Market in Depth

Despite pandemic-induced recession, Italy remains steady

Lalaine C. Delmendo | April 10, 2021

Italy's housing market remains steady, despite the pandemic-induced recession. During the year to February 2021, nationwide house prices rose by 1.6% to an average of €1,719 (US$2,055) per square metre (sq. m.), according to real estate portal Idealista. When adjusted for inflation, house prices increased 1.1%.

In Rome, Italy's capital and largest city, homes prices stood at €2,848 (US$3,404) per sq. m., on average, in February 2021, up 0.6% from a year earlier (unchanged when adjusted for inflation).

“Italy's real estate market has withstood the impact of the pandemic well, under the pressure of changed housing needs triggered by the crisis, and with interest rates at historic lows,” said Vincenzo De Tommaso of Idealista.

DilettaGiorgoloSpinola of Sotheby's International Realty attributes the housing market's resilience to historically low borrowing costs. “People are more committed to buying at the moment,” Spinola said. “Property seems to be a safe place to put money, and people are giving more thought to property in places where life is very sustainable.”

The latest figures from National Institute of Statistics (ISTAT) show the nationwide house price index rising by 1% during the year to Q3 2020, and by 1.5% when adjusted for inflation. Over the same period, new house prices rose by 3% (3.5% inflation-adjusted) while existing house prices were up by 0.7% (1.2% when adjusted for inflation).

Venice and Milan have the most expensive housing in the country, with average house prices of €4,467 (US$ 5,340) and €3,994 (US$4,774) per sq. m., respectively.

“The prospects for 2021 are marked by cautious optimism. At the first signs of economic recovery, the real estate market has always been quite quick to recover,” De Tommaso noted.

However, the COVID-19 pandemic has taken a heavy toll on the country as a whole, with 102,000 deaths as of mid-March 2021. Italy was the first Western nation to implement a national lockdown. The government eased restrictions in June 2020, but reinstated them in November due to an infection surge. Recently, a travel ban between different regions and provinces was extended until March 27.

Italy house price graph
The pandemic dragged Italy into deep recession.  GDP fell by almost 9% in 2020, the steepest decline since World War II, according to ISTAT.

The eurozone's third largest economy is projected to grow by 3.4% this year and by another 3.5% in 2022, according to estimates released by the European Commission.

Analysis of Italy Residential Property Market »

Rental Yields

Italy: Moderate rental yields from 3% to 6%

Gross rental yields i.e., the rental return on a property if fully rented out, before all expenses, are low to moderate in Rome, Milan, Venice, and Florence. Gross rental yields for apartments in Italy are between 3% to 6%.

The purchase price of apartments in Rome is around EUR 3,000 per square metre (sq. m.) to EUR 6,000 per square metre (sq. m.) and these prices are now more obtainable than in Venice. Venice now has a price range between EUR 4000 to EUR 6,500. Florence is now about as costly as Rome.

Milan is a more expensive city to buy an apartment than any other Italian city, with apartment prices in Milan ranging from EUR 3,000 to EUR 13,000 per square metre (sq. m.). Despite Milan's high purchase prices, it generates good yields. Ostiense (7.9%), Pigneto (5.7%), Prati (5.5%), and San Lorenzo (5.4%) are the best yielding areas in Milan.

Round trip transaction costs are moderate to high in Italy. See our Property transaction costs analysis for Italy.

Read Rental Yields »

Taxes and Costs

Rental income tax is high in Italy

Rental Income: Nonresidents are taxed on rental income earned in Italy. The rates range from 23% to 43%. Personal allowances for spouse and family are not available to nonresidents, but certain deductions may be granted.

Capital Gains: Capital gains are not taxed if the property was held for more than five years. Otherwise capital gains are considered as ordinary income and taxed at progressive rates.

Inheritance: Inheritance taxes are levied at 4% to 8%, depending on the relationship between the deceased and the beneficiary, with non-taxable threshold amounts.

Residents: Residents are taxed on their worldwide income. at progressive rates, from 23% to 43%.

Read Taxes and Costs »

Buying Guide

Transaction costs are moderate to high in Italy

Total round-trip transaction costs in Italy range from 8.88% to 22.70%of the property value. Registration tax is 3% for main homes and 7% for second homes. Nonresident buyers pay a fixed registration tax of 7%. The real estate agent’s commission is between 3% and 8% plus 22% VAT; typically split between buyer and seller.

Read Buying Guide »

Landlord and Tenant

Italian law is strongly pro-tenant

Because of strongly pro-tenant landlord & tenant laws, the rental market is shrinking.

Rents: Rents can initially be freely negotiated, but increases are restricted. Landlords can only increase the rent after the initial 4-year contract.

Tenant Security: Tenants have the right to controlled rents, and effectively eight years or more of security of tenure. A landlord may only serve a disdetta - a registered letter of notice which must be sent at least six months before contract expiry - to coincide with the end of the standard 4 years. Failure to do so automatically renews the contract for another 4 years.

Read Landlord and Tenant »


Italy’s economy is forever struggling

Italy luxury housesItaly has never fully recovered from the 2008-09 global crisis and the COVID-19 pandemic has added another blow to the country’s still weak economy. Before the financial crisis, the Italian economy was growing sluggishly, with average GDP growth of 1.2% from 2001 to 2007. It has been a miserable decade since then. The economy contracted by 1% in 2008 and by another 5.3% in 2009. The country went back to 1.7% growth in 2010 and 0.7% in 2011, but contracted by 3% in 2012 and 1.8% in 2013, according to the International Monetary Fund (IMF).

Italy’s economy then grew by 0.1% in 2014, 0.8% in 2015, 1.3% in 2016, 1.7% in 2017 and 0.8% in 2018. Italy’s economy grew by a minuscule 0.3% in 2019, amidst trade tensions and weaker investment outlook.

The eurozone’s third largest economy is projected to grow by 3.4% this year and by another 3.5% in 2022, according to estimates released by the European Commission – yet still not enough to offset last year’s sharp decline.

Italy’s budget deficit climbed to about 10.8% of GDP in 2020 due to stimulus measures to cushion the impact of the pandemic. Italy’s deficit is expected to fall to 9% of GDP this year.

Public debt increased sharply to 158% of GDP in 2020, from 134.8% of GDP in 2019, 135.4% in 2014 and 116.6% in 2009. The country’s debt pile is expected to fall this year to about 155.6% of GDP.

Consumer prices in Italy rose by 0.6% y-o-y in February 2021, up from the previous year’s 0.3% rise.

Italy gdp inflation
Unemployment was 9% in 2020, down from 9.8% in the previous year and from an average of 11.4% from 2012 to 2018. Youth unemployment remains high at 29.7%.

Mario Draghi, a former president of the European Central Bank and an ex-governor of the Bank of Italy, took over the premiership in February 2021 when a coalition of the radical 5-Star Movement and centre-left Democratic Party fell out on how to spend the EU’s €200 billion coronavirus recovery funds. He has the support of all major parties in parliament for his recovery plan.

Nicknamed “Super Mario”, Draghi earned impeccable internationalist credentials during his stint as ECB president, and is widely credited with saving the euro currency after the Eurozone debt crisis.

Oddly, Draghi is now the first leader to initiate an export control system that critics perceive as vaccine nationalism. Draghi, without any objection from the EU, blocked a consignment of more than 250,000 doses of AstraZeneca vaccines destined for Australia. The move underscores a growing frustration in the EU about the slow rollout of its vaccination drive and the shortfall of promised vaccine deliveries, especially from AstraZeneca.