Blog "Nea Oikonomia" by Michele Rizzo Law Firm

The real estate market in Milan: Slow recovery in prices

The real estate market in Milan: Slow recovery in prices

According to the 3rd Real Estate Observatory 2018 by Nomisma, an economic research institute, the Milan property market is continuing its slow but gradual recovery process, although it’s taking longer than expected.

In the residential sector, the growth of transactions for residential properties reduced considerably compared with the rises in 2016 (+ 21.5%) and 2017 (+ 8.1%) and stopped at + 1.4% for 2018. This slowdown in growth must be attributed not so much to the fall in demand, but to the longest time needed to complete credit allocationand conclusion of the negotiations. Indeed, the average prices of old – used houses continue to remain positive, recording a very modest increase (+ 0.2% annually). The recovery in real estate prices also affected the prices of new homes located in central and suburban areas, where the supply of under construction or newly built real estate (+ 0.8% on average) is concentrated.

It is worth noting that the gap between sellers’ expectations and buyers’ availability is almost bridged: the difference between the asking price and the actual selling price (equal to 10% for old houses and 5.5% for new ones) is decreasing.

The recovery in the rental housing market is confirmed: the rents are rising (+ 1.5%) for the third consecutive semester and they are characterized by a small average tenancy length. There are no substantial changes in the expected gross rental yield, which is around 5%.

In the commercial real estate market in Milan, in the second half of 2018 there was a slight decrease in the lease length of offices and shops. Similarly, there was a decrease in discounts -as a result of negotiations (11% the average of discounts for offices and 10.5% for stores), in response to owners’ willingness to a downward revision of the initial asking prices.

The outlook for the first semester of 2019 is for a positive performance of transactions and rents, with a gradual recovery in the value of property in the city center, while the value of real estate in the suburbs is estimated to remain stable.

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