Luxury property: perhaps the reason is the low interest rates of the BCE.

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 sector remains safe. This particular segment is not credit-dependent, and buyers have not been deterred by rising rates. In other words, demand continues to be strong with insufficient supply in both quantity and quality. Here are the key facts that emerge from the data in theMilan andRome market report compiled by Engel & Völkers in association with Nomisma.

The report looks at the luxury real estate market inMilan andRome.

According to the study, Milan's premium real estate market continues to show good activity despite the general downturn. The higher end of the market, which is not dependent on credit and therefore not deterred by rising interest rates, still has strong demand. However, the share of transactions that cannot do without bank support is decreasing.

When it comes toMilan's luxury real estate market...

The report revealed a significant decline in the first quarter of 2023, following the excellent results obtained in 2022: -22.9% compared to the first quarter of 2022. Looking at data for other cities, the decline inMilan was second only to Bologna, where it amounted to -23.9%.

TheMilanreal estate market as a whole is a trend indicator: experts fear that this trend could spread to other regional markets during the year. The negative trend is already affecting other regions of Italy, where a decrease in demand has been noted.

Real estate prices.

While the number of transactions has fallen, real estate prices have remained largely stable. The growth of interest rates affected the luxury real estate market and the segment of new buildings to a lesser extent. The latter have become more attractive following recent European guidance on the energy efficiency class of buildings.

Prices remain resilient because Italy's real estate market, in general, has been delayed in reacting to economic changes. But also because of the lack of supply, demand cannot find an adequate response. It should be noted that selling times and average discounts are increasing: the market is becoming less lively.

Potential buyers.

Who are the potential buyers inMilan's luxury real estate market? A report from Engel & Völkers provides a clear insight into this.

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

When it comes to the luxury real estate market inRome...

demand in the first half of 2023 remained at roughly the same level. Prices were rising and the number of transactions was slightly declining.

The survey shows that deals continued to decline in the historic city center. At present, this has not affected prices, which remain stable or rising.

There is growing interest in the Aventino neighborhood, far from the city center, and demand for premium properties is confirmed. Investment purchases are active, especially in the neighborhoods of Trastevere and Testaccio, where there is a lot of nightlife, and therefore they are attractive for short-term rentals. Inquiries from abroad, mainly from Northern Europe, remain stable compared to the previous six months, with a strong interest in properties in prestigious neighborhoods.

Prices.

In the most exclusive areas, prices for renovated properties can reach 10,000 euros per square meter. In the Prati Vatican area, average prices remain in the range of 4,200 to 7,000 euros per square meter for renovated homes. In the northern part ofRome, average prices remain stable on a semi-annual basis, with the exception of the neighborhoods of Parioli, Trieste Salario and Talenti-Monte Sacro, where they have increased. Here, prices range from 2,700 to 7,000 euros per square meter for new or renovated residences.

What buyers are looking for.

Buyers choosing the northern part ofRome are looking for properties with a large area and the availability of open spaces offered by the neighborhood and plenty of green areas. The west side of town is looking for green space. Inquiries from abroad, mainly from Northern Europe, are mainly directed towards premium properties such as Pinciano, Parioli and Trieste, but also towards Eure, which, thanks to various renovation programs, has become one of the most sought-after areas for foreign buyers for investment purposes.