Italy Real Estate Outlook 2023

  • 10/04/2023
  • Reading time 5 Minutes

Italy's real estate market suffers the consequences of international macroeconomic scenarios with rising interest rates and inflation. Despite turbulences the Italian market remains attractive.

In a nutshell

  1. Rising inflation and interest rates lead to a market slowdown, though temporary and contained. Political stability gives credibility and guarantee solid investment conditions.
  2. Public investments, “PNRR” (the National Recovery and Resilience Plan following the pandemic), and the EU directive on buildings for the reduction of emissions create business opportunities, as happened with the “Superbonus” (tax measures for seismic renovations and energy efficiency improvements) in the last two years.
  3. Most of all, Logistics and Hotellerie attract foreign investments despite the macroeconomic difficulties.


Both the European and Italian real estate markets, before the spread of COVID-19, were characterized by an expansive phase with an increase in prices, basically in all sectors, from residential to offices.

After the pandemic pause, 2021 saw an evident increase in real estate transactions and investments, and the number of sales returned to pre-covid levels. Investments in construction has been the main growth engine of the Italian economy over the past two years. Approximately one third of the GDP growth in the period is attributable to construction.

In 2022 there was a significant growth in the entire construction sector of about +12.1% in real terms, resulting from increases in all sectors.

In 2023 the prospects for the near future are not very rosy.

The change in monetary policy with the consequent rise in interests on all Eurozone government bonds has slimmed the spread between the risk-free rate and the average cap rate indicating the risk premium in real estate. This decreased the attractiveness of investing in real estate.

Residential real estate today may offer less protection against inflation than in the past.
Prices trends are still positive but tending towards stability. If in nominal terms house prices will register a +1% in 2023 (compared to +3,1% in 2022), in real terms this will translate into a drop of 4.8%. Another determining factor is the low supply of new homes in Italy, which is an expression of the increase in raw material prices; this means that real estate price dynamics will not fully reflect inflation.

During Q1 2023, the Italian residential real estate market experienced a slight decline, with a total of 166,745 transactions.
Projections for 2023, according to the Italian Statistical Institute, show how annual income growth is expected to slow from the figure at the end of 2022.

It is undeniable that 2023 is proving to be a difficult year for capital market investments but the Italian market is still attractive despite the turbulence in the macroeconomic scenario and the rise in interest rates. A scenario that will see the inflation curve still falling, and Italy's GDP which is given at 1%, among the highest in European countries, with an unemployment rate that has been increasingly low since 2008. All these factors make Italy a country where it is still interesting to invest in real estate.

Main trends:

Hotellerie: 2022 closes with a +40% of total turnover equal to euro 3.5 bn and 2024 is expected to be even more satisfying. Also noteworthy are the ambitious projects in some destinations such as Rome, which is preparing to add over 2.000 rooms in the luxury segment in the coming years. An increase in investments in the hotel industry is also expected because of the Milan - Cortina 2026 Winter Olympic Games.

Milan has now become a tourist destination, and the growing presence of tourists is also evidenced by an increase in the purchase of hotel structures.

Logistics: With a 7% increase in investments in logistics, Italy confirms its first place for growth in Europe during 2022. In H1 2023 logistics continues to be the most interesting real estate segment in the Italian market for investors in terms of number of deals concluded. It is estimated that around 1.9 mln sqm will be placed on the market by the end of 2024, in about 48 projects, of which around half are already leased. Milan and its greater area continue to be the preferred location for investments.

Residential: 2022 recorded a significant increase, with around 784.000 transactions, 4.7% more than those recorded the previous year, for an estimated value of almost euro 123 bn. In 2023 even as inflation is easing due to falling energy prices, key inflationary pressures have proved more persistent than central banks had anticipated there will be a sharp contraction in sales with prices which, however, should withstand the new shock wave.


The real estate market will suffer the repercussions of the international macro scenarios (increase in interest rates and inflation). However, it is evident how the market, as happened in the past, will overcome the difficulties despite a slowdown.

Italy, and in particular Milan, also because of public investments and the PNRR, which also aims to guarantee energy efficiency to public and private buildings, will be an additional vehicle to support financing and investments.

The greater political stability, an increase in employment, public investments, the 2026 Olympic Games, and other factors, make Italy today a country where real estate investments should be taken in serious consideration.

Cristiano Meroni
Senior Associate (Baker Tilly Italien)     


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