Luxury homes in Milan: better to sell or rent them?

Owning a luxury residence in Milan can be a real stroke of luck and it is a treasure to be put to good use, whether one opts to sell or to make an income. According to Nativo, a company specialising in luxury short rentals, the latter is the preferred option for owners of luxury homes in Milan. According to co-founders Sara Lini and Adriano Frigoli, here are the reasons why more and more owners of premium properties in Milan prefer renting to selling.

Luxury short term rentals in Milan: why they are the preferred investment

According to data from Nativo (Nativostay.com), more than 30% of luxury property owners are considering either selling or renting, but almost all opt for renting after a thorough analysis of the market and economic factors.

In short, the key factors that often determine the choice between selling and renting a luxury home in Milan are: rising inflation, the difficulty in finding cost-effective alternative investments - both in the property market and in the stock and government bond markets - rising mortgage rates and the increasing demand for luxury homes for rent influenced by events such as the Brexit or the introduction of the flat tax as well as more fluid lifestyles that require greater mobility.

Why rent a luxury home

There are several reasons for choosing to rent a luxury house in Milan:

Protection against inflation

First of all, the luxury rental sector represents a protected segment in the real estate market. Valuable real estate is considered a solid asset against inflation and an option that protects the return on investment in the long run.

Difficulties in investing the proceeds of the sale

Currently, there is a lack of alternative and convenient solutions in which to invest the cash from the sale of a luxury property. The instability of the stock market, aided by the geopolitical context and the rising cost of raw materials, makes residential real estate investment in Milan more profitable than other options, such as government bonds. For example, renting a two-room apartment in Milan with a free eight-year contract yields on average 5.5 per cent per year gross for the landlord, which is more profitable than, for example, government bonds, which yield 3.75 percent.

Scarcity of valuable properties

Another aspect to consider, for those who leave Milan temporarily but intend to return, is the fact that finding a valuable property in the Milanese capital is always complicated: demand always exceeds supply, many properties are owned by families who have no need for liquidity, and therefore those who have a nice flat often hold on to it.

Olympics effect

Also not to be overlooked is the Olympics effect, as many imagine that prices will continue to rise until at least 2026 and so focus their assets on income until the market reaches its peak.

ECB rate increase

Also looking at the economic context, the European Central Bank's monetary tightening led to a significant increase in mortgage interest rates. This means that those who bought a property in the past at lower rates would find themselves paying a lot more if they decided to buy another one, consequently losing the advantage of the previous rate.

Growing demand for rent

Other factors influencing the choice of renting rather than selling include the growing demand for rentals by high-salaried foreigners, which makes this segment particularly profitable. Many of the tenants renting a Native property come to Italy to take advantage of the flat tax, others arrive from London because of Brexit. In general, it is becoming increasingly evident that Milan is developing a great capacity to attract talent, including successful executives and entrepreneurs, and it is therefore natural that there is a very good demand for valuable rental properties.

Greater flexibility

Finally, the changing lifestyle and work makes it difficult for property owners to predict where they will live in the future. Flexibility thus becomes a crucial aspect, and renting offers the possibility of keeping the doors open for possible future use of the property.