Residential Real Estate News
Italy's 2024 Tourism Boom, Tax Perks Energizing Local Home Sales
According to Kate Everett-Allen, Head of European Residential Research of Knight Frank, consumer interest in Italy is gaining momentum, with a rise in tourist numbers boosting investment returns for holiday accommodations. The country's favorable non-dom tax policy is attracting more foreign residents, drawn by the allure of the Mediterranean lifestyle and the financial benefits it offers. Additionally, the post-pandemic increase in hybrid working has led to a wave of mobile workers eager to experience the dolce vita.
Despite stricter monetary policies, prime property prices in Italy have remained strong, supported by limited supply. Sales volumes declined when the European Central Bank began raising interest rates in 2022. However, with rates now easing, we expect a resurgence in demand and sales activity. This recovery is expected to take place within the context of limited new supply, as high construction costs continue to affect developers' profit margins.
In 2023, prime property prices grew by an average of 4%, standing 16% higher than pre-pandemic levels in 2019. Lake Como and Florence led the way in price growth for 2023, while Lucca and Milan topped the rankings over the past five years.
For non-European Union (EU) residents, including UK citizens since the UK's official departure from the EU in January 2020, long-term stay options in Italy have been limited. However, the unveiling of a new digital nomad visa in April 2024 targeting skilled workers with an annual income of €28,000 or more, is poised to amplify rental demand in tech hubs like Milan and Rome.
While landmark events and visa changes may spark temporary surges in demand, the real game-changer for Italy remains its flat tax or non-dom tax regime. Introduced in 2017, this policy continues to be a significant attraction, putting Italy on a similar footing to Monaco and Switzerland for some individuals. Ultra-high-net-worth individuals (UHNWIs) pay a single flat rate of taxation, €100,000 per annum, on foreign income in return for Italian residency.
Data from Italy's Ministry of Finance reveals some 957 overseas residents have relocated to the country and now pay the single rate of tax.
With global wealth increasingly mobile, driven by geopolitical tensions, economic uncertainty, and a series of elections many of which are likely to trigger significant tax and policy changes, Italy is poised to be a focal point in this shifting landscape.
The number of UHNWIs in Italy, defined as those with a net worth of $30 million or more, is projected to increase by 19% over the next five years. This growth will add 2,977 UHNWIs to Italy's affluent demographic, allowing the country to maintain its lead over neighboring Switzerland, concludes Kate Everett-Allen.
