We Wealth | September 2021
There is an old bond between Italians and real estate. 92,7% of residential units in Italy belong to private citizens and 80% of Italians live in a house they own.
When we focus on the HNWI segment, that is those who own over one to several hundred million euros, the number of properties increases exponentially.
Moreover, in Italy the HNWI segment has greatly profited from real estate investments.
Some figures: in 2020, the number of HNWIs has grown by 6,3% worldwide, exceeding the 20 million threshold; in Italy, HNWIs are currently just over 300 thousand, having increased by 9,2% as compared to 2019.
In 2020, the HNWIs’ net worth has grown by 7,6% worldwide, reaching almost 80 thousand billion dollars; Italy reached $593 billion (+2,3%).
Globally, growth has been fostered by the growth of the stock market and by government incentives. North America has surpassed the Asia-Pacific area and has become the leader for both amount and overall wealth.
In Italy, the key factor has not been the positive trend of the stock index (in fact, the capitalization of the Milan stock exchange has decreased by 6,4%), as much as the real estate boom stimulated during Covid by the desire to live in bigger houses with an average growth in value of 5,2%.
There is another interesting figure concerning real estate. It is club deals, real associations made of single investors (on average, very rich and selected) who join forces (financial and more) to acquire valuable historical buildings located in central areas.
The most remarkable example dates to the end of 2020, when Mediobanca acquired an entire block between via Cordusio 1-2 and via Armorari 14 from Kryalos SGR on behalf of a club deal of professional investors promoted by Mediobanca Private Banking for a total price of 250 million euros.
Cordusio is an iconic building designed by Luigi Broggi, with an area of fourteen thousand square meters, located in the heart of Milan.
The Asset, completely renovated in 2015-2018, hosts the headquarters of JP Morgan, the Starbucks Reserve Roastery, the flagship store of the coffee shop chain, as well as the offices of Natwest and Kryalos SGR.
The operation is the third club-deal in an exclusive and highly profitable asset in the Milan real estate market, after Santa Margherita 12 and Turati 12.
The aim is to earn an average dividend yield of 3,2%, in a macroeconomic scenery of low interests, through the investment of an asset class otherwise hardy accessible.
So, HNWIs cannot resist the charm of real estate. However, as opposed to less wealthy members of the population, they aim at luxury real estate in exclusive areas in the most beautiful cities of the world.
Just as in almost all illiquid markets, those who spend more earn more and risk less, if well advised
In fact, in term of returns, it is much riskier to buy a terraced house for one hundred and fifty thousand euros in the hinterland of a big city, where its value will most certainly drop due to the erection of dozens of houses, than acquiring a unique building worth tens of millions of euros.
The best private bankers who manage to advise and support their clients in successful real estate operations will certainly conquer the hearts of their Italian clients, forever in love with brick and mortar.
Nicola Ronchetti