Investing in residential assets

The Italian real estate sector is having an active year in 2025, driven by positive economic indicators and increasing investor interest. Although there was a slowdown in the latter half of 2024, with GDP growth anticipated to be around 0.5-0.7% by year-end, the economic outlook remains optimistic. Inflation is well-managed, staying below 2%, and the labour market is strong, approaching full employment.

From late 2024, the housing market has shown signs of gradual recovery. The number of transactions in 2024 exceeded 2023 levels by over 700,000 units, with an additional growth of about 5% in 2025. This growth is supported by stable property values, despite a slowdown in price increases observed in the second half of 2023. In the rental market, demand remains high, particularly among younger people who prefer renting in major cities for greater flexibility. A decrease in supply is pushing rental rates higher, driven by property owners’ perceptions of low returns and their preference for alternatives to traditional rentals.

In Italy’s two primary markets, Milan and Rome, both sales prices and, to an even greater extent, rental rates are rising compared to 2023, particularly for newly constructed and contemporary offerings. This trajectory is swayed by the dearth of supply, also attributable to the slowdown in new project development, a trend which may endure in 2025.

Regarding investments, investor attention remains robust in Build-to-Rent (BTR) and Build-to-Sell (BTS) projects, and in the Purpose-Built Student Accommodation (PBSA) and serviced apartment categories. The PBSA segment has been particularly dynamic, driven by the increasing number of international students and the significant shortage of beds in major university cities. In 2024, investors, recognising that the Italian market is still in a consolidation phase, primarily targeted value-add projects. But there were also some forward commitment and core acquisitions, with the expectation that the latter will become increasingly common, as developments currently in the pipeline are brought to market.