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Real Estate Market Overview
The euro area economy showed resilience in 2024, but the start of 2025 was marked by increased global uncertainty due to new U.S. tariffs, retaliatory measures from major economies, and renewed conflict in the Middle East. As a result, global growth is projected to slow to 2.8% in 2025, with the euro area’s annual GDP growth expected to decline to 0.8%, before a moderate recovery to 1.2% in 2026. Disinflation continues, with euro area inflation projected at 2.1% in 2025 and 1.9% in 2026, broadly in line with the ECB’s target. Price pressures remain concentrated in energy goods and services, while monetary policy maintains a cautious easing trajectory
In the first quarter of 2025, the euro area’s GDP grew by 0.6% quarter-on-quarter, reflecting persistent uncertainty and tighter financial conditions. Household consumption rose by 1.1%, driven by a 2.8% increase in real wages, but the savings rate remains high, indicating consumer caution. The European Central Bank implemented three rate cuts this year, lowering the main refinancing rate to 2.15%, with further reductions expected in 2026. The unemployment rate is projected to decline steadily, reaching 5.8% by 2026, supported by employment growth outpacing GDP growth.
Central banks are adopting a more cautious approach in the monetary easing cycle, keeping interest rates at high levels for longer to contain instability risks. The ECB continues its easing cycle, with two recent rate cuts—on April 23 and June 11—bringing the main refinancing rate down to 2.15%. These measures aim to support recovery and ensure stability in the face of ongoing uncertainties, while closely monitoring economic conditions and making adjustments as needed.
Domestic demand is expected to be the main driver of growth in the coming months, supported by rising real wages and fiscal easing, particularly in Germany. Gross fixed capital formation grew by 1.4% in 2025, recovering from a contraction in 2024, though still below historical averages. Italy showed signs of growth in early 2025, with GDP rising by 0.3% quarter-on-quarter and 0.7% year-on-year, mainly driven by domestic demand and fixed investments.
Headline inflation in Italy rose slightly to 1.7% in June 2025, with core inflation climbing to 2.1%, reflecting underlying pressures in the services sector. The unemployment rate is expected to decline steadily, indicating a gradual improvement in labor market conditions and enhanced workforce participation.
Real Estate Market Overview Italy 2025
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