Italian residential property market poised for significant rebound in 2025

Italy’s residential property market is experiencing a resurgence after a period of uncertainty. This revival can be attributed to various favourable macroeconomic conditions, including decreasing interest rates, stable inflation rates, and renewed confidence among households in real estate as a secure investment option. Insights from the latest “G Market Pulse” report by Patrigest – Gabetti Group’s Research & Data Intelligence division indicate that the sector is poised for robust growth in 2025.

The recovery of the property market in Italy is being supported by an expansion in credit availability. The European Central Bank’s monetary policy, which has reduced interest rates to 2.15%, has injected fresh momentum into the market. This, coupled with stable inflation at 1.6%, has resulted in a significant increase in residential property transactions in the first half of 2025 compared to the previous year. The growth in Italy’s largest cities reached 6.9% in 2025, continuing the positive trend observed in 2024.

Mortgage lending has played a crucial role in driving this recovery, with notable increases in the first and second quarters of 2025. The average mortgage amount has also seen a steady rise annually, reaching €141,500. High-value loans over €100,000 now make up a significant portion of mortgage applications, with fixed-rate mortgages being the preferred choice for most households. First-time buyers remain a key driver of demand, with a growing interest in second homes.

As confidence in the market grows, housing demand is on the rise, with purchase intentions increasing throughout the year. The national average property price is expected to see a moderate increase by the end of 2025, with a subsequent stabilization projected for 2026. The average size of properties being purchased is also on the rise, indicating a renewed sense of confidence among buyers.

The new build sector in Italy shows regional variation, with Northern Italy leading in active construction sites. Demand for three-room apartments is high, but the supply struggles to keep up, leading to imbalances in the market. Major cities like Florence and Milan saw a decline in new build sales, while cities like Genoa and Palermo are showing promising signs of growth.

Italy’s rental market continues to expand, though at a slower pace compared to previous years. Long-term rentals account for a significant portion of the market, but short-term and agreed-rent contracts are also on the rise. After a period of rapid growth, rental prices are stabilizing, indicating a maturing market.

Looking ahead to 2026, total real estate investment in Italy is expected to consolidate at pre-pandemic levels, supported by strong residential demand and gradual price stabilization. The future of Italy’s property market lies in urban regeneration and innovative housing solutions that cater to the evolving needs of Italian households for modern living.

In conclusion, Italy’s residential property market is witnessing a substantial recovery, driven by a combination of favourable macroeconomic conditions and growing confidence among buyers and investors. With careful planning and strategic investments, the sector is poised for continued growth in the coming years.