The reduction of official rates by the ECB has generated a greater climate of trust among potential buyers on the Italian real estate market and during the remaining part of the year, a decreasing trend is expected for both Euribor and Eurirs rates: the former should continue their downward phase until June 2025, while the latter, over the course of the next year, should show points of upward turn. This is what the economists of Intesa Sanpaolo in a report on the Italian residential market.
The real estate market
According to the latest data published in the Revenue Agency Observatory in Italy between April and June 2024, approximately 186 thousand homes were sold, 1.2% more compared to the same period of 2023. A modest but significant increase, which reversed a negative trend that had characterized last year and also the 1st quarter of 2024. Residential sales, in fact, in 2023 suffered a decline of approximately 10%. and in the first three months of this year the decline was 7%. The progress concerned most of the territorial areas, albeit with slightly different intensity.
The trend is also changing in the rental segment, which many Italians have moved to and have preferred to postpone the purchase in recent semesters. “The increase in prices, the high mortgage rates, the increasingly unclear international geopolitical situation pushed many to choose a less binding rental solution“, underlines Intesa Sanpaolo. In the 2nd quarter of 2024, just over 202 thousand homes were rented, 2.7% less than in the same quarter last year. The decline affects residences located in municipalities with high housing intensity and in municipalities that are not.
According to Nomisma data published in the Real Estate Market Observatory in July, which examines data from the 13 largest Italian cities, the rental market sees Milan, Rome, Florence, Bologna and Padua express higher average valuesbetween 780-830 euros per month on average. At the other extreme are the markets of Catania, Palermo, Turin and Bari with average rents between 450-520 euros per month.
Rates on mortgages and loans
From mid-September i Euribor rates and the 2-year Eurirs rate they have the downward trend continued on the gradual strengthening of expectations, later confirmed by the actual outcome of the October meeting, of closer cuts by the ECB. The 5, 10 and 30 year Eurirs rates remained substantially unchanged.
Regarding the prospects, Intesa Sanpaolo believes that i data will justify another ECB rate cut of 25bp in December; on this occasion, moreover, the staff’s new forecasts could also lead to a change in the direction on rates (which was not made explicit in October as it was preferred to maintain an attitude dependent on the data). For 2025, in any case, Intesa Sanpaolo expects two more reductions of a quarter of a point by the central bank: these should take place in March and April, unless the publication of new disappointing growth data leads to the monetary authority to bring interventions closer.
This context should therefore determine a decreasing trend for both the Euribor and Eurirs rates over the remainder of the year: the former should continue their downward phase until June 2025, while the latter, over the next year, should show upward turning points. These reversals will probably take place in the 2nd quarter for the 2 and 5 year rates and already in the 1st quarter for the 10 and 30 year rates. This forecast framework makes variable rate debt is still preferable to fixed rate debt.
