Luxury homes, Milan challenges London driven by taxation and foreign demand

Milan's luxury residential market is trying to approach that of the historic global hub of London. And while prices are rising in the Lombard capital, values in the City have fallen by more than 4 per cent annually. A recent Financial Times analysis highlighted how Milan's 'traditional' residential market has already become less affordable than London's when looking at the ratio of property values to incomes.

In the luxury market, the Milanese capital still lags a little behind the levels of the English capital: the prices of high-end homes (Engel & Völkers estimates) have reached a range between 10 and 23 thousand euros per square metre (compared to around 20-30 thousand in central London), but with peaks of over 27 thousand per square metre that bring it into line with the levels of other competing metropolises. It is in terms of attractiveness that Milan already beats London: the British capital is going through a phase of critical decline while the Lombard capital benefits from a high level of international interest, stimulated by a more competitive fiscal context.

According to the latest Observatory on Exclusive Residences by Tirelli & Partners, in five years the maximum asking prices in Milan in the luxury segment have risen from almost 18,000 per sqm in 2020 to almost 28,000 in 2025 (+54%). According to Anna Ward, senior analyst at Knight Frank, "Milan is overtaking London as the prime residential property market. This change comes as Italy's affluent population has grown faster than that of the UK, supporting demand in the high-end residential sector'.

Driving the attractiveness of the Milanese market is first and foremost the tax relief regime linked to the flat tax - although the flat tax on income earned abroad has increased to €300,000 per year, it remains extremely convenient for some income brackets - together with the still competitive real estate prices in the luxury segment and the high quality of life and prime locations.

On the contrary, London's luxury market suffers from the tax policies introduced in recent years, which are geared towards increasing the tax burden especially on higher incomes. Market values in the city centre - in Prime Central London, the most international and upmarket area of the British capital - fell by 4.8% in 2025 according to data from Savills and Knight Frank. The highest-value properties (over £10 million) have seen sharper declines of more than 6 per cent per annum, compared to declines in the £2-5 million and £5-10 million brackets that have fallen by 3-4 per cent.