Real Estate Market: Prices Rise in Some Cities, Houses Depreciating in Others. Where They Cost More and Where Less

From 2018 to today, the Italian population has fallen slightly below 60 million inhabitants with a continuing negative trend. The causes are multiple: from a progressively decreasing migratory balance, to a drastic drop in birth rates, never so low before.

A growing number of Italians are achieving economic stability at an increasingly advanced age, postponing the possibility of supporting an entire family and putting off projects that often never come to fruition. For the next 50 years, ISTAT predicts a drastic decline in the population, which will collapse below 48 million inhabitants by 2070, 20% less than today .

Added to this is the phenomenon of internal migration, whereby an ever-increasing number of people tend to move to large urban centers, abandoning their cities of origin, which thus end up emptying almost completely, precluding any form of generational change. Consequently, the progressive decline in population in many Italian cities places the local and national economy before the need for profound change to cope with the new social divide in every single sector.

Population decline and residential real estate market: Wikicasa analysis

In this future scenario, the reaction of the residential real estate market, which has always been the preferred investment for Italians, is of particular interest.

Wikicasa (https://www.wikicasa.it/), an Italian proptech company specialized in the collection, processing and distribution of real estate information online, has conducted an analysis on this aspect, which shows how the cities that in the last 10 years have proven capable of retaining the population and even attracting new inhabitants from outside, are those with the most flourishing real estate market.

Cities such as Milan, Bologna, Bolzano and Treviso , which have been able to attract an ever-increasing number of inhabitants, have seen a revaluation of the internal real estate market, which in the last 10 years has seen a considerable increase in demand that has led to an increase in average sales prices of over 20%.

The reasons behind this correlation are to be found in the strong attractiveness of these urban centers. While Milan has long been the economic engine of Italy, and Bologna is now one of the main university centers of the nation, Bolzano and Treviso have proven capable of creating a modern and high-quality urban ecosystem. These cities also have a real estate stock that complies with what potential buyers require today, who have completely different needs than in the past. Real estate demand is in fact continuously fragmented, due to increasingly smaller family units, and is oriented towards factors of increasing importance, such as energy performance and maintenance and management costs. Consequently, these cities are the ones that more than others are renewing their real estate stock, with numerous new constructions and properties with smaller average sizes, which are well suited to the needs of the new demand.

The other side of the coin: the rest of Italy

The other side of the coin is represented by the rest of Italy, where in the last 10 years a massive decline in the population almost always corresponds to a devaluation of residential properties, a case well represented by cities like Genoa and Taranto, which in recent years have seen a progressive decline in the labor market.

The exception: tourist resorts

Among the very rare exceptions in this sense we find places that are highly attractive from a tourist point of view, such as Venice, Verona and Florence. Cities with high tourist flows inevitably stimulate the market of purchases with investment purposes, which in turn causes an increase in sales prices and an increase in rental fees, leading at the same time to a revaluation of real estate assets but to a progressive depopulation, especially in the historic centers.

What will the Italian real estate market landscape be like? Future scenarios

The Italian real estate market of the future therefore shows a gap that is increasingly widening. On the one hand, particularly dynamic cities that, in order to retain market demand, will have to increasingly try to satisfy the new criteria for choosing homes of increasingly smaller families, in many cases single-member. It will therefore be necessary to intensify the renovation and redevelopment activities of the current stock, improving the energy efficiency of the properties and providing new solutions that contain an ecosystem of value-added services for the end customer. Modern residential complexes, capable of moving many of the main activities of the tenants as they are equipped with every comfort, from gyms to co-working spaces, from green areas to local shops, up to home automation systems, will become increasingly popular solutions and that in the long term could make the request for properties with larger square footage or a greater number of rooms increasingly less necessary.

On the other hand, urban centers that are progressively emptying must try to stem this situation in order to avoid a deep devaluation of real estate, which is expected to become increasingly marked in the near future. For this reason, these cities must find a range of solutions to retain part of the population, while at the same time stimulating the real estate investment market. A first step could be to create an increasingly structured university system, which at the same time goes hand in hand with a proliferation of work activities in the area. An example in this sense is represented by Modena, a city with zero growth in terms of population but with a dynamic real estate market, where the academic context is 360° linked to the automotive industry.

Another aspect that can lead to a possibility of revaluation of the local real estate assets is linked to tourism. As demonstrated by the boom in short-term rentals in recent years, tourist-friendly and particularly receptive cities have seen an increase in real estate yields and market prices, attracting local and even foreign investors in some cases. This path has already been taken by some large urban centers in the center-south, such as Naples, Bari and Palermo, which have in fact witnessed a significant increase in property prices, especially in the more central neighborhoods. Although not very attractive from a residential point of view, areas such as the Spanish Quarters or Bari Vecchia are well suited to tourist rentals and, with the boom in this practice, have undergone a profound revaluation.

"The demographic decline has certainly transformed the structure of families, leading to a strong misalignment in the real estate market. As demonstrated by the data relating to user searches and the real estate stock collected on our Wikicasa portal, the growing demand for studios, one-bedroom and two-bedroom apartments by new families clashes with an offer that is still predominantly composed of large properties, a legacy of times when families were larger. To bridge the gap between supply and demand, significant opportunities emerge from activities such as the subdivision of properties and the redevelopment of spaces. Adapting homes to current needs does not only mean reducing the size, but also rethinking condominium environments, integrating shared services that can respond to a flexible and constantly evolving lifestyle." - says Pietro Pellizzari, CEO of Wikicasa.