Italy’s residential property market is expected to stabilize in 2018 as the country’s economy returns to growth after years of recovering from global financial crisis, according to a report Friday.
The total residential transaction volume in Italy increased by 18% in 2016, reaching its highest level in the past four years. Meanwhile, as the eurozone’s third largest economy, and the eighth largest in the world, Italy is projected to see a 1.4% growth in 2017, according to a Savills report.
"With national elections to be held by spring 2018, political uncertainty remains, but the economic outlook is improving," said Paul Tostevin, associate director of Savills World Research, in the report.
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Rising transaction volume will help reduce inventories and boost prices, Mr. Tostevin said. The prime markets could be further stimulated following the government’s new incentives to attract wealthy buyers to Italy, he added.
In March, the government introduced a flat tax rate of €100,000 on worldwide income of high-net-worth foreigners who claim Italian residency, local media reported.
Overall, national home prices were slightly up 0.1% in 2016 annually, reversing the 1.7% fall in 2005, according to data from the National Institute for Statistics cited by Savills.
But more recent data from Idealista, a leading brokerage in Italy, show that home prices fell 1% in the second quarter of 2017 compared to the first quarter. Compared to the same period last year, the price was down 6.5%, according to the report.
Yet challenges persist, the report said. Government debt stands at 133% of gross domestic product, higher than Portugal, but lower than Greece. Unemployment stands at 11.3% and youth unemployment at 37% is alarmingly high.
Europeans still comprise the bulk of international buyers in Italy, while U.S. purchasers are becoming a growing force motivated by the strong dollar, according to the report.
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Looking at metro level, the number of residential sales in Rome increased 11% in 2016 from a year ago. While prices across the capital city averaged about €3,200 per square meter (about US$358 per square foot), prime historic properties were sold from €8,000 to €10,000 per square meter (US$894 to US$1,118 per square foot), according to Savills.
It still represents a good value compared to other global prime markets. In Hong Kong, the average prime price reached €39,000 per square meter (US$4,359 per square foot) in 2016, New York and Paris averaged €16,700 per square meter (US$1,866 per square foot) and €12,000 per square meter (US$1,341 per square foot), respectively.
As a popular tourist destination, Venice has a more active rental market. Luxury home prices there rose 4% to 5% last year. In the fashion capital of Milan where retail and office properties are more sought after, prime residential prices increased 1.4% in the second quarter of 2017, according to the report based on the latest data available.