italy countless times a year to follow the work in progress.

I’ve met several buyers from abroad who purchased cheap homes sight unseen after merely looking at photos posted online by local authorities, but then had to book many expensive long-haul flights to hire the architect, get the paperwork done, and select the construction team (a few even got stuck here during Covid).

Thanks to their contacts the local agents can ensure fast-track renovations are completed within 2-4 months, which could prove very useful as the ‘superbonus’ frenzy in Italy has caused a builder shortage meaning many people renovating property now face long delays

Photo by TIZIANA FABI / AFP

Their all-inclusive commission usually starts at 5 percent of the total cost of a renovation, or at 2.500 euros per house independently from its cost and dimension. The fee also depends on the type of work being carried out, how tailored it is and whether there are any specific requirements, like installing an indoor elevator or having furniture pieces shipped from the mainland if it happens to be a Sicilian or Sardinian village. 

However, buyers must always be careful. It is highly recommended to make sure the local authorities know who these agents are and how reliable they are in delivering results.

Town halls can often suggest which local companies to contact, and this gives the renovation legitimacy in my view. In a small village, where everyone knows each other, when the town hall recommends an agency there’s always a certain degree of trust involved and agents know that their credibility is at stake (and also future commissions by more clients). 

Word of mouth among foreign buyers is a powerful tool; it can be positive or detrimental for the agency if a restyle isn’t done the right way, or with too many problems.

READ ALSO: How to avoid hidden traps when buying an old property in Italy

So it’s best to avoid agencies from another village, even if nearby, who come to you offering fast and super-cheap services, or local agencies that are not suggested by the mayor’s office. 

Then of course there can be other downsides, which largely depend on how ‘controlling’ and demanding the client is. 

For those not based in Italy full-time, the most important consideration is: how much can you trust these professionals to deliver what you expect, exactly how you want it, without having to be constantly on the ground? 

Photo by Philippe HUGUEN / AFP

Language can be a major obstacle. There are technical building terms that prove difficult to translate, and if the local agency doesn’t have English-speaking renovation professionals with a track record in following foreign clients it’s best to look for an intermediary with a greater language proficiency. 

I remember meeting an American couple once who got lost in translation with a village agent for days, and had to hire a translator just to hire the intermediary.

It’s always useful to ask for a ‘preventivo’ (quote) with VAT indication, considering roughly how much inflation could make the final cost go up. Buyers should also sign a contract with the exact timeframe of the works and delivery date of the new home, including penalties if there are delays on the part of the agency. 

READ ALSO:

But, even when there is complete trust, I think it is impossible to fully restyle an old home from a distance, contacting intermediaries by phone, emails, messages or video calls only. 

Details are key and there’s always something that could be misinterpreted. Buyers based overseas should still follow-up the renovation phases personally, perhaps with one or two flights per year to check all is going well and up to schedule.

Asking to see the costs so far undertaken midway through the restyle is useful to make sure there are no hidden costs or unexpected third parties involved – like buying the most expensive furniture or marble floor when not requested, or hiring a carpenter to build artisan beds.

While there is really no such thing as a hassle-free renovation, these agencies can ease the pressure and do most of the burdensome work – but buyers’ supervision will always be needed.

Read more in The Local’s Italian property section.

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