Diversifying real estate investments: here’s where to invest according to the “City to be” research, conducted by Scenari Immobiliari in collaboration with Investire Sgr.
In Italy, vacant homes make up only 19.3% of the housing stock
If one were to invest in the Italian real estate sector, what should one focus on in 2024? In Milan, Rome, and Florence, the focus should be on university rentals, social housing, and affordable property transactions. In Turin and Palermo, on the other hand, short-term rentals and managed rentals should be the focus. In Bologna, Naples, and Genoa, the emphasis should be on sustainable rentals and social housing.
This is the response provided by the “City to be” research, conducted by Scenari Immobiliari in collaboration with Investire Sgr and presented during the 31st Scenari Forum in Rapallo. The research analyzed the national residential real estate market in eight of Italy’s major cities: Milan, Turin, Genoa, Bologna, Florence, Rome, Naples, and Palermo.
“These cities have, in different degrees, a significant appeal to demand and present the need for new real estate supply, each according to its own characteristics,” commented Francesca Zirnstein, General Manager of Scenari Immobiliari. She added, “The theme of the search for housing will remain fundamental even when the current market conditions, characterized by immobility and limited dynamism, which are cyclical and not structural, come to an end. This is why real estate operators should use this phase to prepare adequately and be ready to face a recovering market, in order to better meet the future demand pressures. In addition to investing in rentals, there is still plenty of room for operators interested in developing real estate products for sale at market prices.”
Dario Valentino, CEO of Investire Sgr, clarified that the report confirmed that housing is an extremely dynamic asset class with ample market growth potential for institutional investors. “This is particularly evident in the PRS (Private Rented Sector) and student housing, but it applies in general to the residential sector, as demonstrated even in secondary markets by the widespread interest in rentals, with very short saturation periods and minimal structural vacancy,” he explained.
The Sectors to Invest in: Comparing Across Cities
According to the study, in the coming years, investments in the residential real estate market in Milan should favor rentals for university students, social housing, and affordable property sales. The city, characterized by significant pressure from the student population, could invest strategically in the development of dedicated residences, covering a market segment that is currently lacking.
The same sectors recommended for Milan should also be considered as winning strategies for Rome and Florence. According to estimates, Rome has relatively balanced percentages of future housing supply, with a slight preference for “sustainable” housing types available in the property market. Future investments in Florence should focus more on the development of social housing projects for rentals and affordable residences for property transactions, catering to a population with medium to low incomes.
In Turin, short-term rentals and property sales at market prices should be considered, just as in Palermo, where the focus should shift towards managed rentals.
In Bologna, Naples, and Genoa, investors should target property sales at market prices and sustainable rentals as well as social housing. And that’s not all: cities like Bologna and Florence have seen a contraction of around 10% in rentals in the property market. The reasons? In Bologna, this contraction is linked to the pressure exerted on the city by out-of-town university students and increasing tourism attractiveness. In Florence, it results from a significant share of available housing stock being put on the short-term rental market, effectively competing with other types of residential demand and driving rental rates above market thresholds.
The Market Share of Actually Available Homes in Italy
Analyzing residential properties in Italy raises a question: how much of the housing stock is actually available and vacant on the market? If you subtract owner-occupied homes, rented homes, and homes rented to workers and out-of-town students (especially in major cities), and then eliminate apartments available for short-term rentals from the count, it turns out that in Italy, vacant homes make up only 19.3% of the housing stock. This percentage drops slightly in Palermo (15.6%) and Naples (10.9%), while it doesn’t reach double digits in Genoa (6.8%) and Turin (6%), and falls significantly in Florence (1%), Rome (0.7%), Milan, and Bologna (0.5% each).
Conclusion
In large cities, there is a shortage of real estate offerings that can meet the housing demand. The future development of supply should align with demand to seize the opportunities the market offers.
