Luxury Residences Report - I half 2022 - Press release
EXCLUSIVE RESIDENCES IN MILAN: THE SEMESTER OF RECORDS!
The Observatory on Exclusive Residences published by Tirelli & Partners Società Benefit with data for the first half of 2022 was presented today. The report analyzes in detail the highest segment of the real estate market for the city of Milan. Many records were broken during the period, some absolute since we have been conducting the survey (2003),others relative to the last 10 years:
SALES:
- The absorption index reaches 27.5 percent;
- Average sales time drops to 3.8 months;
- The maximum average prices of all 5 specific zones surveyed exceed €13,000 per square meter;
- The maximum average price in other areas of Milan exceeds the threshold of 11,000 euros per square meter;
- Top prices of individual properties exceed €20,000 per sqm in 4 areas;
- The actual average selling price touches €8,772/sqm;
- The total amount of the three largest transactions is close to 43 million, with sales prices all above €21,000 per square meter.
LETTINGS:
- The absorption index reaches 32.7 percent;
- The average discount applied to negotiations drops to 4.4 percent;
- Average contract closure times drop to 4.9months;
- Fee and top rent levels reach a 10-year high.
"A historic six-month period, in which in terms of the purchases and sales we highlight a demand that is once again very active and determined, but at the same time very selective and mature in the purchase decision - commentsMarco E. Tirelli - The favorite areas for the search are mainly the areas within the first circle of theNavigli and its natural external propagations of Magenta, Garibaldi and CentroStorico. Other locations become attractive especially when they offer houses of high standing in terms of architectural merit and livability."
The gradual and steady thinning of the supply of exclusive residences is confirmed. Consequently, the number of transactions does not grow: it is a segment held back by the reduced availability of the stock. The insufficient renewal rate of supply induces a further increase of more than one percentage point in the absorption index, which rises on average to 27.5 percent, with growth peaks in Brera, Centro Storico and the Other areas.
"Quality homes that are offered either officially or off market find a buyer in an increasingly shorter time frame-says Gabriele Torchiani, senior partner in charge of the Observatory- he discounts recorded reflect this market dynamic, ranging between zero for the best homes-sold overnight-and 12 percent for the less valuable ones, with a stable average around 5 percent, a congruous value for a seller-driven market." The asking price shows an average increase of 1.2 percent, a faithful mirror of the combination of strong demand, languishing supply and stagnation in the number of purchases and sales. As always, the most significant indications come from the disaggregated data: the variance according to the characteristics of the properties is very marked: compared to 0.6 percent for those in the last quartile of the distribution, the most valuable ones instead tick up +1.7 percent. The average value per body of the properties offered in the six-month period falls by more than 2.1 percent, due to the average decrease in surface area: large exclusive residences in Milan are increasingly a rarity. At the level of individual areas, the dynamics of average asking prices are more varied, ranging from +2% in Brera to -0.3% in the Venice area. The combination of the increase in asking prices and the fractional decrease in the discount has generated a further increase in the average actual sales prices recorded, amounting to 1.3% compared to the average value in 2021.
"The demand for rent for exclusive residences inMilan is in turmoil, driven in particular by temporary needs related to the protracted search for a home to buy, whether for the domestic market, for returns of compatriots from abroad, or for foreigners relocating for personal choice, work reasons or tax attractiveness," Torchiani adds. Requests far exceed availability, especially in the €80,000-plus annual rent range, and are exclusively for homes in excellent condition and of immediate habitability, considering that prospectively contracts will last between 18 and 24 months at most.
On the supply side, we are seeing positive signs, especially in the gradual disappearance of properties that would need major fix-up work before finding a tenant. It is a strong signal that landlords hitherto reluctant to invest in redeveloping their assets, after months or years of fruitlessness on the market and in the face of the concomitant income success of the homes fixed up and the incentives provided, have finally decided to move in the direction unequivocally indicated by the market. Within a couple of semesters we should therefore have positive effects on the number and quality of supply. Given these dynamics, it is not surprising that the percentage of homes rented in the period rises over the previous six months to 32.7 percent.
The segment's health is evidenced in particular by the sharp drop in discount and time already highlighted in the beaten records; those in stock of houses that do not find a tenant go below 10months, indicating that the quality of the proposed offer is improving sharply and rapidly. As for rents, after a few semesters of stagnation induced by the shock derived from the pandemic emergency, the rental market for exclusive residences in Milan has literally exploded for the reasons highlighted above.
The effects on rents are definitely significant: on average they go up by 3.1 percent, but the most conspicuous effect concerns the average maximum rent (+4.1 percent for the best houses) and especially top rents, the maximum values demanded for individual units, which have skyrocketed in all survey areas.
Forecast
In buying and selling, conditions of political stability and related to turbulent international scenarios will determine the market picture in the second half of the year: in the absence of exogenous shocks, a consolidation of the current trend is likely, the real driver of which will continue to be the quality of supply. The top segment (> 3 mln euros) will certainly be able to absorb further increases in asking prices, which will thus be transferred to transaction prices.
For leases, with demand likely to grow further, an increasingly improved and qualified supply may gradually lead to an increase in the number of contracts and the level of rents.