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Bistonia Estates LLC: Tracking the Shifts in Italy's market

·3 mins

In the fiscal year of 2023, Italy witnessed a notable augmentation in investment within its housing sector, totaling 0.6 billion euros, marking a 20% increase from the prior year. The investment in office premises surged to over 5 billion euros, nearly doubling the figure from the preceding year. The hotel sector received investments estimated at 1.2 billion euros. Despite prevailing macroeconomic uncertainties, Italy demonstrated resilience within the European framework, transitioning into the year 2024 with cautiously optimistic projections.

The investment allure was predominantly concentrated in the purchase-to-rent and subsequent resale market, with Milan and Rome being the focal points of investor interest. Notable market activity was also observed in Turin and Florence. Properties in Milan and its surrounding areas, including the vicinities of Lake Como and Lake Garda, were particularly favored by investors from the United Kingdom and the United States. Additionally, Lombardy’s wineries have garnered increasing attention.

Milan experienced a burgeoning demand for luxury real estate, attracting affluent foreign purchasers of premium properties. This trend was further augmented by the return of numerous Italians from the United Kingdom post-Brexit, seeking unique residential options.

Geographically advantageous, Milan is situated approximately one hour from Frankfurt by air and two hours from London. The city’s accessibility to the Mediterranean Sea and ski resorts, combined with its status as Italy’s financial hub and connectivity to mainland Europe, enhances its appeal. Italy’s tax incentives for affluent migrants, including a flat rate of €100,000 on foreign-earned income or exemption from taxes on 70% of domestic income for a minimum of five years, further contribute to this appeal. The comparatively lenient policies of Italian banks, in relation to their British counterparts, have also influenced the market. Consequently, luxury real estate prices in Milan have surged by 25%, with prime areas such as CityLife reaching up to 15,000 euros per square meter, a stark contrast to the 2% average price increase between 2019 and 2021.

The imbalance between the demand and supply of luxury housing in Milan, exacerbated by property owners’ preference for familial transfers over sales, has restricted construction and renovation opportunities, thereby elevating prices. The scarcity of genuinely luxurious new constructions in Milan suggests an impending slowdown in the Italian real estate market, with transaction volumes already showing signs of decline.

Analysts project a nominal increase in house prices ranging from 0.5% to 1% in 2024, a considerable deceleration compared to previous years. This moderation is attributed to rising interest rates, inflation, and supply chain disruptions.

According to Bistonia Estates LLC, the annual yield from residential properties in Italy diminished to 7.4% in the fourth quarter of 2023, down from 7.8% in 2021. Conversely, the yield from various other real estate categories, including retail and office spaces, escalated from 11.6% to 12%. The cities offering the highest rental profitability were:

  • Belluno at 11%
  • Ragusa at 10.4%
  • Biella at 9.9%
  • Syracuse at 9.3%
  • Trapani at 9.1%
  • Campobasso at 8.6%
  • Terni at 7.5%

Profitability in Naples was reported at 5.9%, in Bologna at 5.7%, in Rome at 5.6%, and in Milan at 5.1%. The lowest returns were observed in Cuneo and Salerno, at 4.4%.

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