Generous tax breaks, splashy urban development projects and a low cost of living are luring foreigners and returning Italians to the financial hub
The market for luxury flats in Milan is booming as bankers, fund managers and private equity investors are flocking to Italy’s financial capital.
Thousands of foreigners and Italian nationals have relocated to the country since the government started granting generous tax breaks in 2017 to lure new arrivals. That has helped tilt Milan’s real estate market toward the high-end, especially as the city has become a popular landing spot for finance workers leaving London in the wake of Brexit.
The northern city has enjoyed something of a renaissance in recent years thanks to the completion of several big urban revitalization projects. In the run-up to Milan hosting the World Expo in 2015, city leaders and real estate firms transformed the run-down Porta Nuova area and the old Milan fairgrounds into sleek contemporary landmarks, triggering the development of new luxury residential, commercial and business districts.
The dynamics position Milan as a rare bright spot in global real estate. Rapidly rising interest rates have put an end to the cheap money that fueled property markets from Berlin to Beijing. Italy is well-placed to avoid much of the turmoil because its real estate sector recovered only slowly from the fallout of the global financial crisis.
“Since Lehman, European real estate market went for a run, while Italy just walked. But it did it steadily,” said Mario Breglia of real estate research firm Scenari Immobiliari.
“After 20 years of redevelopment, the city can stand a chance compared to other European capitals,” said Manfredi Catella, founder and Chief Executive Officer of Coima SGR, the developer behind the Porta Nuova transformation project, which was backed by sovereign fund Qatar Investment Authority and includes the iconic Vertical Forest buildings.
Part of the appeal is geographic: Milan is an hour’s flight from the financial center of Frankfurt, and less than two from London. It’s also a two-hour drive from the Mediterranean coast, and about an hour-and-a-half by car from Alpine ski resorts. “Milan is a great place to relocate,” said Giovanni Raffa, a private banker for Credit Suisse Group AG who moved to Milan at the end of 2021 after 16 years in London. “It’s the country’s financial powerhouse, is well-connected to the main hubs in continental Europe, and offers a high-quality lifestyle.” Because the city is so compact, Raffa added, his commute now takes roughly half the amount of time it took in the UK – and features neoclassical and Liberty-style palazzi.
Prices are beginning to reflect the city’s newfound appeal. The value of luxury properties in Milan rose 25% to €5.8 billion in the six months ending in November, according to real estate website immobiliare.it. That’s a significant increase over the period between 2019 and 2021, when average luxury real estate prices in Italy only climbed around 2%, the platform said in a separate report. The turnaround time for high-end homes is also declining – they currently stay on the market for just over two months on average; shorter than before the pandemic.
“The real estate market for luxury properties in Milan is showing an upward trend,” said Andrea Pincherli Vicini, founder and CEO of Milan-based high-end real estate broker Vincenzo Monti Prestige. “After Brexit we have seen a significant flow of Italians coming back, along with a growing number of rich foreign buyers.”
Foreigners originally “started investing in Milan based on word-of-mouth,” according to Pincherli Vicini. But, he added, as news has gotten out about the city’s real estate opportunities, “tax advisers now actively offer it as an investment option.”
CityLife, a mixed-use luxury district on the northeast outskirts of the city featuring swanky buildings by starchitects Daniel Libeskind, Zaha Hadid and Arata Isozaki, is a striking showpiece of the new Milan. Facilities include “a swimming pool, padel facilities, a shopping mall,” said Paolo Micucci, CEO of Generali’s CityLife unit. Prices in the neighborhood can reach 15,000 euro per square meter, according to people familiar who asked not to be named. But that hasn’t dampened interest — the last batch of 103 houses sold out before construction was even completed. “Roughly 20% of buyers are foreigners or Italians returning from abroad,” Micucci added.
In the wake of Brexit, some of the world’s biggest banks have been under pressure to move traders out of the UK and into continental Europe. While Italian banks such as UniCredit SpA and Mediobanca SpA were the first to repatriate employees to Milan, their international counterparts are now following suit. Goldman Sachs is shifting traders from London to the northern Italian city, and investment firms Certares, Eisler Capital UK and Andera Partners opened shops in town in the last few years. According to a new report from the European Banking Authority, in 2021, the number of high earners in Italy — defined as individuals earning more than a million euros a year — grew to 351, an 88% increase from the year prior.
These changes could help Milan secure its fledgling status as a global financial hub. Right now, the city still lacks the kind of truly global environment that would put it on par with London or even Frankfurt. According to the Global Financial Centres Index, which rates the competitiveness of international finance capitals, Milan ranked 48th out of 119, lagging behind Paris, Frankfurt, Amsterdam and Geneva.
A major draw for high net-worth individuals considering a move to Italy are the tax breaks, which give newcomers the option of paying a €100,000 ($108,570) flat rate on income made abroad, or of not paying taxes on up to 70% of their income for at least five years. In 2020, last year data was available, around 16,000 Italian nationals and foreigners were taking advantage of these incentives, and more than 400 people were benefitting from the flat tax, according to the Finance Ministry.
In Milan, demand for high-end housing is outpacing supply. As in the rest of Italy, owners often “prefer to pass properties through to younger generations instead of selling,” said Laurian Douin, a partner at BC Partners, which is actively investing in the city. That limits opportunities for construction and redevelopment, which drives up prices. “Luxury new-builds on offer in Milan are scarce,” lamented Pincherli Vicini.
Yet across the city, new development projects are underway. Near the Prada Foundation, the Scalo di Porta Romana, an out-of-use railway hub, is set to be transformed into an Olympic Village as the city prepares to host the 2026 Winter Olympics. That site is being designed by several of the architects behind New York’s iconic High Line park. Renzo Piano, the Italian architect behind London’s Shard skyscraper, is at work on the new Bovisa-Goccia campus of Milan’s Politecnico University. The city is also building what it boasts will be the densest network of bicycles lanes in all European cities.
At the same time, with inflation surging and supply lines under strain from the war in Ukraine, many expect a downturn to come soon. Still, even tough economic times might be better than the previous status quo. While the pace of real estate transactions in Italy slowed in the year ending in September, Bloomberg calculations found that with more than 788,000 sales recorded, the total number was still the highest since 2007.
That bodes well for the city’s status as a rising star, and suggests that its appeal extends beyond the financial elite. Brexit may have been a “negative event,” Catella said, but it still has had a positive effect on Milan.