Luxury properties in Milan always on the crest of the wave

The Milanese residential real estate market is expected to close in 2022 with an estimated growth of over 27,000 total sales of used and new homes, equal to +1.5% on 2021. The prime real estate sector, i.e. luxury, located in the inside the city’s historical center, there was a 2.1% increase in exchanges compared to the previous year, with a total of 485 transactions (estimate made on the data provided by the OMI of the Revenue Agency).

Luxury homes, how much they cost in Milan

According to estimates, the turnover of the Milanese luxury market recorded a trading volume at the end of 2022 of approximately 854.2 million euros (+8.7% compared to 2021). The average price for luxury homes calculated on the transactions carried out is 11,750 euros per square meter.

Compared to 2021 there was therefore an increase in average values of 7.2 percentage points. Compared to the previous year, the supply of homes for sale has dropped significantly (-13.3%) and represents around 8% of the total for the whole city. Sales times have increased, especially in the second half of the year, and today the days needed on average are 120 compared to almost 100 in 2021.

Milan real estate market, 2023 forecasts

Despite the crisis triggered by the Russo-Ukrainian war, the turmoil on the financial markets and the increase in interest rates, forecasts for 2023 remain positive, with trade and turnover growing, against a new slight increase in prices.

The luxury real estate sector is proving to be solid and buoyant after this three-year boom in unprecedented home purchases.

Emerging from the pandemic, high net worth buyers have focused their attention on the real estate market. Rising interest rates, inflation and rising economic uncertainty have only slightly dampened demand in 2022, and we don’t see how they might attack larger fortunes in 2023.

Most international luxury home markets were still supportive of sellers as of August 2022, but conditions are gradually changing in favor of buyers.

Property hunters have more bargaining power, despite having to contend with limited supply and high prices. Many after covid have said they are not satisfied with their homes. Driven by investment priorities and quality of life, the parameters of choice seem to be changing rapidly and the most interesting places, net of tourist ones, are confirmed as New York, Miami, London, Paris and finally also Milan.

War and inflation, consequences on the real estate market

The current geopolitical context and the economic turbulence that has arisen have had an impact throughout 2022, creating a lot of uncertainty and causing the confidence of Italian families to drop. Despite this change in climate, the prestigious residential real estate market in Milan remains lively. Regardless of the massive investments made in recent years by institutional investors who are transforming the city skyline, the positive effects deriving from Milano Cortina 2026 and the post-covid motivations which push buyers with more purchasing power to buy a suitable first home in the city, the Lombard capital confirms itself among the top eleven global metropolises most interesting for international investments, ten steps above Rome.

Milan and the rest of Italy: a two-speed market

Between Milan and the rest of Italy, a picture of a “two-speed real estate market” has now consolidated, as has already been the case abroad for some time with London which produces totally different numbers from the rest of the UK market or Paris compared with the markets of other French cities.

Paradoxically, Milan has been burdened with an “excess demand” which it is unable to satisfy. The take-up rate of high-standing properties in the last three years has been very high and the drop in offer we are witnessing is also caused by this trend.

Towards the end of the year, the consolidation of negative macroeconomic data then induced some sellers to withdraw their assets from the market, judging it wiser to keep their capital away from the inflation through the real estate tool. Supply drops, demand remains alive and prices have thus increased even in 2022. The growth is essentially due to the market and not to the au ment of raw materials. The share of newly built homes in the historic center of Milan is very low, less than 3 percent of the total supply. Certainly the demand of those looking for a high-quality luxury home in the center cannot fail to turn to new generation properties, but, often, the buyer does not want to wait two – three years before taking possession of his new home.

Supply and demand in the prime real estate market of Milan

By then comparing the surfaces that demand requires and that the market offers, both in terms of square meters and financial budget, other elements emerge which lead us to say that 2022 has confirmed that, in addition to the drop in supply, the that is on the market today often struggles to be in line with demand. In fact, about forty percent of the houses for sale today in the “prime” areas of Milan (about 1,300 homes) have a surface area between 100 and 200 square meters and 27 percent are below the 100 square meter threshold.

Basically, almost 70 percent of the offer goes from less than 100 square meters to a maximum of 200, while about half of the demand seeks homes larger than 200 square meters. Looking at the offer from a financial point of view, the increase in prices has increased the share of houses for sale between 1.5 and 2.5 million euros (55 percent).

The share of houses for sale with an asking price of between 3.5 and 4.5 million euros has dropped; in fact, today it is only 13 percent, while last year the share was 20 percent. Finally, the share of houses with values above 4.5 million euros has also decreased, today it represents only 7 percent of the market, less than 100 apartments in the whole city. Prices on the rise, but until when? In the presence of a still lively but always selective demand, the real driver of the market will continue to be the quality of the offer. However, considering the thinness of the stock with this characteristic, no jolts in the market indicators can be expected in the first part of 2023, but we expect an adjustment phase with a slight growth in values (no more than a couple of percentage points). Also because, on a general level, there is little renewal of the stock on sale. In fact, the houses sold do not find a new product to replace them. Indeed, in a market with the characteristics of supply and demand that we have highlighted, one might also expect a much more robust rise in asking prices.

Sales prices of luxury real estate in Milan

The average selling price of prime Milanese properties is close to 12,000 euros per square meter, with a 7.2 percent increase compared to 2021. In Milan, always keeping as a reference the prestigious areas of the historic center and the most prestigious ones outside the walls, the average price shows the greatest variations in relation to the actual state of the house.

A perfectly renovated and technologically well-equipped property (wi-fi with fiber and home automation) has an average value of 45% higher than one that needs to be completely redeveloped. The Quadrilatero della Modamaintains its leadership with the highest prices (in some rare cases they are close to 30,000 euros per sq m.). In the other areas of the Historic Centre, however, there is a certain homogeneity in the average selling price which remains firmly above 12,000 euros per square meter.

Given these supply conditions, a sharp drop in values is not expected for 2023, on the contrary, values will certainly remain stable if not growing in the first two quarters of the year. The demand of “millionaire migrants” 2022 also led to an increase in demand that was already present on the Milanese luxury market but in a minimal part. The global population of ultra high net worth (UHNWI) individuals grew by 46,000 at the end of 2022 to reach a record 218,200 ultra-millionaires worldwide.

As countries ease restrictions and reopen borders, the migration of millionaires is starting to grow again. A recent survey estimates that around 88 thousand millionaires will move to a new country in 2022.