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If until the end of 2022 buying was a must, today renting is also seen as a “bridge solution,” waiting for better times
Interview with Andrea Napoli, CEO & Founder of Locare
Personal needs, financial situation, and local real estate market conditions are the main factors influencing the decision to rent or buy a house.
But what is the current trend? We Wealth asked Andrea Napoli, CEO & Founder of Locare.”If until the end of 2022 buying was a must, today those who approach the choice of housing delay the commitment to purchase by choosing rent as a bridge solution, waiting for better times, especially in large cities where the cost per square meter is high, and the cost of living is felt,” Napoli explained, specifying that “renting is increasingly chosen by those who see the house only as a tool to live close to the workplace, to live in city centers, where due to prohibitive costs, it would hardly be possible to buy a house.”
However, the situation changes in small towns or in the suburban areas of medium-sized cities. “Here, buying is still the preferred choice, but even in these places, the focus is shifting towards renting, which by its nature is more flexible, with less burdensome costs and fewer responsibilities,” Napoli emphasized.
What to do then? Locare’s Research Office compared the cost of living in a owned property, taking out a first-home mortgage (at 20 or 30 years) to buy it, compared to the cost of rent. As an example, a 105 sqm three-room apartment was considered in both cases.
Buy or Rent a House in Milan
In the city center
In the city center of Milan, buying a three-room apartment is not affordable for everyone. The average asking price is 798,000 euros, financeable with a mortgage up to 638,400 euros.
In this case, Locare’s analysis reveals a monthly installment of about 3,900 euros for a twenty-year fixed-rate mortgage and 4,300 euros if the reference rate is variable. If the duration were 30 years, the installments would decrease to 3,000 and 3,550 euros, respectively.
And what if you choose to rent? The average rent for a similar apartment would be around 2,890 euros per month.
In a Semi-Central Area
If you choose a semi-central area instead, the same solution in the Lombard capital would cost an average of 698,000 euros. A 20-year mortgage would weigh on the family budget by 3,360 euros per month for a fixed rate and 3,730 euros for the variable rate. Over 30 years, the monthly costs would decrease to 3,100 euros for the variable and up to 2,650 euros for the fixed rate, as illustrated by the research office. On the other hand, renting a three-room apartment beyond the Navigli and before the first ring road would cost an average of 2,550 euros per month.
In the outskirts
In the outskirts, a three-room apartment costs an average of 420,000 euros, with a 20-year mortgage installment that varies on average, depending on the fixed or variable rate, between 2,110 and 2,250 euros per month. In the case of a 30-year mortgage, these figures become, depending on the rate, 1,575 or 1,860 euros per month.
And for rent? The monthly amount a family would have to pay might even be higher than the mortgage. According to Locare’s analysis, “to live in rent in the outskirts, a family must consider paying around 2,050 euros each month.”
Buy or Rent a House in Rome
In the city center
Rome is slightly “cheaper,” so to speak. In the city center, the average asking price for a three-room apartment, always about 105 sqm, is around 588,000 euros. In the case of a 20-year mortgage, the monthly installment is about 2,900 euros at a fixed rate and about 2,150 euros at a variable rate. If the duration is 30 years, the installments are reduced to 2,270 and 2,640 euros per month, respectively. On the other hand, the cost of rent is around 2,150 euros per month.
In a semi-central area
The average asking price is around 451,500 euros, with a fixed-rate mortgage installment ranging from 2,250 to 1,950 euros depending on whether the duration is 20 or 30 years, and a variable-rate installment of 2,350 and 1,880 euros per month, respectively.
The monthly rent, on the other hand, is around 1,780 euros.
In the outskirts
For a similar solution, the average asking price is 378,000 euros. The 20-year mortgage installment is therefore 1,910 and 2,000 euros per month, depending on whether it is a fixed or variable rate, while for 30 years, 1,480 or 1,680 euros per month are required.
Alternatively, the average rent is about 1,470 euros per month.
Italian rental market trends: 5 cities compared
If one were to opt for renting and compare the 5 main cities of Milan, Rome, Turin, Naples, and Palermo, the impact of the monthly rent on the family budget would be significantly different.
At the end of 2023, proceeding from the lowest to the highest rent, we find:
- Palermo, with an average request of 101 euros per square meter per year, increasing by 10.9% from the 91 euros at the end of December 2022;
- Turin, where rent has also risen by 10.9%, reaching 132 euros per square meter per year (compared to 119 euros per square meter a year ago);
- Naples, which sees an average rent cost of 167 euros per square meter per year (+12.8% from the 148 euros at the end of 2022)
- Rome, where at the end of 2023, the average cost of renting has risen by 8.6%, at 190 euros per square meter per year
- Milan, which confirms itself as the city where living in rent costs the most, with an average cost at the end of 2023 of 278 euros per square meter per year, an increase of 10.8% from the end of 2022.
