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As a result of Rachel Reeves' non-dom tax raid, ultra-wealthy non-doms are fleeing London, driving up rents for luxury residences in Milan.
Since the UK government indicated it would no longer maintain a favorable tax policy for wealthy foreigners, demand from London movers has doubled, and prime rental prices in Italy's business hub have increased by about 10% in the past year.
According to Diletta Giorgolo Spinola of Sotheby's International Realty Italy, "the non-dom tax changes have caused an explosion of UK buyers and renters."
Since the announcement of the non-dom tax reforms, Ms. Giorgolo Spinola reported that the number of London-based inquiries for Milan homes has risen.
In the last year, prime prices have surged by 10pc, Ms Giorgolo Spinola estimated.
Prime rental transactions have surged by 30pc year-on-year, she added, saying the company had never done so many deals in the bracket of €15,000 (£12,500) to €30,000 per month.
Jelena Cvjetkovic, director of Savills’ international residential network, said prices in the top 10pc of Milan’s rental market are now between €7 and €7.5 per sq metre, up from €6.6 last December, meaning growth of between 6pc and 14pc.
Under Britain’s existing tax system, wealthy internationals who are non-domiciled benefit from a favourable regime that means they pay tax on their overseas earnings only if they bring the money into the UK.
In his March 2024 Budget Jeremy Hunt, the then-chancellor, announced that he would scrap this system.
In its election manifesto, Labour pledged to go even further and close loopholes for non-doms, such as for inheritance tax.
In her October Budget, Ms Reeves confirmed that she will abolish the non-dom regime from April 2025.
Italy, by contrast, introduced a favourable tax system for non-doms that was designed to encourage wealthy internationals to move there in 2017.
Initially, people with overseas wealth paid a flat tax of just €100,000, regardless of how much they earned overseas. Earlier this year, Georgia Meloni, the Italian prime minister, raised this to €200,000, but for the international jet set this is still far cheaper than staying in Britain.
Bill Thomson, chairman of Knight Frank’s Italian Network, said: “There is no doubt in my mind that the market for luxury rental properties in Milan is being fuelled by non-doms leaving London.”
Milan is home to Italy’s banks and financial centre, is well-connected to the rest of Europe, has international schools and is in relatively easy reach of the lakes, the Alps and the beach.
Ms Giorgolo Spinola said: “We are a little bit overwhelmed by how many international buyers are relocating from London to Milan.
“You have to understand, Italy is not one of the relocation countries. We are one of the second home countries. Usually what we would get is people looking to rent or buy homes for their holidays. Now, after March 2024, it is relocation, which is quite different.”
International demand has climbed for homes in Rome too, but Milan is where the change is most pronounced.
Transactions are happening rapidly as supply cannot keep pace with demand.
Ms Giorgolo Spinola said: “If someone likes the house, the same day, they do the contract. It is a very quick market now.”
Relocaters moving from London are renting in Milan first before they buy, Ms Cvjetkovic said.
She said: “There are a number of families with school-age children who are moving. Then there are people who might have grown-up children who are relocating. Then there are the people who will go directly to look for a trophy asset on the lakes because they are not bound by having to run a business which has to have offices in a large city.”
Typically, they have rental budgets of between €20,000 to €50,000 per month and then will house hunt for a property worth between €5m and €10m, Ms Giorgolo Spinola said.
