Luxury Real Estate: a growing market

By the end of 2023, the luxury real estate market in Italy reached a capital value of over 53 billion euros. This market, which includes high-quality properties mainly located in prime areas, appears to be thriving without any signs of crisis. According to the Immobiliare.it 2024 Observatory, the market share has risen to 2.7% of total assets, up from 2% in 2019. Additionally, due to increasing demand and new supply, sales times have accelerated significantly, now averaging 5.7 months compared to 5.2 months for traditional residential properties. This trend is expected to continue, highlighting luxury real estate as a promising investment opportunity.

Drivers of growth

Tourism and urbanization are key drivers of growth in the luxury real estate market. In 2022, Italy welcomed approximately 50 million tourists, making it the fourth most popular tourist destination globally, following Spain, Turkey, and the United States. Italy's appeal extends beyond visitors, as it is also one of the most sought-after locations in Europe for second-home ownership. Research by Savills, a UK-based real estate services company, indicates that major Italian cities experienced positive rental and capital value growth in 2023, despite challenging global economic conditions and rising interest rates. This resilience is shared with other Southern European markets, where prime real estate remains more affordable than in Northern Europe. For instance, Milan, Italy's most expensive prime market, has prices that are 15% lower than London and 36% lower than Geneva.

Expectations

Growth in the luxury real estate market is expected to continue in the coming years, driven by sustained interest in urban markets and both international and domestic demand for prime rural areas. Savills estimates a 0.6% increase in prime housing prices for 2024 in major cities worldwide. Italian cities are expected to follow a similar trend, with Milan projected to see capital value growth of up to 1.9% and Rome up to 3.9%. But all of Southern Europe is attractive, with eight of ten fastest-growing European locations located in Spain, Portugal, Italy and Greece, according to Knight Franck’s «Wealth Report 2025». In this context, luxury real estat represents an investment opportunity that can generate attractive and higher returns compared to traditional real estate.

Purposes of purchases

The primary purpose of purchasing luxury residences varies by city, according to Gabetti's latest report based on data from Santandrea Luxury Houses & Top Properties. In cities like Milan, Genoa, Florence, Naples, and Bari, the main reason for purchase is to upgrade one's home (average 40%). In contrast, the choice of a first home for new housing needs is prevalent in cities such as Bologna and Turin (average 40%). Meanwhile, the investment component dominates in Rome, Como, and Santa Margherita Ligure, with figures ranging between 40% and 50%.

Ongoing Projects

The European fintech group Yeldo, which specializes in raising capital for real estate transactions, has several ongoing projects targeting the most dynamic luxury markets. In Italy, Yeldo is active in Sardinia's Costa Smeralda, where it has financed the development of 42 luxury villas and a boutique hotel with a €12 million bond. In Tuscany, Yeldo is collaborating on the development of six villas in Bolgheri, through a capital increase of 10 million euros, and in Santa Margherita Ligure, it has secured a €90 million deal. Beyond the border, Yeldo has initiated several real estate developments in the high-end residential segment, with 20 million euros of capital, raised to support the construction of luxury villas in Ibiza, Spain, and Cascais, Portugal, the latter project involving the architecture firm Foster + Partners, led by the star architect Sir Norman Foster.

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