THE RESIDENTIAL SECTOR

Prestige living: Italy’s luxury residential market

Much of the real estate market may be showing signs of crisis but demand of top-quality property is booming on a global scale with more and more buyers willing to purchase properties regardless of their geographical location throughout the world. But what can be defined as a luxury property? According to Luxury Fine Homes Properties Portfolio, an exclusive affiliate of Leading Real Estate Companies of the World, luxury properties are those valued at upwards of 1.5 million Euros.
Kay Coughlin, CE of Christie’s Great Estates, the world’s largest network of real estate brokers dedicated to the marketing and sale of important properties, declares that the luxury market is surging ahead, a view backed up by figures issued by Hélène Ludgreen of Féau Immobilier, a French broker and affiliate of Christie’s Great Estates trading important properties. According to their survey, negotiations have risen by 50% for assets sold for 1.5m to 3m Euros, by 80% for assets from Euros3m to Euros6m and by 450% for those over Euros6m. This boom has not been affected by rising interest rates; on the contrary, it is proving particularly attractive to an increasing number of global investors when compared with other investment tools.
According to a survey of medium and top-range luxury properties issued by the Italian real estate agency Tirelli & Partners and the leading research institute Nomisma, the Italian luxury residential market forged ahead in the second half of 2007, especially in top-prices range. Demand for high-quality residential assets is growing but there is not enough supply to meet that demand. «In Milan, for example, the same areas that were exclusive 50 years ago are still exclusive now and the places that weren’t still aren’t » says Marco Tirelli, Managing Partner at Tirelli & Partners. «The most critical issue is to satisfy an increasingly demanding market».
According to Giorgio Viganò, founder and current president of Giorgio Viganò Real Estate Consultants, a Milan-based family-run business established in 1960s specializing in residential sales, luxury property prices have risen enormously throughout Italy in the last three to four years a fact confirmed by his daughter Benedetta, who is in charge of international and domestic sales. Most buyers are Italian and international demand still poor. Foreign investors’ interest in luxury residences is focused mainly on new “green” constructions equipped with the latest technology and providing the best in comfort. There are not many such brand-new properties on offer in a market restricted by Italy’s extensive historical heritage.
The number of American buyers has fallen somewhat because of the weakness of the U.S. dollar vis-à-vis the euro, says Benedetta Viganò. Among Europeans the biggest buyers are Russians with a few from other parts of the world such as Brazil and Argentina and emerging Asian countries like India and China.
Giorgio Viganò makes it clear that to sell property in Italy is important to gain the trust of foreign investors who are sometimes scared off by a different and often unclear or dubious legal and political framework.
«Investors base their choice on various factors such as return on investments and the status and stability of a country» he explains. «Selling an exclusive property in Italy is like selling a piece of Italy. Buyers and intermediaries must have all the information to hand concerning laws, taxes, buyers’ and sellers’ rights and deeds. That’s why every EREN (European Real Estate Network) member provides an online guide where buyers can browse through the various websites to obtain clear and up-to-date information on whatever country they are interested in».
To be classified as top quality, a neighbourhood must have guaranteed standards of maintenance. Italy has the world’s largest share of historic and architectural real estate heritage its best known cities like Rome, Milan, Venice, Florence, and in regions like Tuscany, Sardinia and the Northern Lakes.
According to the Tirelli & Partners and Nomisma review of sales of luxury houses in the second half of 2007, Milan and Rome show positive trends though with some variations in average and top prices. Average prices were higher in Rome (Euros 9,817 per sq m against Euros 9,348 in Milan) while top prices were markedly higher in Milan (Euros 28,000 against Euros 24,000 in Rome). The most expensive house was sold in Milan. Located in the inner-centre district of Magenta it occupies 390 sq m and fetched Euros 7,225,000. Rome’s most expensive house sale amounted to Euros 5,800,000. More highly priced but still looking for a buyer is a residential property located in the Aventino-Gianicolo area of the Eternal City with an asking price of Euros 11,000,000.
Rome beats Milan in the time taken to clinch a sale with 4.1 months against 7.9 months. The difference is in the size of the downtown areas of the two cities: Rome’s inner centre is more extensive than Milan’s so there is more on offer. In Rome luxury neighbourhoods are located in the inner centre: Pinciano Veneto, Parioli, Prati, Salario, Trieste, Villa Torlonia, Villa Massimo, Trastevere, Aventino Gianicolo, Monteverde Vecchio, Aurelia antica, Flaminio, Vigna Clara, Camilluccia, Fleming, Balduina, Colli della Farnesina and Cassia. Milan’s luxury neighbourhoods are the Quadrilatero, a rectangle formed by Via Spiga, Via Montenapoleone, Via Sant’Andrea and Via del Gesù, The charming Four Seasons hotel is located in this fashionable neighbourhood with its elegant boutiques offering the creations of all the great names of Italian high fashion. The inner centre around the famous Gothic Duomo is another sought-after area together with Brera-Garibaldi, Magenta and Manin-Giardini-Duse.
Ten per cent of international buyers prefer Rome compared with only 2% favouring Milan. Buyers in Rome are mainly Russians, Swiss , English and Americans. They are a mixed bunch including celebrities, ambassadors, politicians and sport stars. Most of Milan’s foreign investors are from EU countries such as the Irish Republic, Germany and Sweden and they tend towards the Magenta and Manini-Giardini-Duse areas. There is also a growing number of Russians and most of them are especially interested in the Quadrilatero which also attracts some interest from South American investors in Argentina and Brazil.
Some differences are to be found also in the rental market. Milan features a short-term rental market mainly related to business, while Rome has an high percentage of embassies that require medium to long-term agreements. Rome’s inner centre commands the highest monthly rents (Euros 378 per sq m) followed by Pinciano (Euros 354 per sq m)). Rome’s most expensive apartment, located in Vigna Clara was rented at a price of Euros 51,600 per annum The rental market as an alternative to hotel accommodation is also gaining ground, the historical centre being the most sought after. Milan’s monthly rental market values range from Euros 300 per sq m to Euros 500 with the highest at Euros 675. The most expensive house was rented for Euros 130,000 per annum in the Magenta area.
In the rest of Italy prices vary and obviously for some of these unique pieces the price per square metre varies widely. Locations such as Piazza di Spagna in Rome or a beachside villa in Sardinia (where recently passed legislation prohibits any building being located less than 250 metres from the sea) today are priceless. Sometimes value is defined by other factors. The Lake Como district is an example of where prices have risen following the purchase of Villa Oleandra by movie star George Clooney.
Accommodation of five-star hotel standard is the latest trend for well-to-do holidaymakers or high-ranking business executives. This entails renting an apartment in a luxury block with a concierge and all services. A well known example is New York’s historical Plaza hotel, recently restructured and refurbished, with a part converted into a condominium. Italian companies have also gone into this market for alternatives to hotel accommodation, offering luxury apartments in prestigious locations and services such as concierge, chauffeur, health spas and leisure activities together with the latest in technology such as wi-fi, touch screens and cinema screens. These apartments are let out on a time-share basis.
Two Italian companies operating in this sector of the market, Halldis and Windows on Italy, owned by Ferragamo Group, recently merged combining their assets in Italy and elsewhere in Europe to create Windows on Europe. With a current capital of Euros 1m, the company’s turnover amounted to Euros 8m in 2007. This is expected to grow to Euros 10 m in 2008 and Euros 15m in 2009. Profits for owners range from 4% to 8%. Windows on Italy is part of Windows on Europe, a one-stop shop concept offering fully serviced temporary accommodation on a time share basis for either business or leisure, fully furnished and cabled temporary office spaces (staffed if required) and fully managed property acquisitions for investments or for personal use. Windows on Europe now intends to build a pan-European portfolio (with Paris, Brussels and Frankfurt already underway and flourishing), enabling it to offer its clientele an all-rounded product.
Windows on Europe’s President is Leonardo Ferragamo, scion of the of the Italian shoe and apparel dynasty, and Pietro Martani, President of Halldis, is Managing Director.
Windows on Italy manages and rents 100 top-quality apartments in Florence, 70 villas in Tuscany, properties in Venice and on the Lakes. Its apartment prices range from Euros 4,500 for a weekend to Euros 1,200-Euros, 1,400 for a week. For its villas the rates range from Euros 3,000 for a week right up to Euros 40,000 for the most luxurious ones with top-grade services.
Windows on Europe network includes other operators, part of Halldis Group, as Rentxpress, a company dealing with online rents and office rents and Global System rents for offices and residences in Italy. Prices vary depending upon type and service on offer: The estate agency Gentili and Roy offers corporate and private rental with concierge service in top locations in Paris, Rome and Florence. Prices vary depending upon type and service on offer: Its rates range from Euros 900 to Euros 1,800 for a weekend and from Euros 4,000 to Euros 15,000 for a month, Halldis Tech Real Estate offers serviced apartments as an alternative to a hotel stay in Italy, France Germany and Belgium; Summing up, Marco Tirelli believes the Italian market has good growth potential that should certainly be backed up by a more effective national policy while Giorgio Viganò calls for more incisive marketing strategies.

ITALY: A REAL ESTATE PORTRAIT - September 2008