al minimoLuxury real estate: why prices are holding up despite BCE minimum rates.

The first effects of the European Central Bank's decisions to raise interest rates are beginning to be felt in the real estate market. However, the luxury real estate segment remains safe. Value immobilization is independent of credit, and buyers are not deflected from rising interest rates. In other words, demand remains stable, while supply does not always meet the requirements in terms of quantity and quality. Here are the main conclusions that can be drawn from Engel &'s Market Report Milano/Roma data;

Report on the luxury real estate market inMilan

The evaluation of the situation in the luxury real estate market was told by Nomisma CEO Luca Dondi. He explained that despite the overall negative trend in the real estate market, the luxury segment continues to show good viability. The high end of the market, which is not dependent on credit and therefore does not lose interest due to rising interest rates, still has steady demand. At the same time, the number of transactions that cannot do without bank support is decreasing.

Focusing on the luxury real estate market in Milan, the Engel & Völkers report highlighted that the first quarter of 2023 recorded a serious decline of 22.9% compared to the first quarter of 2022 after an excellent performance in 2022. When looking at the main monitored cities, Milan came second after Bologna, where the decline amounted to 23.9%.

The Milan real estate market as a whole is an indicator: experts fear that this trend could affect other regional markets during the year. The negative trend is already affecting the rest of Italy, where a negative change is noted.

Prices in Milan

While the number of transactions has decreased, as far as prices are concerned, they remain stable. The increase in interest rates had a smaller impact on the luxury market and the new-build segment. The latter have become more attractive following recent European guidance on the energy class of buildings.

Prices remain stable because, firstly, the Italian real estate market usually reacts with a delay to economic changes. And secondly, because of the current lack of supply, demand cannot find an adequate response.

Potential buyers

Who are the potential buyers in Milan's luxury real estate market? The Engel & Völkers report provides an accurate description:

• The loss of purchasing power of families caused by inflation has further widened the gap between real demand, which has the means to buy instantly, and potential demand, which depends on credit.
• The luxury market in Milan today is moving towards transactions over 1.5 million euros, which do not require financing and are often made thanks to a favorable tax system for returns from abroad.
• The interest of buyers is always directed towards semi-central or even peripheral areas, provided that they have good transport accessibility. The center remains very attractive to non-Milan investors or young adults attracted by the nightlife.

The Engel & Völkers forecast shows that the real estate market is expected to see a decrease in transactions in the second half of 2023, with average prices remaining stable in all areas of the city.

The luxury real estate market inRome

When it comes to the luxury real estate market in Rome, demand in the first half of 2023 remained at roughly the same level. Prices rose and transaction volume fell slightly.

Looking at the city's neighborhoods, the historic center continues to see a decline in transactions. But so far it hasn't affected prices, which remain stable or rising.

There is growing interest in the Aventine, a secluded downtown area, as well as high value areas. Investment purchases are mainly concentrated in the districts of Trastevere and Testaccio, which are in a very central location and characterized by an intense nightlife, making them attractive for short-term rentals. Inquiries from foreign buyers, mainly from Northern Europe, are stable compared to the previous six months, with an increase in interest in properties in highly prestigious areas.

Prices

In the most exclusive areas, prices for reconstructed properties reach 10,000 euros per square meter. In the Prati Vatican area, prices average between 4,200 and 7,000 euros per square meter for newly renovated residential units. In North Rome, average prices on a semi-annual basis remain stable, except in the neighborhoods of Parioli, Trieste Salario and Talenti Monte Sacro, where prices are rising. Here, prices range from €2,700 to €7,000 per square meter for new or renovated residential properties.

What buyers are looking for

Buyers looking for homes in the North Zone are looking for spacious accommodation with the open spaces the zone offers and large green areas. In the West Zone, the demand is for green space. The request of foreign buyers, mainly from Northern Europe, is mainly directed towards properties in prestigious areas such as Pinciano, Parioli and Trieste, but also towards Eure, which, thanks to numerous renovation programs, is one of the most popular areas for foreign buyers who purchase properties for investment.