Co-founder of Affari Miei
January 29, 2024
There will indeed be a real estate market collapse in 2024? Will we witness an epochal disaster or will it surprise us and we might witness something different?
These are all legitimate questions that we generally ask ourselves when we ask ourselves about the future of the economy and, in general, about the evolution of the financial markets or the real estate market itself.
Asking such a question in this historical phase is normal: i changes in the interest rate policies implemented by central banks have entered our lives and therefore we must ask ourselves what repercussions they are having and what repercussions they will have on the real estate market in the coming times.
In fact, today we will see some recent data ontrend of the Italian real estate market and we will try to draw some predictions for the short, medium and long term future.
This article talks about:
Some data: the first six months of 2023
We can begin our analysis and reflections with some data, taken from a recent study by National Council of Notaries which photographs the situation in Italia in the first half of 2023.
As might be expected, 2023 saw a significant slowdown in the first home market.
For example, we read a -8,7% compared to the same period of 2022 and the notary tells us that with this trend, from now until the end of the year, therefore when we know all the data for 2023, we will arrive at a -0,3% compared to the previous year.
The cities most affected by this slowdown in sales are:
Florence (-10.3%) Rome (-9.6%) Milan (-8.4%)
always compared to the same period of 2022.
Inevitably, all this is determined by the slowdown in the mortgage market which, compared to the previous reference period, fell by as much as 29.5% with the amount of capital disbursed falling by 30%.
Therefore, in line with the general reduction in disbursements. All this is logical and consequential because, if you are interested in these issues, you know very well that the increase in interest rates has resulted in a general increase in mortgage rates.
Therefore, the amount of the monthly payment that each person can afford to pay is no longer sufficient as it was a few years ago to carry out certain sales.
What happens then? Some people don’t buy because maybe Wait better times, someone else instead has to focus on properties of more modest dimensions.
Let’s see the price trend
Istat tells us that in the first half of 2023 prices even increased slightly compared to 2022: less people are buying because fewer people can get mortgages, but basically no one is selling off, on the contrary there is a slight appreciation which fits in a little with the trend of recent years which has seen a recovery in property valuations.
Bearing in mind that we are light years away from the period pre-2008 real estate bubblein fact in some cities prices have almost halved and show no signs of recovery.
This helps us understand it a little better price situation and consequently how the whole scenario is moving.
What are the forecasts for 2024?
Now we can see together what the forecast for 2024what we can expect in the coming months and I would even say in the coming years.
The key factors to keep under control and which I am about to tell you about are Three:
Trends in interest rates: it remains to be seen whether central banks, in particular the European Central Bank, decide to lower interest rates. If this were to happen, mortgages will become affordable again and probably all those people who are now waiting could return to the market again and make purchases. However, we should not expect a return to the previous period with rates at zero or almost zero, but we have probably reached the peak in terms of the cost of mortgages and therefore the situation will most likely become more affordable in the coming years;
General stability of the economy: in 2023 we were waiting for the recession, which has not technically arrived yet, even if there has still been a slowdown in the economy. For the moment, employment is still holding up, both in Italy and in other European countries and also in the United States. But if we were to head towards a period of prolonged crisis, with layoffs and cuts in company staff, all this cannot fail to be felt in general in purchases, consumption and will obviously also have repercussions on the real estate market;
Demographic factor: every year we read that in Italy people are no longer having children, that the population is aging and that we know that more than 70% of the Italian population already owns their first home. What does this mean? That in the medium to long term, there will be fewer and fewer people who will have to buy a house because fewer and fewer people will live there. The phenomenon we have been witnessing for some time sees a concentration of market people in a few large cities, with rural or peripheral areas that are practically abandoned to their fate. All this will have repercussions on the pricing plan.
Don’t know how to invest?
Find out what kind of investor you are. Are enough 3 minutes to discover the best strategy for you.
>> START NOW!
So what is the best solution?
Let’s try to ask ourselves what to do if we are doing something wrong requests with respect to this sector.
If we already have properties we need to be careful analyses of the real estate assets and ask ourselves some things, such as what the future prospects of the area are (if we are in a tourist area, if we are in a university area, if we are in a city that attracts many workers). At this point we need to look at the dynamics of arrivals and then see the profitability of real estate.
If we already have them, we need to understand how much these properties are making us. A property that pays off less than 2% in my opinion it should be disposed of as soon as possible because, considering that even a deposit account now pays much higher rates, it is probably not worth the risk.
If instead we are thinking of buy a house we must distinguish if we want to use the properties as productive assetsthat is, to make a business out of it (for example, create a B&B or in any case start a business in the hospitality sector), or if we want to buy because we think of real estate as alternative investment compared to the stock market which we consider more complicated or which perhaps we do not fully understand.
Conclusions
I think I’ve said everything there is to say about the real estate market and I think I have analyzed the macroeconomic scenario step by step and what are the questions you need to ask yourself if you are thinking of making an investment in this sense.
It is never easy to make predictions when it comes to investments and, even less so, when it comes to real estate.
Before saying goodbye, I leave you with some resources on the real estate market that I believe may be useful to you:
Before I say goodbye completely, I would like to leave you with some more guides with which you can begin your investment journey:
Enjoy the reading!
Find out what kind of investor you are
I have created a short questionnaire to help you understand what type of investor you are. At the end, I will guide you towards the best contents selected based on your starting situation:
>> Get Started Now