Arcano Research anticipates a steady rise in housing prices in Italy. The recently debuted research firm expects an annual increase of 1% to 5%, driven by recovering demand, improved family purchasing power, and a persistently low housing supply despite the rebound in construction activity.

Compared to other major European countries, the number of new homes constructed in Italy remains relatively low, even with the increase in building permits. This helps to mitigate the rise in raw material costs that typically impacts construction activity. Ignacio de la Torre, Chief Economist at Arcano Partners, highlighted positive signs of recovery in both the sentiment of the construction sector and the activity, which, coupled with the decrease in construction costs, is expected to lead to an acceleration in the initiation of new construction projects in the next twelve months. However, this pace may not be sufficient to close the gap with other major European countries. In the long term, Arcano’s analysis suggests that housing prices tend to follow salary trends and the nominal GDP growth, with Italy well-positioned to narrow the negative gap with the rest of Europe.

According to the analysis, estimates for the next year indicate a real GDP growth of 0.5% in Italy compared to 0.7% in 2023, before accelerating to 1.2% in 2025, a trajectory lower than the expected average European growth for 2025. Medium-term challenges include managing public finances and the labor market, areas that will require further structural reforms to align Italy with high per capita income countries. In the short term, however, Arcano Research suggests that economic growth will slow, but not significantly. Moreover, in the current economic cycle, Italy appears better positioned than other countries like Germany, thanks to less exposure to China’s weakness and a stronger presence in robust service sectors such as tourism.

Private consumption will remain the primary driver of growth in the medium term. Families will have more spending capacity, drawing from excess savings accumulated during the pandemic and benefiting from a partial recovery of their purchasing power, with salaries expected to increase more than inflation in 2024. Structurally, the research notes that the adjusted labor cost for productivity in Italy remains competitive, and there are ample growth opportunities in terms of potential labor supply with the implementation of necessary structural reforms.

Source: Il Sole 24 Ore