Milan is becoming a bit of a hotspot for international investors looking for properties. While the capital of Lombardy doesn’t have the same tourism pull as other Italian renaissance cities like Rome and Florence, it actually boasts more visitors. MasterCard’s Global Destination Cities Index puts the number of visitors to the city over 2017 at 8.17 million compared to Rome’s 7.09 million. The reason behind the high visitor numbers can be linked to why property investments in the city have become so popular – business is booming. More than 25% of the visitors to Milan come on business, compared to only 14% of the total to Rome.
Milan, while always the most commercially active city in Italy, is becoming a real economic titan. The global fashion industry’s capital, Milan also has booming banking, commerce, business and design sectors. The Lombardy region that includes the city is also now the richest of the ‘four motors for Europe’ – the four most industrialised regions of continental Europe. The other three are Lyon and the surrounding Auvergne-Rhone-Alpes region in France, Spain’s Catalonia and Germany’s Stuttgart and surrounding Baden-Wurttemberg.
While Italy does not generally spring to mind as one of Europe’s wealthiest countries, the Lombardy region is richer than Switzerland, the world’s 19th largest economy. In Europe, Zurich is the only city to boast a higher GDP per capita than Milan’s €40,137. The 2015 World Expo, hosted in Milan, brought more than 20 million visitors into the city, further boosting its profile and leading to infrastructure developments such as a new metro line.
Despite its wealth, as in the rest of Italy, property prices in Milan were hit hard by the financial crisis. The prime property market saw prices plummet by as much as 30% and the recovery took far longer to take hold than was the case in the UK. However, the fact that prices in Milan are still lower than in most European cities of comparable standing, wealth and economic strength, is attracting the attention of investors. In central Milan, transactions rose 22% in 2016 – 4% more than the Italy-wide average of 18%.
Neighbourhoods around the outskirts of the city are also seeing significant construction activity, and new mixed use and residential developments are now up to international standards according to Rupert Fawcett, head of Italy sales at Knight Frank. That’s not always the case in the rest of the country. However, with outer Milan, which suffered heavily from bombing during WW II, fairly non-descript, it is the more central areas of the city that are popular with foreign property investors.
However, despite prices still considered to be relatively low, rental returns are not spectacular. In the town’s historic centre, the Global Property Guide puts rental yield on a 50 m2 apartment at 3.88%, or 3% for a 120 m2 property. In Citta Studi, a northwest area of the city popular students and home to most of the University of Milan’s science and engineering faculties, yields are 4.84% for 50 m2 apartments 5.54% for the typical 120 m2 home. For UK investors, the attraction would be an economically powerful and stable city that offers relative long term safety and a euro hedge against pound sterling. There should also still be some good room for price growth over the next few years.