Buzzing Milan aims to entice London’s bolting non-doms

Silvia Sciorilli Borrelli is the FT’s Milan correspondent

One hot afternoon in May, I was among six people touring a luxury penthouse in Milan, for rent, marketed at €14,000 per month — though I was the only one visiting for reporting purposes, rather than an actual interest in renting. The property was bright and airy, and equipped with a small outdoor pool overlooking the Milanese and Alpine skyline. The agent later told me that about a dozen wealthy people from several countries had visited over two days.

It reminded me of the dynamics of London’s pre-Brexit real estate market and it left me wondering whether Milan is experiencing a bubble or a boom, as Italy competes to attract the wealthy looking to leave the UK.

A report by property agency Knight Frank says that, while wealthy people historically snapped up mansions on Lake Como or in Tuscany as holiday homes, they are now buying luxury real estate as primary residences, as they are lured to Italy by generous tax incentives devised since Brexit.

The new UK Labour government’s need to raise taxes and decision to end the country’s “non-dom” regime, which offered residents whose permanent home was abroad up to 15 tax-free years on money held overseas and not remitted to the UK, have prompted a (potentially overstated) panic among the rich looking to move abroad, experts say.

Meanwhile, Italy offers a flat-tax yearly charge of €100,000 on overseas income for new residents. That charge is set to double for those moving here from next year, but tax advisers and experts say the increase will do little to discourage those who have set their eyes on Italy as their new home. Their reading is: for the ultra-rich, a €200,000 charge on their unlimited foreign income is still a good deal.

The flat-tax scheme has attracted roughly 2,700 individuals, including Russian oligarchs, private equity executives and sportspeople, since its introduction in 2016, according to official figures. With most people moving to Milan and the lake district, north of the city, according to residence and citizenship advisory business Henley & Partners, Italy now has the sixth highest projected inflow of millionaires, globally, and the highest in all of Europe.

Yet there are questions as to whether the country’s financial ecosystem and its infrastructure are ripe for an influx of rich new residents.

There is no doubt that Milan, the country’s financial capital, is buzzing like never before. Its convenient location, close to the Alps, the lakes and fancy beach resorts such as Portofino, as well as its rich cultural and culinary scene, make it a popular destination for wealthy individuals seeking to move their residency.

To make rich expats feel at home, several private members’ clubs have announced plans to launch in Milan, including private equity-backed The Wilde. Luxury housing developments in and around the city are springing up and selling for €15,000-€25,000 per square metre, and London-style bars, rooftops and spas — some inside new luxury hotels — have multiplied over the past few years.

But housing supply problems, a modest international school offering and a society that is comparatively less diverse than in other global cities limit the number of multimillionaires it can attract. The influx of foreigners moving to the continent post-Brexit was also much more contained in Milan compared with Paris and Frankfurt. According to EY’s Financial Services Brexit Tracker, in 2022, of the 7,000 finance jobs that were transferred to the continent, 2,800 went to Paris, 1,800 to Frankfurt and 1,200 to Dublin. Milan doesn’t appear in the rankings.

Even so, Marco Cerrato, a partner at Milan-based tax firm Maisto & Associati, says Italy is now one of the three “most palatable jurisdictions in Europe for people looking to leave London” alongside Monaco and Switzerland. “The choice depends on a series of considerations that are both personal and professional.”

So far, Italy has proved attractive for the Middle Eastern wealthy, as well as Latin Americans, Russians and families with young children, say tax advisers. But I doubt Milan will ever turn into an upgraded version of London or Paris. Space, above everything else, is limited. And Italy’s bureaucratic and political woes are structural.

Multimillionaires, though, mean new businesses, job creation and forex revenue, which, for a highly indebted country such as Italy, are vital sources of economic growth. Successive governments in Rome have understood this and, although legislation has been confusingly amended over the course of eight years, both the left and the right have stopped short of slashing the incentives.

Moreover, the changes do not have a retroactive effect — something that would be unconstitutional in Italy — so fears that laws will change or be withdrawn during the course of a rich arrival’s stay are ill-founded.

“Everyone can see there is an excellent opportunity for Italy amid changing laws in the UK and political instability in France,” says one government official. “We want to become the most attractive jurisdiction for those leaving other countries for tax reasons.”

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This article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment