Real Estate Market Trends in 2021: Optimism, But with Caution

Real Estate Market Trends in 2021: Optimism, But with Caution

Like every year, those who think of selling a house are wondering what the main trends in the real estate market will be in 2021. At the moment, the Italian real estate market shows three very clear trends:

  • property prices continue to decline slowly, mainly due to the caution of families, who think and rethink before buying a house. However, falling prices have several exceptions, and it doesn’t affect all cities equally
  • in large cities, such as Turin, Milan and Rome, it is possible to witness a slow recovery in sales, and also a slight increase in the sale prices of properties
  • The situation is quite different in medium and small cities, where real estate sales continue, but are struggling to take off

According to the Monism Observatory, these trends will continue throughout 2021, with a slow but steady rise in sales prices. The real turning point of the real estate market, however, should take place between 2020 and 2021. The turning point should mainly concern the sales market, but could gradually extend to the rental market as well.

The Trends of the Real Estate Market in 2021: Real Estate Trading

Like many other markets, the real estate market is also made up of supply and demand. In order for the market to recover, the demand for residential properties must exceed supply. Put simply, people willing to buy houses must be more than the houses offered for sale. Therefore:

  • families must be able to obtain a mortgage with ease. If to take out a mortgage it is necessary to anticipate a large part of the price of the apartment, many families may prefer to wait a few more years before buying a house.
  • the economy must be recovering. If employment grows, and if potential buyers are guaranteed to keep their jobs for at least ten years, they will be more likely to take on a twenty-year or thirty-year mortgage.

If families are unable to get a mortgage, nor have the security of a job, real estate trading continues, but is slow. But for 2021 it is possible to be optimistic. Although the economy is restarting with some difficulty, real estate sales have shown growth of 5.6% over the past year. This real estate market trend could continue throughout 2021.

The Italian real estate market has not yet reached the maximum point of sales, which according to the Revenue Agency is estimated at around 600,000 apartments sold in a year. At the moment, transactions are still below this level.

But the recovery is there and it shows, especially in 13 major cities. Milan, Rome, Florence and other cities are now at the halfway point, with a decisive recovery in both the residential market and that of commercial properties. The recovery could continue throughout 2021.

An increase in sales does not always mean an increase in the price of houses. A worrying trend, registered since the real estate crisis of 2006-2008, has seen the slow and steady decline in house prices. Apart from estimates, as homeowners well know, an apartment purchased with sacrifices twenty and at a high price 15 or 20 years ago, in the worst cases it can be sold even at 50% of the purchase price.

However, according to Nomisma, the downward trend in prices should now have come to an end:

  • prices of new buildings are expected to rise in all major cities. In particular, the increases should be higher in the prestigious areas and in the central areas, ranging from + 0.1% to + 1.85%
  • luxury property prices are expected to continue to rise
  • Newly built properties in the suburbs or in non-central areas of large cities and in the provinces should undergo more contained increases, of the order of less than 1%
  • non-new apartments in the central areas of large cities, as well as luxury apartments, should experience positive appreciation, albeit slightly below 1%

Unfortunately, the prices of apartments located in non-central areas of large cities, or even in suburban cities, may continue to fall. The drop in prices should be contained between – 1% and -2%.

The Forecast for the Real Estate Market for 2021: Rentals

The real estate market is made up of several sectors. The trading sector shows a positive trend, but a rise in prices perhaps lower than that hoped for by the owners. However, the rental market has some very interesting niches:

  • the short-term rental market is experiencing a real boom, especially in the cities most visited by foreign tourists
  • the student housing market is growing steadily, so much so that some foreign groups are also tempted

Slightly different is the discourse of rents for families. Many of the apartments available on the rental market have modest sizes, which are badly suited to the needs of a family with children. So this type of property mainly attracts demand from tourists or students. For 2021, however, the trend in the family rental sector should be stable.

What Does the 2021 Real Estate Market Forecast Mean for Who Wants to Sell Home?

Understanding the trends in the real estate market is important for anyone who wants to sell a house. In this article we have provided you with an outline of the forecasts made by the Nomisma Observatory. These are by far the most reliable forecasts on the real estate market.

But often those who intend to sell a house want certainties: certainties on the selling price, and also on being able to find a buyer in the short term. Although property prices may rise in 2021, these are still small increases within 2% maximum. In the face of these estimates, in our opinion a little common sense does not hurt, therefore:

  • if sales of modest-sized apartments stagnate, it might be more profitable for landlords to try to exploit the short-term rental market
  • if instead the rental market is stagnating, a good strategy could be to try to understand the potential of the apartment, perhaps by requesting the services of a property management company

Apart from common sense, in our opinion, if you have doubts about the advisability of selling an apartment, it is advisable to contact a professional in the sector, and request tailored forecasts and market analyzes.

The Forecasts for the Real Estate Market for 2020 and 2021

The next two years could be decisive for a definitive recovery of the real estate market. According to the Revenue Agency, the number of 600,000 trades could be reached in 2020.

If the market were to reach its maximum potential, homeowners could breathe the much-needed sigh of relief. At that point, in fact, the demand for apartments would be higher than the supply. This would mean that:

  • property prices could recover
  • the shortage of real estate could push construction companies to build new apartments for sale
  • mortgage interest rates could fall

Even if the return of mortgages that finance 100%, if not 110%, of the price of real estate is very unlikely, a drop in interest rates could in any case push many families to buy a house.

In addition to the volume of sales, 2020 and 2021 should also record a stabilization of prices in some regions of Country, and a slight increase in the large cities of the Center and the South. More specifically, Florence, Venice, Bologna and Rome should finally witness a rise in property prices. Monism’s forecasts for other large Italian cities are more cautious. According to the Observatory, however, the real year of the real estate market turning point could be 2021.




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