The financial use of real estate wealth in Italy: reverse mortgage contracts

Home equity conversion (HEC) schemes offer a valuable financial strategy for the elderly facing financial vulnerability by providing the needed liquidity (for example, for health expenditures) while allowing them to continue living in their homes. While this mechanism is particularly relevant in Italy, where the homeownership rate of the elderly and the real estate wealth are high, the HEC market in Italy remains underdeveloped compared to other countries. This paper aims to analyze the Italian market for a specific HEC scheme, i.e. the reverse mortgage (prestito vitalizio ipotecario). The debate surrounding this topic is multifaceted, involving academics, market operators, and regulators. Therefore, the present paper first examines this instrument’s theoretical and regulatory framework to understand its current use in Italy and to compare it with international practices. Then, the work also develops a novel analysis of the potential need and feasibility of reverse mortgages across Italian regions based on quantitative (i.e. demographic, economic, real estate, and credit) indicators to highlight the current gaps and opportunities in each regional market. The ultimate goal of the analysis is to provide valuable insights for policymakers and investors interested in developing and promoting these financial instruments in the domestic market.