Italy’s luxury property market will likely remain insulated from political and economic fallout following a referendum in which Italian voters crushed a proposal for constitutional reforms, leading to the resignation of left-of-center Prime Minister Matteo Renzi, experts said.
The country overwhelmingly voted "no" Sunday to constitutional amendments designed to speed up a sluggish lawmaking process and centralize more power with the federal government. Like Brexit and the U.S. election of Donald Trump, the "no" vote is seen as a rebuke of politics as usual and a sign of growing European populism.
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But for now, the political upset is unlikely to diminish the allure of a penthouse overlooking the Colosseum or a second home in Tuscany’s wine country, said Diletta Giorgolo Spinola, head of sales for the Rome and Florence offices at Sotheby’s International Realty.
"Italy has always had a lot of changes in government," Ms. Giorgolo Spinola said. "Our stability is different than in other European countries. Politics do not affect our trophy assets."
Over the last 18 months, an influx of American buyers has flooded the Italian luxury market due to a favorable currency exchange—a trend that’s unlikely to change as a result of the referendum, Ms. Giorgolo Spinola added.
Still, the referendum will hurt Italy’s economy, said Nicola Nobile, a chief economist at Oxford Economics
The vote and Mr. Renzi’s resignation will mean a period of political limbo that will distract the government from economic issues vital to most Italians, such as high youth unemployment and national spending. The severity will depend on the time it takes President Sergio Mattarella to replace Mr. Renzi or, worse, the time it takes to hold new elections, Mr. Nobile said. Mr. Renzi has agreed to stay on until a budget passes, which is expected to happen within days.
"If the president will not be able to find a prime minister, then they will have to do new elections, then we will need more time, and the (economic) effect will be much more severe," Mr. Nobile said.
But the high-end property market is unlikely to take that disorder, a perennial feature of Italian politics, into consideration.
"If you’re investing in a lake home, you will not consider this as something to prevent you from doing that," Mr. Nobile said. "This is negative more for average people, but not for the high-income market."
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Stocks and the euro had already shrugged off the referendum vote by the end of Monday. Despite losses in the banking sector, the FTSE MIB index traded flat. The Stoxx Europe 600 was up a half-percent by the end of the day.
And while huge quantities of bad debt have pummeled Italy’s banking sector, that will play little-to-no role in luxury real estate, where many buyers pay in cash, said Rupert Fawcett, head of Knight Frank’s Italian department, in a post-referendum analysis.
Furthermore, prices will remain stable as Italians typically refrain from putting property on the market during uncertain times, Mr. Fawcett said. "As such, the supply of quality properties coming to the market will most likely not change dramatically, meaning prices will be protected," he said.
There’s some anecdotal evidence that demand will hold as well. Euro buyers from northern countries and Scandinavians "continue to have an affinity with Italian property," regardless of the economic or political climate, according to Mr. Fawcett.
Requests through the real estate site Gate-away.com for houses priced at €1 million or more have grown 67% since the beginning of the year, according to a report, with Germans making up the largest segment of foreign buyers, then Americans and the Swiss.
While overall housing prices continued to slip in Italy, prime markets rebounded last year. Luxury homes in Venice, the Italian lakes region, Rome, Florence and Liguria saw year-over-year price growth in 2015, according to a Frank Knight report.
Despite that trend, the referendum could scare off some buyers who believe the "no" vote signals a deeper threat to European integration and the euro, said Stijn Van Nieuwerburgh, a professor of finance at New York University’s Stern School of Business.
"As prospects for further European integration fade, and indeed the risk of a collapse of the Eurozone increases, with the Italian referendum, the Italian property market will suffer," Mr. Van Nieuwerburgh said in an email.
"Italy's appeal to luxury buyers will decline because of the increased uncertainty and the—still remote—risk of a return to the lira and a steep devaluation of the Italian currency in such an event."