What is a "luxury" home like and what makes it so special? Let's see look at one answer from a study by Santandrea-Doxa, and the what’s happening in the luxury property markets in Rome and Milan.
New or renovated luxury residences in Milan
The analysis of the luxury real estate market based on the qualitative survey carried out by Doxa on behalf of Santandrea at the beginning of 2019 focuses on the most expensive properties in the Milan market. In this city, the luxury sector is thriving, and sees two different approaches to the concept of "luxury":
- The period house: mostly homes built in the early 1900s, these are the luxury property of choice for over 40s who have more traditional values. It doesn't matter if it's a non-rational choice (windows and doors are often not as energy efficient as modern ones, the wood may be in a worse state, etc.), these buyers often prefer to renovate if the shell of the building is in good condition, but the finishes and systems in particular must be up to modern standards. The data show that the prestige of the house is fundamental for 49% of buyers, and sufficient for 33%.
- The new house: this type of luxury home is preferred by the 30-40-year-old target group, who fall for the charm of the architect’s signature, the modern concept of space and green living. The living spaces (including living room/kitchen as unique but divided environments, "in/out" spaces, terraces) are enhanced at the expense of the bedrooms, which are generally small in size.
The demand is greater for four-bedroom flats (44%), followed by five or more-bedroom apartments (37%) and the three-room flats (19%). 37% of clients for luxury property in Milan are looking for a house that is already renovated, 19% for a new building, 31% a property in need of renovation, and 13% a used home in good condition.
The characteristics of luxury properties
In line with what this target market is looking for, some characteristics emerged from the study that a luxury property must have to be defined as such:
- Natural light: this is considered one of the most important elements. Buyers want exposure to sunlight on two or three sides of the house, with lots of windows and doors.
- The area: a luxury building must be in the centre of Milan, inside the Bastioni. Among the most sought after areas are Brera, Garibaldi, Porta Venezia, Porta Nuova and CityLife.
- Upper floors: ground-floors and first-floor apartments are less desirable; luxury houses are on the upper floor, which means panoramic view, more light and more value (also for future sales/investment).
- High ceilings: generally over three and a half metres, this is a valuable element which adds light and charm to the property.
- Terrace or balcony: it is important that the flat has some sort of outside space: at least a balcony, or even better, a terrace with a view. Glass walls that can be opened are very popular, increasing the light in the room and creating continuity between the inside and outside.
- Elevator: a lift adds value to the building by making the upper floors more accessible.
- Concierge: important both from the point of view of security and logistics.
- History: the attention falls on aesthetic details of the facade, but also the interior, such as antique doors, stucco work, exposed beams, antique fixtures, fireplace, fine parquet, arches, and other luxury details that "speak of history and distinctiveness".
- The living room and kitchen as a single space: a separate kitchen is seen as something old fashioned.
- Indoors and outdoors merge into a single space: buyers look for solutions such as a "greenhouse" or veranda to be able to experience outdoor spaces not only during the summer, but also in winter.
- Double (or triple) bathroom: the modern bathroom has been transformed into a relaxation area, where you can take your time and take care of yourself. A luxury house with only one bathroom is not even considered. 66% want two bathrooms, 34% want three. 56% want both a shower and a bathtub, while 32% want only a shower.
The luxury house of tomorrow
When you think about the house of tomorrow (projecting into the future, in ten years' time), new luxuries/needs come to mind:
- Smart home automation: these are the characteristics of the home of the future, even if often we tend to prefer smart solutions that can be managed from a mobile phone using apps (e.g. light bulbs or intelligent thermostats) that are easier to understand, install and manage.
- A space dedicated to guests: a possibly separate and independent area with its own bathroom, which can accommodate friends, relatives or a carer.
- A terrace full of greenery: having plants in the outdoor spaces is especially important for those who currently have to hang out their clothes on the balcony and want something a bit nicer.
- En-suite bathrooms
- A double entrance: this can be useful for future divisions of the house into two units, for example, to help the children to get some freedom.
The market for luxury real estate in Milan
According to Santandrea’s research, prepared by the Gabetti Studies Office during the second half of 2018, the market for high-value properties in Milan confirmed the recovery observed in 2017 and the first half of 2018.
"Milan is playing a central role for Italy as a pole of attraction for various types of investors, both national and international,” says Fabio Guglielmi, Managing Director of Santandrea Luxury Houses. “It is therefore no coincidence that in Milan by 2018 there are about fifty construction sites or new developments, for a total of almost three thousand new luxury units.”
During the second half of 2018, the Brera, Centro Storico and Magenta-Pagano-Castello areas were among the most dynamic with a constantly growing demand. As for prices, there was a slight increase (+0.6%). On the supply side, the availability of real estate in Milan was up everywhere with the exception of the Palestro-Duse area. The demand for long-term rentals of luxury property in Milan is stable in the areas of the Quadrilateral and Palestro-Duse, and on the rise in the areas of Magenta-Pagano-Castello, Brera and Centro Storico. Rent prices remained substantially stable, with a slight increase of 0.2% in the historic old town centre. In general, the phenomenon of short-term vacation rentals managed directly by owners or service companies continues to grow, which in recent years has significantly reduced the supply of properties for medium- to long-term rental. The average difference between asking prices and final closing prices was between 8% and 10% and, as far as the average sale time is concerned, properties remained on the market for a minimum of two to a maximum of four months.
For new or renovated homes in Milan, prices have fluctuated from a minimum of 7,500 euro per square metre (697 euro per square foot) in the Old Town and Magenta-Pagano-Castello, up to a maximum of 13,500 euro/m2 (1,254 euro/sq ft) in the area of the Quadrilatero.
The majority of the demand, 70%, continues to be interested in purchasing a property while the demand for rented properties makes up the remaining 30%. The most sought-after sizes of homes are those between 180 and 230 square metres (1,938-2,476 square feet) and with at least three bedrooms.
The market for luxury real estate in Rome
“A city like Rome," says Fabio Guglielmi, "which is potentially more attractive than Milan from an architectural and cultural point of view, has gradually lost, in part, its charm of the ‘eternal city’. This loss of charm has resulted in a gradual slowdown in investment in real estate, with only a thousand new luxury properties in 2018. What is happening in Rome is that the state of repair and the context often fail to meet the demand, so much so that the stock of renovated properties represents a small but significant percentage.”
In Rome, during the last six months of 2018, demand for high-value properties increased, with the exception of the Flaminio and Salario-Trieste areas, where the situation remained unchanged. The supply of properties for sale, meanwhile, remained stable. Prices remained unchanged in all areas, with the first signs of a fall in prices in Prati and a rise in Pinciano-Veneto.
Prices are lower in the city of Rome when compared with Milan: from 4,500 euro/m2 (418 euro/sq ft) to 11,000 euro/m2 (1,022 euro/sq ft) for new or renovated buildings; from 4,000 euro/m2 (372 euro/sq ft) in Flaminio, Parioli and Salario-Trieste to 10,000 euro/m2 (929 euro/sq ft) of the Old Town for used properties or those in need of renovation. The Old Town is at the most expensive area for both types of property.
The rental sector in the capital has recorded a substantial stability in demand in the areas of the Old Town, Flaminio, Prati, Trastevere, Parioli and Flaminio, growing in Pinciano-Veneto, while in the Salario-Trieste area has fallen further. The supply of homes for rent in Rome has been stable in almost all areas.
As in the previous semesters, in Rome 60% of the demand was oriented to purchase and the remaining 40% to rent. The investment component remained at 25%. The most sought-after real estate units were those between 150 and 200 square metres (1,615-2,153 square feet) which have at least three bedrooms.
Forecasts for the luxury residential market in Italy
For the first half of 2019, in Milan, an increase in demand is expected, which is echoed by an increase in the number of transactions in a context where prices tend to be stable. Generalised growth is also expected for leasing: demand, supply, number of contracts and rents.
In Rome, stability is expected both in supply and in the number of operations. The prices, which will see slight downturns, will lead – together with the other drivers – to create favourable conditions for the increase in demand. As far as the rental market is concerned, demand is expected to grow, supply to be stable, with contract activity substantially unchanged and rents tending to fall.
