Milan’s luxury real estate market in the second half of 2024 reaffirmed a long-standing trend: a growing divide between the high-end and mid-range segments, characterised by divergent demand dynamics and price variations. Let's find out more, including how international demand is fuelling market growth.
- Key Market Segments
- Limited Supply and Unyielding High-End Prices
- Cautious Demand in the Mid-Range (€1-€3 Million)
- Price Variations and Quality Disparities
- Unfounded Concerns Over Price Declines
- Market Indicators: Absorption and Sale Times
- Price Growth: Steady and Sustainable
- The Quadrilatero: A Price Surge
- The Role of Foreign Investors
- Notable Sales and Trends
- Outlook for 2025
- Luxury Rental Market in Milan
- Rental Outlook: Prices Set to Rise
Key Market Segments
The Top (€3 million+) and Luxury (€6 million+) segments are dominating the market, showing significant growth driven by international buyers. This demand surge is partly fuelled by the impending expiration of tax exemptions for non-domiciled individuals in the UK, set for April 2025. Consequently, Milan has become the preferred destination for around 80% of these international buyers.
Limited Supply and Unyielding High-End Prices
High-quality properties in Milan are increasingly scarce, and the limited supply has been absorbed swiftly. Buyers, often from abroad, are willing to meet the asking price without negotiation, further underlining the strength of Milan's high-end market.
Cautious Demand in the Mid-Range (€1-€3 Million)
In contrast, demand in the mid-range segment remains cautious. This market is primarily driven by Italian buyers looking for upgrades but who face challenges finding properties that offer a meaningful improvement over their current living situation. Many have opted to delay their purchase decisions due to the lack of suitable options.
Price Variations and Quality Disparities
The market is marked by significant price discrepancies, with some properties commanding over €25,000 per square metre, while others struggle to reach €7,000 per square metre. These differences are largely attributable to the condition and location of the properties. Renovated, bright homes on upper floors of elegant buildings fetch higher prices, while lower-floor properties in need of renovation with less desirable views or inefficient layouts remain less attractive.
Unfounded Concerns Over Price Declines
Despite some concerns from buyers regarding potential price declines, data points to the contrary. High-quality homes in Milan’s exclusive areas have consistently exceeded €10,000 per square metre, and this trend is expected to continue due to the ongoing shortage of supply. The UBS Global Real Estate Bubble Index (September 23rd) confirms Milan's market stability, ranking it among the most balanced in Europe, with a low risk of a housing bubble.
Market Indicators: Absorption and Sale Times
In the second half of 2024, the absorption rate increased by 0.6%, surpassing 20%, but still far from the 27.5% peak of the first half of 2022. The average time to close a sale has risen to 6.8 months, with the gap between the asking price and the final sale price increasing to 7.2% (+1% year-on-year). Notably, mid-range properties (those priced between €1-€3 million) are taking over two years to sell, particularly as many long-unsold homes have been removed from the market.
Price Growth: Steady and Sustainable
Price increases have been modest, with average sale prices rising by 0.8% and top-tier prices by 1%. Since 2019, actual sale prices have grown steadily, with no speculative spikes. However, in the luxury segment (over €6 million), square metre prices have increased nearly 50% since 2020, driven by international demand, especially from UHNWI leaving the UK for tax reasons.
The Quadrilatero: A Price Surge
The most notable price movement has occurred in Milan’s Quadrilatero area, where the maximum price per square metre has surged from €25,000 in 2021 to nearly €39,000 in 2024.
The Role of Foreign Investors
Foreign investor interest in Milan remains strong. The recent increase in the flat tax to €200,000 has had little effect on demand, as the fiscal benefits of Italian residency remain highly attractive, particularly for high-net-worth individuals.
Notable Sales and Trends
The three most significant sales of the semester totalled over €27 million, with prices per square metre ranging from €16,400 to nearly €35,000. Of all transactions, 49% were for primary residences, 42% for replacements, and 9% for investments. With stock markets at record highs and interest rates falling, there is potential for more investment in the €1-€3 million price range.
Outlook for 2025
Looking ahead, transaction numbers are expected to remain stable in the short term. The Top segment (€3-€6 million) may face some pressure from global economic and political uncertainty, but the Luxury segment is likely to see further price increases, although they will have little impact on the overall averages, given their smaller market share.
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Luxury Rental Market in Milan
The exclusive residential rental market in Milan remains robust, driven by consistently increasing demand across the city. Tenants are almost exclusively seeking recently renovated, fully furnished or semi-furnished properties (with kitchens and wardrobes), and are highly selective in their choices.
Secondary and Primary Rental Demand
Secondary demand is most prominent, with tenants seeking temporary homes while waiting to purchase property. This includes both Italians and expatriates who have returned to Italy for work or tax reasons. Primary demand, driven by long-term housing needs, remains stable, though formal four-year contracts often end earlier than expected.
Demand Outpaces Supply in the Luxury Rental Segment
In the Top rental segment (properties with rents exceeding €100,000 annually), demand significantly outstrips supply, with a wider gap in the Luxury segment (rents above €200,000 annually). The few “perfect” residences – those with high aesthetic value and scenic appeal – have been swiftly occupied by new residents relocating to Milan for tax purposes. Even in the lower price ranges, despite an increase in supply, the market remains under pressure and unable to meet the high demand.
Growth Indicators: Rental Absorption and Lease Times
In the second half of 2024, the proportion of rented properties in relation to available stock increased slightly, reaching 36.8%. In areas such as Brera and Magenta, rental absorption exceeds 40%, while other areas are hindered by properties in poor condition or less appealing to discerning tenants.
The average rental period has dropped, returning to the record low of 3.5 months seen in the first half of 2023. Luxury properties are often rented before renovations are even complete.
Rental Price Growth and Selective Discounts
The average rental price continued its moderate upward trend, increasing by 0.32% in the second half of 2024. The highest rental rates have surpassed €600/m² citywide, with peaks of €1,200/m² in the Quadrilatero. This price surge is driven by limited supply, high-quality properties, and the presence of international tenants accustomed to higher prices in their home countries.
The average discount on asking rents stands at 4.5%, with a significant difference between first- and second-tier properties. Exclusive residences receive no discount, while less attractive homes may see reductions of up to 10%. Properties that linger on the market for longer periods now take an average of 9.6 months to rent.
International Demand in the Rental Market
Foreign demand now represents around one-third of Milan’s luxury rental market. For properties larger than 300 m², the presence of foreign tenants or expatriates is nearly universal.
Rental Outlook: Prices Set to Rise
The rental market will remain buoyed by strong demand, particularly from tenants seeking temporary accommodation while waiting to buy. However, the scarcity of supply will limit the number of new rental contracts, especially in the luxury segment, where new record rental prices are expected. The broader market is likely to see moderate price growth, in line with recent trends.
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