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Outlook 2023: BTR a solution to housing shortages in Italy

Build to rent can provide the solution to Italy’s housing problems, experts agreed at GARBE’s Investment Briefing – Italy: Real Estate Outlook 2023, which took place this week on Real Asset Media’s REALX.Global platform.

“BTR is the answer to the housing shortage, especially in cities like Milan that people flock to for jobs”, said Marco Grassidonio, Managing Director, GARBE Italy. “Cost is becoming a sensitive issue and a percentage of all new developments must be dedicated to affordable housing”.

Over 80% of Italians own their own home but the market is changing as mobility increases and young professionals gravitate to cities that offer employment opportunities.

“The professional residential investment market is still at its starting point in Italy”, said Giacomo Morri, Faculty Deputy & Associate Professor of Practice in Corporate Finance & Real Estate, SDA Bocconi School of Management in Milan.

Institutional investors are likely to focus on Italy’s financial capital, that is seeing high demand driven by its strong economic fundamentals.Milan’s GDP will reach pre-pandemic levels this year and is expected to continue growing until 2026.

Annual disposable income per head is €25,600, compared to the EU average of €19,200, while GDP per head is 55,400, much higher than the Italian national average of €30,000.

“Milan is really outperforming and attracting many young professionals”, said Grassidonio. “It is one of the fastest-growing major urban areas in Europe and it will account for 10% of the additional 590,000 new households expected to be formed in Italy in the next ten years”.

The city is seeing a strong influx of people. Population will grow by nearly 1% between now and 2030, while Italian population in general will decrease by 1.2% in the same time frame.

“Milan is in demand but it’s a small city and there are many challenges to development, which is leading to prices rising”, said Grassidonio. “However, even if prices in Milan are rising faster than anywhere else in Italy, they are still far from comparable European cities like Paris or Munich”.

The urbanization trend and the shortage of accommodation for rent make Milan an attractive opportunity for investors. Institutional capital can help fill the gap in supply and also provide the modern, purpose-built and environmentally sustainable housing that is needed.

ESG-compliance is becoming more important in all sectors. “Sustainability used to be a nice to have, but now it’s must”, said Morri. “Companies require sustainable properties, investors want sustainable assets and tenants choose sustainable homes”.