The slowdown in real estate sales is confirmed in the second quarter of 2023. According to data from Agenzia delle Entrate, reworked by Gabetti's Studies Office, compared to the average number of purchases and sales over the last decade of 149,521, Q2 2023 with 184,110 still stands at a good level of purchases and sales, despite the rise in interest rates. However, a drop of 16% compared to the same period last year is evident.
Real estate sales city by city
Looking at real estate sales in the top eight Italian cities, the year-on-year change in the second quarter of 2023 is negative by 16.4%. The trends, when compared to the same quarter of 2022, are down for all cities: Bologna-22.8%, Milan-17.1%, Rome-21.5%, Florence-15.6%, Turin-10.8%, Naples-5.3%, Genoa-14.4%, Palermo-4.9%. The biggest setbacks are still the cities that saw the greatest growth in listings in 2022, such as Milan and Bologna, and those that had achieved an elevated level of sales in the second quarter, such as Genoa. Buying and selling declined more in capital cities (-17.2%) than in non-capital cities (-15.4%).
Real estate purchases and sales in the last ten years
Looking at the second quarter trend of the last 10 years, however, the picture changes significantly. Compared to the last decade's average of 149,521 NTNs, Q2 2023 with 184,110 NTNs is up +23% and ranks as the third best second quarter in the last 10 years, right after the record quarters of 2021 and 2022, which were the offspring of the post-lockdown flare-up in the residential market. Bearing in mind that the count of the last ten years includes the post-subprime mortgage crisis years, in which the real estate market had come to an abrupt halt also due to very high mortgage rates.
Trends in property sales, some forecasts
In light of these data, the macroeconomic and geopolitical dynamics accompanying 2023 seem to confirm the end of the pandemic 2020-2022 mini real estate cycle and the beginning of a new 'normalised' cycle. The start of this new cycle, at least for 2023 and the first half of 2024, will mostly be characterised by an interest rate level that is no longer at historic lows as it was between 2017 and 2021. The disbursement volume of mortgages for home purchase recorded a decrease of 26% between Q1 2023 and Q1 2022.
However, in the light of falling inflation, which from its peak of 11% in December 2022 is expected to settle at around 5% by the end of the year, thus gaining 6 percentage points, it is plausible to assume that the ECB’s tightening of interest rates will ease and already in 2024 interest rates on home loans could be between 2.5% and 3%. This means that a large proportion of mortgage applicants, who currently exceed the bankable parameter of the instalment-income ratio and remain de facto excluded, will be able to obtain a mortgage.
Finally, although the market’s distress in Q2 2023 is evident, comparing it with Q2 2019 (the best first quarter of the pre-pandemic real estate cycle not characterised by the euphoria-anomaly of the years 2021-2022) yields a not so alarming picture. In fact, comparing the trend change between these two quarters provides a further indication of the future direction of the real estate market: compared to Q2 2019, which recorded 159,792 NTNs, Q2 2023 records a positive change of +15%. This shows that the rise in interest rates, the main reason why real estate buying and selling activity has actually slowed down compared to 2022, is offset by a demand for real estate that still remains high.
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