Is now a good time for young people to buy a house?

Recently there has been a slight reduction in mortgage interest rates for home purchases. It's only a rather small drop, but it represents a significant signal after months of continuous increases, the direct consequence of the policy pursued by the European Central Bank to counter inflation. If the decreases were to continue, there could be significant repercussions on the real estate market: the average rates applied to home loans had tripled over a couple of years, going from 1.45% in January 2022 to 4.40% in November 2023, thus greatly reducing the access to credit for home purchases, especially for younger people. The increase in interest rates has had a direct impact on home sales, which have experienced a 12% decrease in the last year. However, for a few months now, inflation has started to gradually decrease, and consequently, the ECB has halted the increase in rates, at least for the moment: they haven't reduced them yet, but banks and financial operators expect it to happen soon, expectations that are already contributing to lower interest rates applied by banks on mortgages. While a rate cut could potentially stimulate housing demand, the extent of such intervention remains uncertain.

The Italian real estate market goes its own way

A albeit timid reversal of trend suggests a change in the financial landscape. The market expects that the next ECB policies will go in the direction of further stimulating economic activity. The future prospects for the mortgage market largely depend on this, as well as on the ability of families and individuals to adapt to the new conditions. Analysts predict that the ECB will start cutting interest rates starting from June. Since the financial crisis of 2007-2009, very expansive monetary policies, which kept interest rates very low to stimulate consumption and investments after the crisis, fueled a steady increase in housing prices in the wealthiest countries. For example, in the United States, they increased by almost 60% from 2012 to 2019. With the increase in interest rates, on the other hand, housing prices have dropped quite uniformly around the world. However, this trend did not occur in Italy, which has a peculiar real estate market, heavily influenced by traditional supply and demand dynamics, which drive up prices also because the demand for houses remains high. Increases in construction raw material prices, then, have done the rest, with the risk that, after the economic cooling desired by the ECB, the Italian real estate market becomes even more exclusive again. This was especially true in the nineties, where families who could afford it invested "in bricks" to protect themselves from future periods of inflation, buying houses for their children or to rent out. All this, however, has further raised prices, especially in the most attractive cities like Milan.

Living alone in Italy is complicated

Alongside Greece, Portugal, and Spain, Italy is one of the major European countries where independence comes later due to a series of complex economic and social reasons. One of the main reasons is related to the cost of living alone. On average, every month, those who live alone spend 47% more than those who live as a couple, and 87% more than a member of a three-person family. The house - whether rented or mortgaged to buy - represents the investment that, among all, weighs the most. Added to this is the fact that in Italy, average salaries are rather low compared to the rest of the European continent, especially in the case of younger people, who have recently entered the job market. The high cost of living alone obviously has as its main consequence the fact that for young people it is difficult to leave their parents' house with serenity. Those aged 18 to 34 who still live with their families are over 60%, that is, two-thirds of the total. And those who manage to become independent do so on average late, just before turning thirty - much later than young people in other European countries.