In an ever-evolving real estate market, Milan continues to be one of the most attractive locations for investors. A recent study reveals that about 20% of real estate transactions in the Lombard capital are aimed at generating income. But how truly profitable is investing in Milan’s brick and mortar? Il Corriere della Sera has conducted a detailed analysis to shed light on this trend.
Comparing Returns: Real Estate vs. Government Bonds
To assess the actual profitability of real estate investments, we compared Milan’s rental yields with those of 8-year Italian Government Bonds (BTPs), currently at 3.2% net. Our analysis is based on standard 8-year free-market rental contracts, assuming a reliable tenant and regular payments.
The Milan Landscape: Data and Figures
Based on data provided by immobiliare.it, we examined a typical 70 m² apartment:
- Average purchase price: €378,000
- Monthly rent: €1,631
- Gross yield: 5.17%
- Net yield: 3.36%
It’s important to note that the net yield, considering taxes and expenses, is only slightly higher than that of BTPs, but carries significantly greater risks.
The Geography of Returns
Our research highlighted considerable disparities between different areas of Milan:
- Historic center: 2.3% net yield
- Premium areas (> €350,000 for 70 m²): yields lower than BTPs
- Peripheral areas like Baggio and Ponte Lambro: yields up to 4.6% net
Milan’s Hinterland: An Interesting Alternative?
Extending the analysis to the province, surprising data emerges:
- Average yield: 6.8% gross, 4.4% net
- Top 3 for monthly rents: Gorgonzola (€1,156), Vimodrone (€1,084), Segrate (€1,075)
- Municipalities with the best yields: Turibigo, Truccazzano, Tribiano (> 6% net)
These data suggest that the hinterland could offer more profitable investment opportunities compared to the city center.
Short-Term Rentals: The New Frontier?
The short-term rental phenomenon is gaining ground, promising higher gross returns. However, management costs, taxes, and platform commissions significantly erode margins. The profitability of this model seems to be limited mainly to specific areas of Milan.
Conclusions for Investors
Real estate investment in Milan can still offer interesting returns, but it requires careful risk assessment and deep knowledge of the local market. Investors should consider:
- Location as a key factor for profitability
- The potential for capital appreciation in developing areas
- Management and maintenance costs, especially for short-term rentals
- The financial stability of tenants for long-term rentals
In a market characterized by high prices and compressed yields, due diligence and a well-thought-out strategy are more crucial than ever for real estate investors in Milan.
Source: Corriere della Sera