Upscale Property Market Slows Down, But Remains Active: Italy Attracts Investors' Attention

An overview of the most recent Knight Frank analyses confirms the sustained appeal of affluent investors towards Rome and Milan

Following a prolonged period of robust expansion, luxury residential real estate prices continue to climb, albeit at a more moderate rate. Nevertheless, the scenario varies significantly based on the region, sector, and specific urban area. This is supported by data from Knight Frank's assortment of reports for the initial half of 2026 (Global House Price Index, Prime Global Cities Index, Global Super-Prime Intelligence, and European Residential Signals), presenting a comprehensive overview of the global, European, and Italian real estate markets.

Price Upward Trend, Yet Negative Adjustments in Real Terms

The Global House Price Index, monitoring 55 major markets globally, registered an average nominal price surge of 1.4% year-over-year in the initial quarter of 2026. This marks the weakest performance since Q3 2024. Nonetheless, 91% of the monitored markets still exhibited positive nominal growth.

The primary challenge lies in inflation. When factoring in inflation, real prices experienced an average annual decline of 1.8%. Inflation continues to erode nominal growth, necessitating further interest rate reductions and alleviating inflationary pressures for a sustainable recovery.

Leaders and Laggards:

• Turkey leads in nominal growth (+26.2%), but due to high inflation, real growth is negative (-3.5%).
• Also at the pinnacle for nominal growth are Hungary (+21.4%), North Macedonia (+16.7%), Portugal (+16.5%), and Croatia (+16.1%).
• Spain claims the 7th spot with growth of +13.9%, showcasing a real increase of 10.1%.
• Bringing up the rear are mainland China (-6.3%) and Canada (-5.0%).

Asia Leads the Prime Property Market Globally

The Prime Global Cities Index (47 cities worldwide) displayed an average surge in prime real estate prices of 2.0% over 12 months. The market has become more discerning: investors focus on the fundamental indicators of specific cities rather than the general global trend.

Key Urban Centers:

• Tokyo witnessed a remarkable annual growth of +44.4% (the top performer), yet decreased by -8.6% in the last quarter, signaling the conclusion of the rapid growth phase. Over 5 years, Tokyo's market expanded by 126.4%.
• Prominent Asian markets include Manila (+19.9%), Dubai (+13.0%), Seoul (+11.3%), Singapore (+9.8%), Mumbai (+8.2%).
• Dubai has become the growth frontrunner over 5 years - a substantial +180.7%.
• Lagging behind are Vancouver (-10.4%), Toronto (-9.5%), Guangzhou (-8.9%), Beijing (-7.3%), Shanghai (-7.2%). London also remains in the negative (-4.0% annually and -5.1% over 5 years).

Super-Prime Segment: Dubai Leads, New York and Hong Kong Gain Momentum

In the super-prime segment (transactions exceeding $10 million), 636 deals were logged in 12 key cities during Q1 2026, totaling $11.4 billion (average property price of $18.6 million).

• Dubai retained the top position: 193 transactions worth $3.43 billion (+35% in the quarter). However, this peak occurred in January-February, predating the escalation of the regional conflict in late February 2026 as per Knight Frank.
• Hong Kong secured the second spot (94 transactions for $1.84 billion).
• New York ranked third (90 transactions for $1.67 billion, a surge of +58% quarterly).
• Combined, these three cities accounted for nearly 60% of all ultra-prime transactions globally. London saw a rise to 45 transactions ($836 million), though still far from its 2022 figures.
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Europe: Holiday Destinations Witness 60% Growth in 5 Years

The buyer demographic is shifting in the European luxury real estate market. The proportion of Europeans (excluding Britons) declined to 40%, while British and American buyers displayed heightened activity.

• Britons contribute around one-third of the international demand: besides Monaco and the Côte d'Azur, they are actively acquiring properties in Madrid, Ibiza, and Tuscany.
• Americans are making substantial investments in Milan, Ibiza, and the Algarve.
• Price appreciation over 5 years: Within resort areas ("sun-led"), prices surged significantly - the Algarve (+60% since 2020), followed by Provence, Marbella, Mallorca, Ibiza, and Saint-Tropez. Among cities, Zurich and Milan exhibit the most favorable five-year trends.

The currency effect should be considered: for an American or Swiss individual, a transaction in the Eurozone currently appears more cost-effective due to the exchange rate variance.

Italy: Mass Market Expands, Milan Adjusts, Rome Shines

Within a global context, Italy showcases diverse outcomes based on city and segment:

• Mainstream: Italy ranks 27th globally with an annual nominal growth of +5.2% (real growth of +2.8%). This surpasses figures from Germany, France, and the UK.
• Milan (Prime segment): Positioned 32nd out of 46 with -0.9% annually. This isn't a decline but a normalization post a robust five-year surge, during which Milan prices surged by +36% (ranking 7th globally). International interest in Milan from Americans and Britons remains robust.

Rome stands out in the European arena

A dedicated report by Knight Frank and ReLiving agency delves into Rome. According to the PIRI 100, Rome's luxury real estate market expanded by 5.5% in 2025, propelling the Italian capital to the 23rd position worldwide — exceeding Madrid, Paris, and New York.

Factors attracting investors to Rome:

1. Foreign Interest: Primary demand originates from UK, USA, France, Poland, and Northern European buyers. Britons often shift their tax residency to Rome, while Americans purchase prestigious secondary residences. The Italian "flat tax" (a fixed levy for affluent residents) plays a significant role.
2. Presence of Luxury Brands: Leading luxury brands globally are entering the city. Following W Rome and The Rome EDITION, Rosewood, Four Seasons, Mandarin Oriental, Bulgari, and Six Senses are establishing a presence.
3. Desirable Locations: Areas like Via Veneto, Via Biccolati, Trieste-Pinciano, Parioli, EUR, and Appia Antica (with the latter appealing to privacy and historic villa enthusiasts).

Prices in Rome: Renovated luxury properties are selling for 10,000 to 15,000 euros per sq. m (even higher in the "Golden Triangle" / Tridente area), rendering Rome highly competitive compared to London, Paris, or Geneva. The favored format is turnkey residences featuring high energy efficiency, smart home amenities, concierge services, and parking. The scarcity of such turnkey properties is pushing up prices in Rome.