The Italian real estate market is going through a critical phase, with a significant contraction in property sales and a collapse in mortgages throughout 2023. Experts warn about potential impacts on the entire financial system, while the European Central Bank issues an alarm involving the entire continent. The alarming news unfolds through Istat data for the first quarter of 2023, highlighting a 5% decline compared to the previous quarter and a significant -11% on an annual basis in real estate transactions.
Decline in Property Sales
The contraction in real estate transactions is reflected in every corner of the country, with the Northwest and the South being among the hardest-hit areas. Major cities such as Milan, Turin, and Rome experience declines of -8.4%, -3.4%, and -9.6%, respectively. The crisis extends to both large urban centers, with an 18.3% decrease, and smaller ones, with a -6.4% decrease. Istat emphasizes that after eight consecutive quarters of growth, the last three quarters show a contraction mainly driven by the housing sector. The decline affects the entire country, with the Northwest down -16.5%, the Center -16.0%, the Northeast -7.8%, the Islands -4.9%, and the South -4.6%.
Collapse in Mortgages
In addition to the decline in property sales, there is a real collapse in mortgages. In the first half of 2023, mortgages for home purchases record an impressive -29.5% compared to the same period in 2022. The Notary Council’s document highlights a decrease in bank loans by 25.9% in the first quarter, intensifying in the second with a -32.6%. Major Italian cities witness a collapse in granted mortgages, with Milan, Turin, and Bologna being the most affected, with percentages exceeding 30%.
Projections for 2023
The projections from the National Council of Notaries foresee a market decline of around 10.5% in 2023. The crisis affects both first and second homes, but the market for second homes among individuals seems to resist better. Regarding mortgages, a reduction of -23.8% is expected, accentuated by the increase in interest rates compared to 2022.
Causes, Consequences, and Solutions
Notary Flavia Fiocchi of the National Council of Notaries attributes the crisis to the sharp increase in mortgage rates. This phenomenon mainly affects those who purchase a house through financing, automatically halting property transactions. Proposed solutions include a new public residential construction plan, tax incentives for silver co-housing, and an intergenerational virtuous agreement to limit land consumption.
Concerns of the ECB
The European Central Bank issues an alarm, highlighting risks in the real estate sector that could impact bank portfolios and the entire financial system. High interest rates have increased the cost of mortgages, reducing sales and lowering prices.
Alarming data and negative prospects indicate an unprecedented crisis in the Italian real estate market. The need for urgent countermeasures becomes crucial to avoid devastating impacts on the entire financial system. The future of the Italian “brick” is hanging in the balance, and decisions by institutions become crucial to reverse the trend and revive the national real estate sector. The real estate community looks to the future with uncertainty, as hopes for a stable and prosperous real estate market seem to depend on immediate actions by competent authorities.