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There’s a demand for luxury homes, but no offer

27 February, Il Sole 24 Ore

Everybody likes a luxury home, and it can also become an investment. The prime residential segment is going through a positive phase, to the point that prices have been recovering since 2014 the losses the market suffered during the recession. All the main sector’s researches agree with this conclusion. According to the Report on Luxury Residences by Tirelli & Partners, in the second half of 2018 in Milan, considering an index of 100 set at 2011, the average selling prices were set at 96.5, having regained 10 points since the reduction registered in 2014.

“In comparison with the first part of the part of the year, the requested price had further increased by 1.4% concerning the average values, by 1.7% concerning the maximum values (houses of the first quartile in terms of total prices, generally the most exclusive and expensive ones). Top prices for square metres had even increased by 2.1%”, reports the company. “However, we lack products to sell”, says Marco Tirelli.

Quadrilatero concentrates most of the transactions for the semester: houses being sold at 8.6 million euro, corresponding to 15,636 euro/Sq m. The area registers the highest average prices in Milan: 12,488 euro/Sq m. In Venezia-Duse, prices reduce to 10, 000 euro/Sq m.

According to Engel & Völkers, in Milan, the demand for properties offering services of the highest quality and excellently-located has grown. The first nine months of 2018 registered 17,444 transactions (+1.1% yearly basis). The forecast for the current year talks about approximately 24 thousand sales. But the problem is that to the demand doesn’t correspond an adequate offer.

Engel & Völkers reports that the demand has been growing for primary residences as well as for property investments. The number of international buyers has increased along with the number of houses for investment. Chinese are looking in the most central areas, while Brexiters concentrate in Magenta/Brera or in other prime areas of the city.

“The main drivers of the demand remain facilities, a well-served area, along with functional and efficient spaces. Buyers are increasingly focused on quality and sustainability – stressed Marco Sorbara, commercial director for the Engel & Völkers Milan branch – Such aspects are increasingly important in the selection and promotion of a property”.

Gabriele Borgnino, office manager for the Milan branch, commented that: “The latest trends are services such a concierge dealing with all the various needs a family might have: receiving and delivering the groceries bought online, a laundry service, booking trips and events. All these services combine with the most advanced technologies in order to reduce the environmental impact and to limit management costs”.

There are emerging neighbourhoods such as Procaccini and Gerusalemme, Muratori, Spartaco, and Medaglie d’Oro, as well as the requalification of Darsena and the reopening of Navigli.

Foreigners look at the Capital

What’s on in Rome? Also in the Capital, the luxury market has been growing after a very calm first semester. Rome is the first market in Italy concerning the number of transactions: 22,763 in the first nine months of 2018 and over 31 thousand estimated upon final balance for the whole year. In the second half of 2018, EUR and San Giovanni registered the sharpest growth, while Prati reported a slight decrease. Transactions have also been growing for what concerns lease contracts, especially short-term rentals in the old town. A large part of the demand is represented by people from emerging economies such as Russia, the Arab countries and China. These clients mostly concentrate on the Prati-Balduina and Parioli areas, while Europeans and Americans prefer the old town. The favourite property type is the two-bedroom apartments around 100 Sq m.

Rome is also witnessing some residential real estate developments in the city centre. In Monticello, a real estate development offering stunning views and located on the hill behind the Vatican is currently being carried out by Europa Risorse and Benson Elliott and marketed by Savills through Beliving. The first phase of sales hasn’t sold out; for this reason, the project is also looking for buyers abroad.

The development consists in a residential complex featuring villas and swimming pools on the ground floor, a rooftop where to host private parties, a concierge service and a team dedicated to repairs and plumbing works included in the condominium expenses. All the 64 apartments offer domotics along with the highest quality standard. Prices start from 539 thousand euro for one-bedroom-apartments and from over 2 million for penthouses.

Savills with Beliving has also put on the market another upscale development located in Porta Portese.  Porta dei Leoni will be composed of 100 apartments, starting from 60 Sq m and prices from 276 thousand euro up to 678 thousand for three-bedroom houses. 40% of the houses have already been sold to clients from various countries, from China to the United States to Nicaragua and Jordan.

The outlook for the luxury market

“The international appointments scheduled for spring 2019, the European elections and the conclusion of Brexit might impact the European real estate market, especially the Milanese one”, according to Engel & Völkers, which believes the sector will follow a stationary trend. Roberto Magaglio, Licence Partner for the Milan branch, said that: “Spring 2019 is characterised by many international turning points such the European elections and Brexit. The outcomes of such important events will certainly have consequences on real estate, Milan included. Even in the case things will turn out not as we hope, we believe that the Milan prime residential market is a safe haven compared to other asset classes. If the results are market-friendly, we think that the luxury segment may grow further both in terms of transactions and values”.

Source: Il Sole 24 Ore

Translator: Cristina Ambrosi

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