As Australian prestige property buyers face elevated interest rates, foreign buyer stamp duty surcharges, and rising land tax burdens across the eastern seaboard, wealthy offshore investors are pivoting toward Southern Europe’s accelerating luxury market.
New analysis from global real estate advisory firm Knight Frank reveals Italy’s prime residential markets are soaring, driven by strong international demand, compelling relative value, and tax structures attracting globally mobile capital away from traditional financial capitals like London.
While Sydney and Melbourne buyers grapple with million-dollar median price tags that yield modest apartment footprints, European luxury hubs are delivering significantly greater space for equivalent capital outlays.
According to the research, a budget of €1 million (approximately $1.65 million) buys between 126 and 130 square metres of prime real estate in lifestyle strongholds like Venice and Lucca.
In Rome and Florence, that same outlay secures between 79 and 89 square metres, far outstripping the space buyers can purchase for equivalent sums in Paris, Zurich, or London.
However, price growth across Italy is far from uniform, with the country’s financial capital leading a sharp upward trend.
Milan has emerged as the standout performer across continental Europe. Driven by tight stock levels and its role as Italy’s corporate engine, prime values in Milan surged nearly 30 per cent between 2022 and 2025, climbing from €17,270 per square metre to over €22,000 per square metre.
Average asking prices in Milan have jumped 50 per cent since 2017, reducing the amount of space buyers can secure for €1 million in the city by 27 per cent over a five-year period.
The city is also significantly outperforming Prime Central London.
Knight Frank forecasts Milan residential values to grow by 2 per cent this year – following a modest 0.4 per cent increase last year – while London values dropped 4 per cent over the same period.
In regional lifestyle markets, three-year cumulative capital gains to 2025 reached 18 per cent in Florence and 15 per cent in Lake Como, with both regions recording annual price increases of around 6 to 7 per cent.
A primary driver behind this wave of international purchasing is tax residency. Italy’s flat tax regime, originally introduced in 2017 to attract global wealth, was recently tripled by the Italian government from €100,000 to €300,000 per year for new tax residents on foreign income.
Despite the steep increase, Knight Frank reports that buyer demand has remained unaffected.
More than 60 per cent of super-prime international inquiries through the agency are now driven primarily by tax considerations, accelerated by regulatory changes elsewhere, such as the United Kingdom’s decision to dismantle its long-standing “non-dom” tax rules.
Demographic data highlights a rapid concentration of private wealth within the country. Italy’s ultra-high-net-worth population expanded by 23 per cent between 2021 and 2026, nearly double the UK’s 12 per cent growth rate over the same timeframe.
Looking ahead, Italy’s billionaire population is projected to expand by 34 per cent over the next five years, reaching 82 individuals by 2031.
Knight Frank reports that international buyers are increasingly targeting turnkey properties in destination regions like Tuscany and Lake Como to generate strong short-term holiday rental returns, while a growing proportion of second-home owners are moving toward full-time tax relocation.