The Escalating Housing Emergency in Sardinia

Sardinia is grappling with a deepening housing crisis that impacts all facets of the real estate sector. Both property owners and prospective buyers or renters are feeling the strain. The surge in long-term rental costs is affecting nearly every region of the island, from bustling urban centers to serene coastal communities.

Contributing Factors: A complex Web

Several factors are converging to fuel this crisis. The rise in mortgage interest rates has dampened sales, leading to increased demand for long-term rentals and, consequently, higher lease prices.Though, the situation is more nuanced than simple supply and demand.

Mortgage Rate Hikes and Sales Decline

According to Gianfranco Atzeni, an economics professor at the University of Sassari, the increase in mortgage rates between late 2022 and 2023 resulted in a nearly 5% drop in property sales in Sardinia during 2024.

With the increase in mortgage rates, which occurred between the end of 2022 and 2023, in Sardinia the sales of properties fell by almost 5% in 2024.
Gianfranco Atzeni, University of Sassari

The Rise of Option Leasing Arrangements

Concurrently, ther has been a notable increase in short-term leases (approximately 11%), as well as subsidized housing options for students and those with agreed-upon fees. this complex interplay has created a state of market uncertainty.

Stagnant Sales and Overvalued Properties

Potential homebuyers face a double whammy: increased interest rates and inflated property values that often exceed the actual worth, especially considering the age and potential renovation needs of many Sardinian homes. Property owners, on the other hand, are hesitant to sell, hoping for interest rates to decline. They are also wary of long-term leases due to high rental income taxation.

Labor Market Instability: Exacerbating the Crisis

The precariousness of the Sardinian labor market further complicates the housing emergency. The decline in permanent employment contracts makes it harder for individuals to secure credit and obtain mortgages. This forces more people into the rental market, further driving up demand and prices.These individuals are also more likely to face difficulties in paying rent.

We must not forget that the permanent contracts have decreased on the island and therefore this greater precariousness makes it increasingly difficult to access credit and be able to obtain a mortgage.
Gianfranco Atzeni, University of Sassari

Potential Solutions: A Multi-Pronged Approach

While recent decreases in interest rates offer a glimmer of hope, a comprehensive strategy is needed to reverse the current trend. Professor Atzeni suggests several key interventions:

Real Estate Valuation Alignment

Property prices must be brought in line with their true value, reflecting the age and condition of the real estate.

Rental Market Incentives

The government should implement policies that incentivize landlords to offer long-term leases, such as more favorable IRPEF (personal income tax) taxation on rental income. While some reductions have already been made, further tax breaks could have a more significant impact.

Discouraging short-Term Rentals

Efforts to disincentivize short-term rentals should be intensified to free up more properties for long-term residents.

Supporting Homeownership

Measures to support first-time homebuyers are crucial. By making homeownership more accessible, the demand for rentals would decrease, leading to lower lease prices.

It is indeed evident that if measures to support those who have to buy a house, the demand for rents would be designed, it would instantly and with it also the price of the leases.
Gianfranco Atzeni, university of Sassari

Looking Ahead: A Call for Action

Addressing Sardinia’s housing crisis requires a coordinated effort from policymakers, real estate professionals, and the community. By implementing these strategies, Sardinia can create a more stable and affordable housing market for all its residents.The keywords to focus on are: Sardinia, housing crisis, real estate, rental market, and mortgage rates.