Shifting Global Wealth and Real Estate Dynamics
The global landscape of wealth management and tax planning is experiencing significant shifts in 2025. As high-net-worth individuals reassess their residential and tax strategies in response to changing regulations worldwide, Italy has emerged as an increasingly attractive destination. This transformation is particularly evident in the exodus of wealth from the United Kingdom following recent tax policy changes, creating ripple effects across European luxury real estate markets.
The abolition of the “non-domiciled” tax regime in the UK, which previously allowed wealthy foreign residents to avoid paying British taxes on foreign income, has prompted many affluent individuals to seek more advantageous tax jurisdictions. Additionally, the UK government has ended the use of offshore trusts to avoid paying the British inheritance tax, which stands at 40%. These policy shifts have accelerated the relocation of wealth to countries offering more favorable tax environments, with Italy standing out as a premier destination due to its combination of lifestyle appeal and strategic tax incentives.
UK Tax Changes Driving Wealth Migration
The non-dom regime, introduced over two centuries ago, allowed UK residents who declared their permanent residence abroad to avoid paying taxes on income generated outside the country. This legislation attracted numerous wealthy individuals to the UK over the decades. Its abolition, one of the key campaign promises of the Labour party, confirmed by the finance bill presented last October by the Chancellor of the Exchequer, has prompted many to seek more advantageous tax alternatives.
Following the Labour Party announcement in April, offshore trusts could be subject to inheritance tax at 6% every ten years and a 40% inheritance tax charge on the settlor’s death if they have been UK resident for ten of the last 20 tax years. This marks a significant shift from domicile-based rules to a residency-based system for tax purposes.
The inheritance tax status of non-doms has been a potential deal-breaker for many wealthy individuals. The Labour manifesto gave them no cause for cheer, stating: “We will end the use of offshore trusts to avoid inheritance tax so that everyone who makes their home here in the UK pays their taxes here.” Labour has also indicated it will include all foreign assets held in a trust within UK inheritance tax, whenever they were settled, ensuring that nobody living permanently in the UK can avoid paying UK inheritance tax on their worldwide estates.
These changes have triggered a significant exodus of wealth from London, with many ultra-high-net-worth individuals considering relocating to jurisdictions with more favorable tax regimes. The steel industry, luxury goods sector, and other wealth-concentrated industries are seeing key figures explore alternative residency options in the United Arab Emirates, Switzerland, and notably, Italy.
Italy’s Strategic Flat Tax Regime for Wealthy Foreign Residents
Italy, and particularly Milan, has become a privileged destination for these “luxury migrants” thanks to a tax regime introduced in 2017. This regime provides for an annual flat tax on foreign income for new residents, which was initially set at €100,000 and subsequently doubled to €200,000 in August 2024. Despite the increase, Italy continues to attract a growing number of high-net-worth individuals.
The Italian flat tax regime offers significant benefits to wealthy foreigners who transfer their tax residency to Italy. For high-net-worth individuals who have not been tax residents in Italy for at least 9 of the previous 10 years, a fixed annual tax of €200,000 on worldwide income applies, regardless of the actual amount earned. Additional family members can also benefit from the regime for an extra €25,000 per person annually, and this arrangement can last for up to 15 years.
Key benefits include no need to declare worldwide income in Italy, exemption from wealth and inheritance taxes, and no impact on the taxpayer’s global assets. According to the Italian Ministry of Finance, approximately 4,000 wealthy individuals have taken advantage of this flat tax regime since its introduction in 2017, with a significant increase in applications each year.
For retirees, Italy offers an even more attractive option. Foreign pensioners who transfer their tax residence to specific municipalities in Southern Italy with fewer than 20,000 inhabitants can benefit from a flat 7% tax rate on all foreign income for up to 10 years. This initiative aims to repopulate smaller towns while attracting foreign capital.
Italian Real Estate Market: Positive Trends and Growth Outlook for 2025
The Italian real estate market is showing signs of recovery in 2025, with rising demand, increasing prices, and new opportunities for investors and buyers. According to data from ISTAT (Italy’s National Institute of Statistics), house prices climbed steadily in 2024, driven largely by new builds, which saw a +8.8% year-on-year increase, while existing home prices rose modestly by 2.8%.
What makes Italy unique is its historical context. While most EU countries experienced significant price hikes since 2010, Italy stood out as the exception, with house prices still dipping by 4.0% over that period. This trend positions Italy as an intriguing opportunity for buyers seeking value in a competitive European market.
According to Immobiliare.it, demand for real estate increased by 37 percent year-on-year, while supply experienced a smaller increase of 4 percent. This discrepancy has resulted in greater competitiveness among buyers, leading to shorter time to sale. Average prices per square meter increased by 4.7 percent over 2023, with the national average reaching 2,056 euros per square meter. The trend confirms a recovery after a period of stability, especially in large cities and areas of high economic attractiveness.
The market trend is strongly influenced by the new construction segment, which continues to be limited compared to demand. The supply of newly built properties falls short of market needs, especially in cities with high housing demand. This imbalance contributes to the maintenance of high prices in high-demand areas and encourages investors to focus on properties for renovation, often with tax incentives.
Strategic Investment Opportunities in the Italian Property Market
The outlook for the Italian commercial real estate market in 2025 remains positive. Industry experts anticipate that further interest rate reductions and a consistently vibrant occupier market will encourage the return of core investors to established markets and stimulate investment activity among value-add investors also in emerging markets.
In the office sector, quality and location continue to be pivotal factors in property selection. Over the past decade, high-quality office space has accounted for approximately 70% of total demand in Milan, while in Rome it has reached around 50%. Central and consolidated areas of major cities, characterized by numerous services and amenities for employees, public transport, and other businesses, remain highly sought after.
The retail sector in Italy, after showing resilience to the challenges of the pandemic, online shopping, and economic uncertainty, is back in investors’ sights. The fundamentals of shopping centers continue to strengthen, with sales up 0.6% year-on-year and footfall up 1.5% as of October 2024, according to CNCC/EY data. This positive trend, combined with competitive yields and increased bank financing availability, is translating into renewed interest from investors.
For individual investors, the Italian real estate market in 2025 offers several strategic opportunities:
- Properties for renovation in high-demand areas, which can benefit from tax incentives
- Newly built properties with high energy efficiency ratings
- Properties in tourist locations, which attract international buyers
- Investments in the retail sector, which is showing signs of recovery
- Opportunities in the high-quality office market in central areas of major cities
International Buyers Fueling Italy’s Real Estate Renaissance
Italy’s charm continues to captivate international buyers, particularly Americans. They are drawn by its lifestyle, cultural treasures, and tax-friendly policies. The euro’s recent weakening against the U.S. dollar has further enhanced the appeal, making Italian properties even more attractive for dollar-based investors.
Looking ahead, economists predict the euro may decline further into 2025 and beyond, offering potential bargains for Americans and other international buyers ready to make their move. Whether it’s a countryside villa or a sleek city apartment, Italy’s property market offers unparalleled value compared to other European luxury markets.
The significant increase in wealthy new residents, who are seeking attractive locations to settle while paying lower taxes, is beginning to have a relevant impact on the local real estate market. This influx has contributed to an increase in luxury property prices and growing pressure on the non-luxury real estate market as well, particularly in Milan and other major cities.
Historic properties in prime locations are especially sought after by international buyers. Renaissance mansions, restored villas, and prestigious apartments in historic city centers represent not just homes but cultural investments that combine lifestyle enhancement with potential appreciation.
Favorable Financing: Mortgage Trends Supporting Market Growth
Financing a home in Italy is becoming more accessible, thanks to declining mortgage rates. After peaking at 4.92% in late 2023, average rates fell to 3.71% by November 2024, according to Codacons, a prominent consumer association in the country. For buyers, this translates to substantial savings. For instance, on a 25-year mortgage of €125,000, monthly payments are now about €85 lower, saving more than €1,000 annually.
Economists anticipate further rate reductions as the European Central Bank (ECB) eases monetary policy amid stable inflation. This favorable climate has already contributed to stimulating market growth in 2024, setting the stage for continued expansion in 2025.
Italian banks are increasingly open to providing mortgages to foreign buyers, though the process typically requires more documentation than for local residents. Non-EU citizens can generally borrow up to 60-70% of the property value, while EU citizens may access up to 80% financing. The improving lending conditions are expected to further support international investment in Italian real estate throughout 2025.
Navigating Italian Real Estate: The Importance of Legal Expertise
For those considering investing in Italian real estate and taking advantage of the country’s favorable tax regime, consulting with Berti Law Firm and its legal experts, specializing in real estate law, is essential. Leading law firms with expertise in Italian real estate law offer comprehensive services for foreign investors looking to navigate the complexities of property acquisition and tax optimization in Italy.
With extensive experience in assisting high-net-worth individuals relocating to Italy, specialized legal advisors provide tailored guidance on leveraging the flat tax regime while making strategic real estate investments. Their expertise encompasses all aspects of property transactions, from due diligence and contract negotiation to tax planning and compliance with local regulations.
As more wealthy individuals consider Italy as their new tax residence, professional legal assistance becomes crucial to ensure a smooth transition and maximize the benefits offered by the Italian tax system. Specialized knowledge in both real estate and tax matters positions legal experts as ideal partners for those seeking to join the growing community of international elites making Italy their home.
Key legal considerations for foreign investors include understanding Italy’s property purchase process, navigating the notary system, conducting proper due diligence on properties, structuring ownership correctly for tax efficiency, and ensuring compliance with both Italian and home country tax regulations. Expert guidance in these areas can prevent costly mistakes and optimize investment outcomes.
Conclusion: Italy’s Promising Real Estate Future
The Italian real estate market in 2025 presents a compelling opportunity for both domestic and international investors. The combination of favorable tax policies, declining mortgage rates, stable property values with growth potential, and the enduring appeal of Italian lifestyle and culture creates a unique value proposition in the European property landscape.
As global wealth continues to seek new havens in response to changing tax regulations, Italy has positioned itself strategically to attract high-net-worth individuals and their investments. The flat tax regime, coupled with the country’s rich cultural heritage and high quality of life, offers a powerful incentive for relocation that few other jurisdictions can match.
For investors, the current market conditions present an opportune moment to enter the Italian real estate sector. With prices still recovering from historical lows, interest rates declining, and demand increasing—particularly in the luxury segment—the potential for both immediate rental returns and long-term capital appreciation appears strong.
As we move through 2025, the Italian property market’s positive trajectory seems well-established, supported by both domestic economic recovery and international capital inflows. For those with the vision to recognize this convergence of favorable factors, Italy’s real estate renaissance offers not just a home or an investment, but participation in one of Europe’s most promising property revivals.
Source: il Corriere della Sera