Many people have been asking me how the real estate market is going in southern Sardinia in the Cagliari area and surrounding areas where I work, in my experience every property has its history and the individual case is relevant, for this reason, we must take into account the economic context and the variables that have an impact on property prices. We have seen the housing market in 2023 negatively impacted by rising mortgage interest rates and the erosion of household savings. After a period of post-pandemic enthusiasm in 2021 followed by more modest growth in 2022, the sector began to show signs of weakening in 2023, highlighted by a reduction in real estate transactions.
An important indicator is the relationship between the inflation rate and interest rates because it is a fundamental element in the monetary policy of a central bank such as the ECB (European Central Bank). In general, a central bank tends to raise interest rates when inflation is high to curb excessive spending and vice versa.
On a positive note, there has been a slowdown in inflation in 2023, so the ECB may consider reducing tightening, allowing lower interest rates to support the economy. However, the ECB’s decision also depends on other factors, not just inflation: such as economic growth, employment and financial stability, all play a role in the decision-making process.
Furthermore, the trend of inflation can be influenced by various factors, in addition to the demand and supply of goods and services, the conditions of the labor market, geopolitical developments (for example the consumer price index takes into account energy goods and therefore also gas). Therefore, the reduction in the price of fuel is good news because it anticipates a reversal of the trend of the underlying component and therefore a slowdown of the inflation curve. But this is also why economic forecasts, as we all know, always have a margin of uncertainty.
Another important element to consider is that if we look at the data of the large Italian cities, we notice that they suffer more heavily and immediately from the effects of economic changes for better or for worse, and with a little delay these effects also arrive with us in the Cagliari area.
Based on the information available today, the harmonized projection of the consumer price index of the Euro area indicates a decline in inflation which will decrease markedly in 2024 (to 3.2%) and 2025 (to 2.1%). , this predicts a decrease in interest rates.
The real estate market therefore remains optimistic because after a slowdown in sales in 2023 due to the increase in mortgage interest rates, a recovery is expected in anticipation of a decrease in the interest rate in mid-2024.