The performance index of residential purchases and sales shows, for the Milan market, a sudden retreat in the second half of 2023. The main drivers are to be found in the lower intensity of demand compared to previous semesters, attributable to the greater difficulty for buyers to access the credit market. This is what emerges from Nomisma's 3rd Observatory on the Real Estate Market 2023 regarding the real estate market in Lombardy's capital city.
Milan property market
In the first half of 2023, according to Nomisma, the residential market in Milan suffered a significant setback, with only 12,490 sales compared to 15,600 in the first half of 2022 (-20%). The slowdown in buying and selling was partly transmitted to the trend in new and used property prices, which still showed a generalised growth, but of much reduced intensity compared to the previous six months.
How much do houses cost in Milan
In the second half of 2023, prices for new and refurbished dwellings are set to stagnate (-0.6% on a half-yearly basis), compared to an annual increase of +1.7%. The average discount on the initial asking price remains stationary (around 3-4%), which is more than halved compared to used properties. The positive performance also applies to the used property segment, whose average six-month and annual price increases are in the order of +1.3% and +3.3% respectively. Average selling times were stable, ranging from three to four months for used homes. The average discount on the asking price remains in the range of 8-9%. These are small percentages in a market context characterised by a reduced elasticity of supply.
Houses for rent in Milan
On the rental side, demand for rented houses in Milan continues to grow. In the second half of 2023, rents confirmed the positive change of the last three half-year periods (+2.9% half-yearly), with an annual increase of 4.7%. The average gross rental yield is stationary at 4.8 percentage points. With regard to rental time, on average it takes about two months to complete a negotiation, although properties with suitable characteristics may remain on the market for only a few days. Nomisma's survey of market players shows that around 50% of the demand passing through agencies is for purchase transactions, supported by a mortgage in 73% of cases.
Demand pressure on the rental market is increasing due to the gradual rise in real estate mortgage rates on the one hand and the increasing number of residences moved to the short term rental market on the other.
Non-residential property in Milan
In the first half of 2023, transactional activity for retail offices in Milan suffered a significant drop in the order of -33% with only 430 properties traded on the market, compared to 652 in 2022 and 671 in 2021. In the second half of 2023, the increase in average prices continued for the fourth consecutive six months. Quotations show positive changes on both a half-yearly (+1.2%) and annual basis (+2.9%), although real estate located in business districts shows a negative result. Average discounts on the asking price in the most attractive areas remain static on a half-yearly basis (9-11%), while they increase in the suburbs (14%). The ongoing increase in average rents from the first half of 2022 is confirmed, with an average growth rate of +1.2% per annum. The context also remains stable in terms of absorption times, both sales (6 months) and rental (4-5 months). The average annual gross rental yield is almost stable at 5.1%.
In the first half of 2023, the volume of retail sales on the Milan market suffered a slight setback on a trend basis (-2.6%). In the retail sector, the average price trend continued to rise on an annual basis (+1.8% half-yearly). The absorption rate decreases for progressively more central locations, with average sales times of 4-5 months in the centre and 6-7 months in the suburbs. The average discount granted on the asking price increased slightly (9.5%), remaining the smallest among the big cities and the only one in single digits. A better performance was seen in the rental segment, with average rents rising on a half-yearly basis (+1.3%). The market has a fast absorption time (3-4 months), slightly longer in the periphery. Average annual gross yields remained more or less stable at 6.7%.
Residential sector forecasts in Milan
Operators' sentiment forecasts predict a sharp decline in the number of sales and average price levels for the first half of 2024. On the rental side, expectations are for stability in contracts and rent levels.