In Italy, the short-term rental market is growing. Still, one characterized by challenging and strenuous property management and less than stellar returns, which has led to greater use of the services of specialized operators. Taking a snapshot of Italy’s short-rented real estate sector is Locare, which indicated, in 2022, almost a doubling compared to the year before in the number of housing solutions available for short/tourist rentals, about a third of which will be managed by real estate agencies or companies specializing in proptech. However, if one considers that in 2020, due to covid, there was an estimated collapse of around 86 percent in the number of proposals on offer, the result achieved last year is, in absolute terms, 31 percent less than in 2019.
The number of short rentals in Italy
Which market are we talking about? According to data collected by Locare’s study office, out of a stock of about 6.6 million second homes available for alternative, short-rent type management (as they are neither rented with long-medium term contracts nor used with constant frequency by their owners), 579 thousand homes are offered for short rent or 8.87% of the total. And of these, about 212 thousand, or slightly more than a third of the total, are managed through real estate agencies or specialized companies.
Comparison yield short rentals vs. BTP
What kind of investment is this compared to 10-year BTPs yielding about 4 percent and the classic real estate rental market? “After the wave of inflation in 2021-22, property rents in Italy have returned to growth. From 2008 until the end of the darkest period of the pandemic, prices had stalled, even despite the ECB’s meager rates. During 2023, rental profitability will likely continue to be good, especially because of rising interest rates, as the European Central Bank is expected to continue raising them over the spring and summer,” contextualized Andrea Napoli, CEO and founder of Locare. Who then added, “In this market scenario, real estate investment remains an attractive tool for the Italian saver, historically very close to the real estate sector.
Moreover, considering the tourist attractiveness of many Italian locations, an alternative to traditional rentals can be short rentals, which can yield 7-8% net of costs and taxes compared to the value of the property. This yield exceeds that offered by BTPs by about 3/4 points.” In fact, by 2023, according to Locare’s data, major industry players expect average asking rents to rise in line with inflation trends, expected to be around 6.3 percent in 2023.
Italians return to buying homes as a form of investment
Despite rising interest rates, rising commodity costs, and the climate of uncertainty caused by the still ongoing war conflict, “housing confirms its ability to attract savers who want to preserve capital from inflation,” said Fabiana Megliola, responsible at Tecnocasa, explaining that -according to data on purchases and sales carried out by Tecnocasa group agencies – in the second part of 2022, 74.8 percent of cases involved the purchase of the main home and in the remaining 18.2 percent of cases involving the purchase of a home for investment (up from 16.5 percent in the same period of 2021). “Also boosting this is the important return of tourists, revitalizing short rentals. Characterizing the market is above all a shortage of supply of properties in the face of demand that is nevertheless sustained, a situation that has been going on for several semesters now,” he specifies.
How much does a short-rental apartment cost on average per week?
If you analyze rents, here the variability is very high. Often the exact solution is offered on the market at very different prices depending on the time of year, the length of stay and any resulting discounts, the state of the building, the number of beds available, etc. In any case, the average weekly rent charged for a two-bedroom apartment with four beds (the most popular size for short rentals) in tourist resorts varies between 800 and 2,400 euros per week.
Risks and opportunities
“For those wishing to purchase a home today for leveraged short rentals, it is important to point out that they must put into account not only the increase in interest rates for the purchase but also the possibility that restrictions will be introduced on the ability to rent, in addition, of course, to the commitment required to manage the property,” explained Napoli, who in any case remains optimistic about real estate. “Having analyzed all these ‘critical issues,’ and even though the BTP is the liquid instrument par excellence, the short lease, if placed in the right areas, turns out to be an interesting alternative to the BTP itself,” concluded the CEO and founder of Locare.
