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Italy's property market is set to outperform much of Europe in 2026, supported by political stability and clearer building regulations following Milan's permit scandal. Research firm Scenari Immobiliari forecasts real estate transactions to rise 8.4% this year to nearly 176 billion, led by residential demand. Despite fears of foreign investor flight after projects were frozen in Milan, confidence has held up, helped by deeper due diligence and regulatory clarity. Milan continues to attract global capital, aided by tax incentives and major events like the Winter Olympics. However, limited new housing supply and stalled developments could constrain medium-term growth.
Italy's property market is expected to grow faster than other major European markets in 2026, supported by political stability and improved regulatory clarity following a high-profile building permits scandal in Milan, according to industry data. While concerns over new supply remain, investor confidence has strengthened after fears of capital flight failed to materialise. Advertisement
Property research firm Scenari Immobiliari forecasts real estate transactions in Italy will rise by 8.4 per cent in 2026 to 175.8 billion. Residential property is projected to account for over 80 per cent of total activity. The growth rate is expected to exceed that of Spain at 7 per cent, the UK at 6.6 per cent, Germany at 4.1 per cent, and France at 3.2 per cent.
Italy's outlook has improved following the fallout from the Milan building permits scandal, which surfaced in 2024 and focused on alleged irregularities in approvals for high-rise developments. The judicial process led to more than 100 projects being frozen in Milan, the country's largest property market, raising concerns of prolonged disruption. Scenari Immobiliari had earlier warned that extended gridlock could cost Milan up to 38 billion in lost investment over a decade.
However, market participants say the anticipated withdrawal of foreign capital has not occurred. Davide Dalmiglio, Managing Director and CEO of Savills Italy, said the investigations prompted a sharp rise in due diligence rather than a halt in investment activity. According to him, scrutiny levels have increased significantly, but transactions continue to move forward.
Developers also point to greater regulatory clarity. Manfredi Catella, CEO of property developer Coima, said stricter enforcement has reduced uncertainty around building regulations, which had been a major concern for investors. Catella, who has denied wrongdoing after being named in a separate probe, said recent court decisions rejecting restrictive measures against him were viewed positively by international investors.
Political stability has also played a role. Italy has seen a relatively rare period of continuity under Prime Minister Giorgia Meloni, now in her third year in office. Real estate transactions rose nearly 7 per cent in 2025, making Italy Europe's second strongest market after Spain.
International investors continue to increase exposure. Swiss Life Asset Managers France raised its allocation to Italy by 15 per cent in 2025, with total property investments expected to reach 500 million by early 2026. The firm cited narrowing bond spreads with Germany, improved credit outlooks, and strong stock market performance as indicators of lower country risk.
Milan remains a key focus, supported by inflows of wealthy foreign residents attracted by Italy's flat tax regime. The city is also co-hosting the Winter Olympics in February 2026, which is expected to provide a short-term boost to economic activity.
Supply constraints remain a concern. Newly built homes accounted for only 10 per cent of residential transactions in 2025, well below historical averages. Scenari Immobiliari warned that delays in urban regeneration and stalled mid-sized projects could limit growth in the medium term.
Despite these challenges, analysts say Italy's property market enters 2026 with solid momentum, supported by demand, improved transparency, and renewed investor confidence.
Source: Reuters
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