Tax Benefits in Italy results in increase of Home Sales
Kate Everett-Allen, Head of European Residential Research at Knight Frank, notes that interest in Italy is on the rise, driven by increased tourist activity, which has boosted returns on holiday properties. The country's attractive non-dom tax policy is drawing more foreign residents, enticed by both the Mediterranean lifestyle and financial incentives. Additionally, the post-pandemic shift towards hybrid working has led to an influx of mobile workers eager to embrace the dolce vita.
Despite tighter monetary policies, prime property prices in Italy have remained resilient due to limited supply. While sales volumes dropped following the European Central Bank's interest rate hikes in 2022, the current easing of rates is expected to spur renewed demand and sales activity. This anticipated recovery comes against the backdrop of a constrained new supply, as high construction costs continue to challenge developers' profitability.
In 2023, prime property prices in Italy increased by an average of 4%, marking a 16% rise compared to pre-pandemic levels in 2019. Lake Como and Florence led the charge in 2023's price growth, while Lucca and Milan topped the rankings over the past five years.
For non-EU residents, including UK citizens post-Brexit, long-term stay options in Italy have been limited. However, the introduction of a new digital nomad visa in April 2024, targeting skilled workers with an annual income of €28,000 or more, is expected to boost rental demand in tech hubs like Milan and Rome.
While events like visa changes may trigger short-term spikes in demand, the most significant draw for Italy remains its flat tax or non-dom tax regime. Launched in 2017, this policy has been a major attraction, placing Italy on par with destinations like Monaco and Switzerland for certain individuals. Ultra-high-net-worth individuals (UHNWIs) can pay a single flat tax rate of €100,000 per year on foreign income in exchange for Italian residency.
According to Italy's Ministry of Finance, approximately 957 overseas residents have taken advantage of this tax policy and relocated to Italy.
As global wealth becomes increasingly mobile, influenced by geopolitical tensions, economic uncertainty, and upcoming elections that could bring significant tax and policy changes, Italy is well-positioned to become a key player in this evolving landscape.
The number of UHNWIs in Italy, defined as those with a net worth of $30 million or more, is projected to grow by 19% over the next five years. This increase will add 2,977 UHNWIs to Italy's wealthy population, enabling the country to maintain its lead over neighboring Switzerland, concludes Kate Everett-Allen.