Despite housing prices in Milan having increased by over 40% in the last 5 years, the city of Milan, often referred to as the “Madonnina,” is not only not at risk of a housing bubble when compared to other major international cities, but according to UBS, it is also not overvalued. Furthermore, with the launch of a sixth subway line, Milan is poised to reach a densely populated part of the city that has thus far had limited access to public transportation. This is expected to further boost an already thriving real estate market.
“The new M6 line, a subject of discussion for several years, is planned to follow the Viale Certosa, Sempione axis to the northwest, and Tibaldi, Ripamonti to the south, with the goal of covering Municipio 5, the area with the least underground metro coverage, connecting two of the most densely populated areas of the city that currently lack underground connections,” explain experts from Wikicasa, a prop-tech real estate company. They also add, “With the progress of the M4 line, which currently connects Linate to the city center at San Babila, there is increasing talk of creating a new subway line, the sixth for the Lombard capital, following the completion of the M5 line for Expo 2015.”
Areas of Interest for the M6
Which areas are of interest in the M6 metro project?
Viale Certosa, one of the widest and busiest streets in Milan, located north of the Circonvallazione, is currently one of the most accessible areas from a real estate perspective. Wikicasa has estimated an average market price for properties in this area at 3,628 euros per square meter, significantly lower than the Milan average.
Another neighborhood positively affected by the construction of the M6 is Municipio 5, covering a rapidly growing urban area, especially due to the construction of the new Olympic Village, which will be completed for the 2026 Milan-Cortina Winter Olympics. The opening of the M6 would greatly facilitate the expansion of urban areas like Morivione, Vigentino (where properties currently cost 4,285 euros per square meter), and Quintosole (where values currently stand at 3,368 euros per square meter).
So, what should someone do if they wish to invest in the real estate sector of Milan? We Wealth asked this question to Pietro Pellizzari, CEO of Wikicasa.
Pellizzari, given that housing prices in Milan have risen by over 40% in the past 5 years, what would be a wise investment strategy in the real estate sector now?
The increase in mortgage rates has been significant but not unmanageable, leaving room for property purchases. Clearly, acquiring a property in a city like Milan requires substantial budgets, but this has never deterred investors. The fact that a significant portion of demand has shifted towards rentals makes the demand market less competitive, leaving ample investment opportunities. Moreover, the option to rent out a property, positioning it in the rental market for both short and long terms, remains an attractive opportunity. This is a market with a shortage of supply, where demand shows no sign of decreasing. While there is a move toward stricter regulations for short-term rentals, there are also increasing incentives for those opting for long-term rentals. Investing in a property and then renting it out for a return could be an excellent solution.
In the context of investment, what areas and trends would you suggest monitoring besides the areas impacted by the M6 metro?
Milan is a city that accommodates various types of investments. Besides the importance of energy efficiency ratings, the range of opportunities is extensive. Naturally, in the medium to long term, focusing on new or energy-efficient renovated properties can be a winning strategy.
However, one should not overlook properties in need of renovation, which are more affordable and, at attractive prices, which can yield gains if renovated. Regarding areas in the city worth investing in, it’s always advisable to keep an eye on neighborhoods undergoing revitalization and those experiencing an increase in available services. The launch of the M4 line will certainly stimulate the market in some peripheral areas of the city, previously dismissed due to their lack of infrastructure and services. Attention should also be given to new urban redevelopment projects, which often increase the value of the area, as shown by NoLo a few years ago. Finally, another viable option is the buy-to-rent or build-to-rent strategy: investing in properties for the purpose of renting them out later. In this regard, positioning in areas of the city populated by students or young professionals could be advantageous.
In light of the tightening regulations on short-term rentals, what approach do you suggest adopting?
Regarding short-term rentals, there is still uncertainty about the upcoming regulations that are expected to significantly restrict them. Clearly, short-term rentals are an important resource for investors, offering greater flexibility compared to traditional rentals, and even with some limitations, they can remain profitable in the future. However, the new agreements on fixed rents, which are much more advantageous than the previous ones, could encourage some property owners to offer their properties for long-term rentals due to the favorable tax treatment. Finding a balance between both issues is essential, without disadvantaging either party involved.
Expanding to all of Italy, what are your expectations for the Italian real estate market in the coming years?
2021 and 2022 were among the best years in terms of property transactions, with Italy recording a peak of 784,000 units sold in 2022. Looking at reports on statistics for the first quarters of 2023, there is already evidence of a decline in transactions, which, according to our projections, will settle at around 16%. However, there is no need for panic; it is a natural downturn in the sector. Over the past two years, there have been more than 1.5 million transactions, significantly reducing the stock of properties available for sale in the coming years.
Another trend worth noting is the increasing importance of certain variables that were previously overlooked in property purchases, especially energy efficiency. There is already a premium price being recognized for highly energy-efficient properties, as they will incur lower long-term costs to meet the rather stringent standards required by the European Union. So, while the quantity of transactions may decrease, transactions for “high-quality” properties in terms of energy efficiency are likely to increase.
