Over the past 15 years, the real estate market has assumed globally consistent dynamics, influenced by exogenous phenomena of global significance, such as the implosion of sub-prime mortgages in 2009 that originated in the US and the global financial and real estate crisis that followed.

In almost all countries of the world’s largest economies, sales and prices had continued to rise even during the difficult years of the Covid (indeed, the discovery of home working had even fuelled demand for purchases) and even during the first phase of the war in Ukraine. Then, since last summer, the jump in inflation and interest rates caused the real estate market to come to an abrupt halt.

However, the consequences for the real estate market are different depending on who is looking at it: whether from the residential world of private individuals or from that of investors.

In fact, the residential segment is starting to show the first symptoms of malaise, with a reduction almost everywhere, including Italy, in the number of transactions, with forecasts for the end of the year falling compared to 2021, which had even exceeded pre-Covid levels. Prices have also started to fall, albeit more slowly, particularly in the USA, Great Britain and even in Paris, Europe’s most expensive city (after Luxembourg), used to double-digit growth, where the drop in prices is over 1%.

According to the ‘Bubble Index’ drawn up in 2022 by Ubs, the cities at ‘bubble risk’ are Toronto, Frankfurt, Zurich, Munich and Amsterdam. Despite the explosion in prices and the number of transactions, which absorb almost a quarter of the national figure, Milan is still far from the bubble risk, with house values still considered undervalued compared to those of other European metropolises.

For Milan, in fact, despite a physiological slowdown in the volume of transactions after six consecutive quarters of rises, forecasts are still for price growth up to the 2026 Winter Olympics, albeit at a slower pace than today, thanks in part to major urban redevelopments with a high ‘green’ vocation, such as the conversion of the seven former railway yards.

There is Milan and then there is the rest of Italy. Where a general decline in residential property is expected due to the continuing rise in interest rates and the increase in the cost of living, with future buyers from the middle classes having to postpone their projects or reduce their square footage, albeit with exceptions in the ‘luxury’ segment and in second homes, which is experiencing a new youth, also favoured by smart working.

And the world of investors?

Globally, 2022 has been a year of growth for institutional investors and especially for real estate funds, for which global figures speak of a 17% increase in assets under management on an annual basis, proving themselves practically invulnerable to wars, financial fluctuations and market crises, indeed taking advantage of strong inflation worldwide to increase their weight within institutional portfolios. And now preparing for the eco-sustainable revolution and changes in energy consumption.

In Italy, the real estate sector in the post-Covid era has been driven by logistics and hotels, with great demand for new-generation offices. There has also been great growth in the living sector, traditionally the prerogative of private buyers, but increasingly popular with investors, particularly international ones, especially in the derivative segments (co-living, student living, senior living, build-to-rent, etc.) which, by offering diversified residential models aimed at satisfying the changing demand for housing, now ensure greater stability and resilience compared to other asset classes and, thanks to rising rents, also good profitability.

Logistics, life sciences, datacentres, and student housing are asset classes in which Italy is still structurally lagging behind other countries and which therefore have enormous growth potential in the Bel Paese.

For 2023, however, the global economic and geopolitical situation is pushing investors into wait-and-see positions.

And something is also beginning to creak among investors, if we think of the colossus Blackstone, which in December suspended redemptions to subscribers of its $126 billion Breit (Blackstone Real Estate Income Trust) real estate fund and saw its stock market price drop dramatically.

While on the other side of the globe, in the country where the bubble first burst, China, where the real estate sector is an absolute priority for the economy, the first signs of recovery towards normality are being seen, thanks in part to the end of the zero-covid policy and the maxi-injection of capital that the Dragon’s banks guaranteed at the end of November to the construction sector at risk of collapse.

Lastly, there is no cloud on the horizon for the residential rental market, which has been growing steadily everywhere for years, also encouraged by the increased interest of investors in this sector. 25 of the Universal Declaration of Human Rights (“Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including in particular (…) housing.”)