Italy's Residential Property Market Analysis 2026

Foreign-citizen buyer activity also improved, although it remained far below its pre-global financial crisis peak. According to Scenari Immobiliari, purchases by foreign citizens reached an estimated 39,000 homes in 2025, equal to 5.1% of total residential transactions, compared with 135,000 homes, or around 17% of the market, in 2007. This indicator should be interpreted mainly as foreign-citizen / immigrant homebuyer demand, rather than as a direct proxy for high-end international second-home demand. While the segment has been recovering from the pandemic trough, Scenari Immobiliari notes that activity remains constrained by financial barriers, high upfront costs, and access-to-credit issues. Purchases also remained concentrated outside central urban locations, with only 3.6% of homes bought in city centers in 2025, and continued to be dominated by buyers from Eastern Europe, followed by the Indian subcontinent and China.

Italy also continues to attract a distinct international prime and lifestyle-buyer segment, which is only partly reflected in the foreign-citizen / immigrant homebuyer data. Knight Frank describes Italy as “Europe’s tax-led magnet,” with the flat-tax regime continuing to attract internationally mobile wealth and demand extending from Milan to Rome, Tuscany, and Lake Como as prime stock tightened. Engel & Völkers also points to a sizeable international component in Italy’s upper-end residential market, particularly in established prime destinations such as Lake Como and the Northern Lakes, the Tuscan Hills and Chianti, Liguria’s coastal markets, Monte Argentario, Salento, Taormina and the Aeolian Islands, and Costa Smeralda, where demand is focused on high-quality second homes, renovated villas, privacy, outdoor space, lake or sea views, and rental-income potential.

At the national level, forecasts point to continued residential demand growth in 2026, but at a slower pace than in 2025. Scenari Immobiliari expects the market to reach around 800,000 home sales in 2026, supported by resilient demand and continued interest from families and investors. Nomisma presents a more cautious outlook, forecasting residential transactions to increase by about 1.8% in 2026 to around 780,000–783,000 units, before broadly stabilising in 2027–2028. Overall, housing demand is expected to remain expansionary in 2026, but more selective. Activity should continue to benefit from the structural preference for homeownership and improved credit conditions, while remaining sensitive to affordability constraints, mortgage-rate developments, and the availability of suitable housing stock.

Property Supply Trends

Structurally Thin New-Build Pipeline and Tight Existing-Stock Availability

Italy’s residential supply remains structurally constrained, reflecting both long-term and cyclical factors. New development has never fully recovered from the post-2008 construction downturn, while the current pipeline continues to be held back by high construction costs, lengthy planning and approval procedures, limited land availability in major cities, and the growing reliance on redevelopment and regeneration rather than large-scale greenfield construction. At the same time, housing need has not disappeared despite weak population growth. Smaller household sizes, population ageing, internal migration, and the concentration of demand in major urban areas continue to support the need for additional, modern, and better-quality housing.

This shortage is increasingly reflected in policy and industry discussions. Real estate trade association Confindustria Assoimmobiliare estimates that Italy will need around 635,000 housing units over the next five years, delivered through both new construction and the redevelopment of obsolete and inefficient buildings, particularly in the main metropolitan areas. The association also notes that newly built homes account for only a minority of the overall housing offer, while Italy remains below several large European markets in terms of authorised residential floor area per inhabitant.

Official permit data confirms the limited scale of the current pipeline. According to Istat, the number of dwellings authorised in new residential buildings fell by 4.0% year-on-year to 53,024 units in 2025, following 55,256 units in 2024. The figure remained broadly in line with the low volumes recorded over the past decade and far below the scale of the pre-2008 construction cycle, confirming that new development continues to play only a limited role in replenishing Italy’s housing stock.

Data Source: Istat.

The limited new-build pipeline is being compounded by a reduced flow of existing homes coming to the market. According to the Bank of Italy’s Q4 2025 survey of real estate agents, the supply of homes available for sale continued to decline, with agents reporting a further fall in both outstanding sale mandates and new instructions from sellers. This suggests that supply constraints are not limited to low construction volumes but are also visible in the existing stock, as fewer owners are bringing properties to the market.

Supply pressures are also evident in the rental market. The same Bank of Italy survey found that rent growth in Q4 2025 remained mainly driven by the reduced availability of homes for rent, particularly in Central Italy. Short-term rentals appear to be intensifying this pressure in selected urban and tourist-oriented markets by diverting part of the housing stock away from long-term residential use. Around 55% of real estate agencies considered short-term rentals relevant in their local areas, and among these agencies, more than eight out of ten reported upward effects on long-term rents. The survey also noted that the impact on the sales market is mainly supply-related, as short-term rentals can reduce the number of homes offered for sale.

Overall, Italy’s housing supply issue is broader than weak new construction alone. The market is affected by a thin new-build pipeline, a limited flow of existing homes for sale, and shortages in the long-term rental segment. These constraints are likely to remain most visible in large urban and tourist-oriented markets, where demand is stronger, land is scarcer, and regulatory complexity makes new delivery difficult.

Rental Market: Rents and Rental Yields

Continued Albeit Moderating Growth in Asking Rents

In the rental segment of the Italian housing market, rental inflation for existing contracts (as measured by the annual change in actual rentals for the housing component of the consumer price index) remained elevated in the second half of 2025 and early 2026, still trending above the overall price growth in the country. In Q4 2025, based on OECD preliminary figures, the rental sub-index posted a 3.98% year-on-year growth, compared to a 1.15% increase registered in the all-item CPI over the same period.

Italy's rent price index:

Data from property platforms also shows a consistent, albeit moderating, upward trend for listed rates across the country. Immobiliare.it reported a 3.4% annual increase in nationwide average rents in April 2026, compared to 7.4% in April 2025 and 13.3% in April 2024. Similarly, Idealista observed a 3.0% year-on-year increase in asking rents in April, a slowdown from 7.8% and 13.1% annual increases previously recorded during the same period in 2025 and 2024, respectively.

“Today, we observe a context in which demand, while returning to more sustainable levels, continues to exert pressure on supply, which remains limited, especially in large centers and the most attractive areas,” commented Vincenzo De Tommaso, Head of Research at Idealista. “At the same time, the increase — albeit significant — is part of a broader normalisation process: rent growth continues, but with less extreme dynamics than in the previous two years, outlining a more mature, widespread, and progressively more balanced market.”

Data Source: Istat.

In nominal terms, according to Immobiliare.it, the average asking rent in April 2026 reached EUR 14.45 (USD 16.92) per square meter nationwide. Among major cities, Milan (EUR 22.25 / USD 26.05), Florence (EUR 20.91 / USD 24.48), and Rome (EUR 18.48 / USD 21.63) traditionally stood out with rent levels substantially above the national average, while Palermo (EUR 9.55 / USD 11.18), Genoa (EUR 10.45 / USD 12.23), and Turin (EUR 12.63 / USD 14.78) remained relatively more affordable.

Reflecting slower growth in rents and uneven regional patterns, research conducted by Global Property Guide in January 2026 found gross rental yields for housing in Italy at an average level of 7.23%, down from 7.50% previously reported in January 2025. The highest potential performance among the surveyed submarkets was estimated for rental properties in Catania (9.17%) and Palermo (8.25%), while the lowest yields were reported in Florence (5.88%) and Milan (5.26%).

Average asking rents in selected submarkets: