30 November, Linkiesta
The balcony. If we had to find a symbol to the craziness of the Milan real estate, it would definitely be the balcony as the true object of desire for whom is desperately looking for a house in the city. Between a mega terrace facing on City Life and the loaded drying racks in the kitchen, there is the supply and demand for rentals in the city which has the worst prices in the country. The young, wealthy, international Milan aspiring to Ema, here shows to be backward and old when it comes to offering an apartment to rent for a short time. Unable to respond to an increasing demand for rents, the Milan homeowners prefer the more traditional sale. Which it seems to not be interesting anymore. Not only for financial reasons. “Five years ago, the rental market was driven by necessity: those who were renting were students, young people at their first job and families that couldn’t afford to buy a house”, explains Carlo Giordano, Immobiliare.it Ceo, online advertisement leader. “In the last five years, renting has become a choice due to the mobility of work and new lifestyles. There is no more the anxiety to buy a house. Success doesn’t mean anymore owning a house”.
The confirmation of this countertrend comes from Sunia, the tenants’ associations. “There is a countertrend”, explains Lina Calonghi, from the Sunia offices. “Buying a house is no more a requirement, and this depends on economic factors. The mobility of work, the idea of being able to move without problems from a city to another, make think that demand for rentals in Milan will grow even further”. This is the logic of the sharing economy: possession is no more a priority.
Some of the big companies present in Milan have understood that, offering to top managers, often having to move workplace, apartments on rental as a benefit in their employment contracts. As a result, in a prime neighbourhood such as City Life, a 20-storey tower with 60 apartments, previously completely empty and with unaffordable rents, is now fully rented.
In the last year, requests for rent have increased all over Italy, but Milan beats the other cities with a yearly increase of 3.1%. On Immobiliare.it, researches for apartments in Milan double those for purchasing. “Milan is the only marketplace in Italy that has registered a strong recovery of rents and rental prices”, explains Gabriele Rabaiotti, City Councillor for the House in the City of Milan. “The market is responding slowly”.
And without adjusting to the new demand for rental. If in Italy 81% of the population own a first house (against the 36% of Germany, for instance), the market in Milan is aligned with the national spirit. “The offer for purchasing is higher than that for renting”, explains Giordano. Unaware that the returns from renting might reach 4-5% yearly after taxes. According to Tecnocasa, for an old two-bedroom apartment the average yearly return in Milan is 4.9%. More than a 15 years government bond which grants a net return of 1.93%.
“Homeowners are mostly small owners”, explains Giordano, “without a modern investment culture. In Italy, unlike other countries such as Germany, the companies investing in residential lease are very few. There are not tax reliefs, and many of these companies fear the arrears from tenants”.
The companies that used to own big properties in Milan have disinvested almost everything. There are only a few left, but with portfolios of 100 properties, each capable of altering the market. Immobiliare San Carlo Trieste alone owns 1,700 houses in the city. Then there the properties owned by the social security institutions, Policlinico, Pio Albero Trivulzio, the Cà Grande fund and also the Archiepiscopal Curia of Milan. “These institutions or medium-large-sized companies have high return potential for their properties, for this reason, they don’t accept lower rents and prefer to leave them unlet”, explains Rabaiotti.
After all, between excessively high rents and disappointing sales, there are 700 thousand unlet houses in Milan. But with such a high demand and an even lower offer, prices continue to rise. The cost of rents is growing again all over Italy, but Milan is +0.8% above the average, with an 8% increase for furnished houses, according to the latest report from Solo Affitti. The average rent is 938 euro. The gap with the other cities is getting wider, for example, the difference with Rome is 150 euro.
The same is true for shared apartments. “Sharing a house is becoming more and more widespread”, explains Giordani. “Young workers aspire to a better quality of life. For this reason, they prefer sharing in prime areas, rather than renting a studio apartment in the suburbs. And having a chat at the end of a day is always nice”. Certainly, he adds, “being in a couple is always the best way to share rent costs”. If you’re alone in Milan, you spend more.
For a single room, the average is 528 euro monthly, with a 4% increase from last year. Beds in shared rooms have increased even more, with an average rent of 388 euro monthly, 12% more than last year. Who wants to live in the trendiest areas of the city like Navigli and Porta Nuova, will have to consider a budget of over 610 euro for a single room.
The real estate agency fee is often added to this expense since such agencies cover 80% of the ads in Milan. They’re usually beautiful and expensive apartments. The options are two: either the agency takes 10-15% of commission, or it asks for one-two months rent. Making costs rising even more. “The problem of rents is not only linked to prices but also to quality”, says Giordano. “The quality of the properties offered is generally low. This is the symptom of n backward idea of lease, referred to whom cannot afford to buy a house”. There is any sort of property advertised: crumbling houses, badly kept and randomly furnished, as they were the garage of the first house. The offer is concentrated in the suburbs. “In the centre, homeowners tend more to sell, even though nobody buys anymore”, says Giordano. “Being the demand higher than the supply, the average rentals increase considerably if the property features some additional comfort”. That might be just a couch in the living room, a more modern kitchen, or the much-desired balcony.
Searching and finding the right apartment in Milan is quite a challenge. “I have seen everything”, tells Giorgia. “From extremely pricey houses with just one small window for a surface of 50 Sq m to apartments owned by a company requesting to subscribe a second house contract for the duration of one year, so that they could kick me out of the house anytime”. Then there are scams. “When you think to have found the apartment of your dreams at the perfect price, you have always to ask yourself where is the catch”, says Marco. “It’s very common to see the perfect ad, so you write, and they tell you that they’re abroad and that a trusted person will give you the keys. Of course, only after having provided your credit card details as a guarantee or having transferred money to them”. The most commonly used name for this sort of brokerage is Lucas Holm, reported on all the tenants’ forums, who was unexpectedly forced to return to Copenhagen. But there is also Maria Falcone, who clearly writes using Google Translate and requests in broken Italian the last payslip for her trust.
Tricks that don’t fool the experts in Milan. But the newbies smashed by the exorbitant prices might fall into the trap. Even the apparently legal lease contract might be in reality not legal at all. “Contracts not compliant with the regulation are very common”, says Lina Calonghi. “It mostly regards temporary contracts of one year not compliant with the Law, without sticking to the criteria set for lease contrast. For this reason, litigations with tenants are very frequent. This scares, even more, homeowners in renting their properties”.
Having to face this jungle, the City of Milan, Sunia and other tenants’ associations are trying to solve the issues around rents promoting regulated lease contracts, 3+2 contracts at fixed price with fiscal benefits for homeowners. At the end of the day, despite the lower rent, landlords earn more or less the same amount they would with market prices. In Milan, however, contracts of this type are very rare. “There isn’t a great interest in promoting them due to the fear that they would lead to controlling prices in general”, explains the City Councillor Gabriele Rabaiotti. “Moreover, there is little political interest towards this instrument. We renewed the agreement in 2015, which was expired since 1999”. But since June 2015 only 2 thousand regulated lease contracts have been registered on 30 thousand truncations yearly. Landlords fear that some of the benefits, such as that on Imu, might not be granted for the whole length of the contract.
“The social agency “Milano Abitare” has reviewed the communication plan on the regulated lease contracts”, says the City Councillor. “Besides, we’ve made a new agreement with three real estate agencies, Gabetti, Grimaldi and Professione Casa, to promote this low-cost channel among their clients”. In the meanwhile, the City of Milan is dealing with some big property owners of the city to adopt fixed prices. It will not be sufficient to solve the crazy rent situation in Milan, but it will grant to someone an apartment with a balcony without spending the whole salary.
Translator: Cristina Ambrosi