The real estate market in 2024: key trends

With the beginning of the new year, it's time to reflect on the new challenges and opportunities that await the real estate market in 2024.

In 2023, the real estate industry faced significant challenges, notably the impact of high inflation and rising interest rates which resulted in more expensive mortgages. Additionally, global geopolitical tensions contributed to a sense of uncertainty and economic instability, negatively affecting investment decisions in the sector.

However, in contrast to other European nations, the Italian real estate market showed good resilience. And according to an analysis by Scenari Immobiliari, the future of Italy's real estate sector looks promising: it’s expected to continue displaying positive trends, with a forecasted growth rate of about 2% in the upcoming year.

Key trends for the real estate market in 2024

In the dynamic world of real estate, 2024 is shaping up to be a year marked by the strengthening of existing patterns and the emergence of fresh, new opportunities.

The following overview will delve into the key trends that require close attention, including the leading sectors and the shifts in interest rates that have significantly impacted the market over the year.

The push for digitalization advances

Euromonitor International's recent publication, “Top Global Consumer Trends 2024”, reveals that the average consumer in 2024 is expected to be significantly influenced by technology. This is a predictable evolution considering how digital technology is transforming businesses, markets, and behaviors. Real estate is a clear example of this, as it’s undergoing a digital revolution that impacts every aspect, from architectural design to property management.

As already observed this year, Artificial Intelligence (AI) will continue to be a strategic resource for real estate in 2024. AI algorithms, known for their advanced and adaptive learning abilities, will be instrumental in offering customized services, conducting accurate valuations, and handling complex processes, positioning AI as a key tool for industry professionals, enhancing efficiency.

The Internet of Things (IoT) is another strategic pillar shaping the future of real estate. These technologies not only enhance the efficiency and sustainability of buildings but also revolutionize living and working environments by making them smarter, safer, and more responsive to individual preferences. Their ability to monitor buildings in real-time, for instance, provides investors with critical insights for better decision-making and gives property and facility managers useful data to optimize operations, resources, and costs.

Lastly, technologies such as 3D virtual tours and drone footage are expected to gain more and more popularity, offering increasingly immersive experiences. These tools, which rose to prominence during the pandemic, enable potential buyers to virtually explore properties without the need to be physically present. This caters to the evolving preferences of modern consumers, who are mostly digital natives and appreciate the convenience of online options.

Real estate in 2024 is green ad sustainable

In 2024, environmental concerns will stay at the forefront, elevating Environmental, Social, and Governance (ESG) issues from an ethical imperative to a key competitive edge.

Sustainable construction, energy efficiency, and low-impact materials will become critical components of all real estate projects, a trend encompassing every asset class.

In the residential sector, for example, green standards will become as crucial as size and location for buyers. This shift is driven not only by increasing environmental awareness but also regulatory demands, such as the new European directive mandating residential buildings in Europe to meet at least energy class E by 2030 and class D by 2033.

Similarly, in sectors such as offices and logistics, the focus on ESG metrics will be stronger than ever That’s because companies will be increasingly assessed not only on their business performance but also on their environmental footprint, social responsibility, and governance structures (from 2024, sustainability reporting will be mandatory for many firms). And this will inevitably influence their choice of properties and factories.

Investors and leading real estate operators will increasingly focus on the redevelopment and refurbishment of existing properties to boost their environmental credentials These initiatives not only offer attractive business opportunities due to the high demand for eco-friendly spaces but also play a crucial role in modernizing Italy's real estate, which is notoriously among the oldest in Europe.

The real estate sectors to monitor in 2024

In 2024, residential real estate will continue to offer lucrative investment opportunities, especially in alternative asset classes such as Senior Housing and Student Housing. These sectors are experiencing an ongoing shortage of adequate housing solutions for these demographic segments, making them attractive amidst a backdrop of robust demand. The Multifamily segment will also grow, driven by increasing interest in rentals due to difficulties in accessing mortgages for home purchases.

Within alternative assets, data centers - a strategic asset for tackling the challenges of digitalization - stand out as another significant investment opportunity in 2024. Their importance is heightened by the growing application of artificial intelligence across various sectors, driving demand for infrastructure capable of handling very large volumes of data A notable example is Meta's recent announcement of its intention to invest up to $35 billion in data centers in the upcoming year.

The logistics sector is projected to perform well also in 2024, fueled by the steady growth of e-commerce. . Logistics operators are actively seeking high-quality, environmentally friendly, and innovative facilities, ideally located close to urban centers. As for office spaces, which have traditionally been a top choice for major investors, the interest continues to be strong but strategies are now more selective than ever regarding

Will Interest Rates Decline?

Let’s wrap up this article by addressing a key topic that has sparked extensive concern and debate in both personal and professional domains: interest rates.

If 2023 will be remembered as a particularly turbulent year for the mortgage market, predicting the direction of interest rates for 2024 is rather challenging. Throughout the past year, we've witnessed a significant rise in interest rates, driven by the strict monetary policies implemented by the European Central Bank to curb inflation. These policies have made access to credit significantly more expensive, putting considerable pressure on homeowners, many of whom struggled to meet their loan obligations and were forced to sell their properties at reduced prices.

In November, inflation in the Eurozone decreased to 2.4%, its lowest since July 2021. However, many experts believe it's premature to declare a trend reversal. The possibility of a renewed increase in inflation remains, suggesting the need for a careful approach to future economic expectations. It’s plausible to expect interest rates to remain high in early 2024, with a potential gradual decrease starting in the second half of the year.