milan Real Estate: Mortgages Now More Affordable Than Renting, Analysis Shows

MILAN (AP) — A recent analysis of Milan’s real estate market indicates that mortgages are becoming a more financially sound option than renting for manny residents. The analysis, based on city price data published by Tecnocasa, compares the monthly costs of mortgage payments against rental fees across 120 areas of the city.

Mortgage vs. Rent: A Shifting Landscape

The study focused on comparing the costs associated with purchasing a used two- or three-room apartment in medium condition with taking out a mortgage versus renting a similar property. New properties were excluded due to their limited availability for long-term rentals.

Researchers calculated the mortgage costs based on a 20-year term for 70% of the property value for two-room apartments and a 30-year term for 80% of the value for three-room apartments. These figures were then compared to average rental costs.

City-Wide Trends Favor Mortgages

The data reveals a clear trend: mortgages are generally more affordable than renting in Milan. according to the analysis, the median mortgage payment for a two-room apartment is €798, while the average rent is €1,100, representing a savings of €302 per month. For three-room apartments, the median mortgage payment is €1,121, compared to a typical rent of €1,400, resulting in a monthly savings of €279.

High-End Areas Show Starkest Differences

The most important differences are observed in upscale neighborhoods.In Brera, for example, where average prices for used properties reach €10,000 per square meter, a two-room apartment’s mortgage costs €1,995 per month, while the rent is €3,000. For a three-room apartment in the same area,the average rental cost is €5,000 per month,compared to a mortgage payment of €2,802 – a difference of €2,198.

Though, analysts note that these figures are generally beyond the financial reach of average income earners.

Affordable Neighborhoods Offer Significant Savings

The trend extends to more affordable areas of Milan. In Baggio, a mortgage for a two-room apartment costs 58% less than rent (€418 vs.€1,000), and a three-room apartment mortgage is 51% less expensive (€588 vs. €1,200).Similar savings are found in Bonola, where a two-room apartment mortgage offers a 50% savings (€499 vs. €1,000) and a three-room apartment mortgage saves 46% (€600 vs. €1,300).

In the Via Padova-crescenzago area, a two-room apartment mortgage saves 50% (€478 vs. €950), while a three-room apartment mortgage saves 49% (€672 vs. €1,300).Savings of around 50% are also seen in Ponte Seveso, Bovisasca, Quarto Oggiaro, Niguarda, and Rogoredo. In Corso Vercelli, the Fiera area, and Via Paolo Sarpi, rents and mortgages are nearly equivalent.

Factors Driving the Trend

Analysts attribute this shift to a combination of factors. Rental yields in Milan average around 5%, while mortgage rates have decreased from their 2023/24 peaks to around 3-3.5%, with further declines expected, particularly for variable-rate mortgages.

Though, purchasing a home requires careful consideration. Potential buyers need sufficient savings for a down payment,and their income must be able to support the monthly mortgage payments. Furthermore, purchasing with a mortgage is most beneficial for those planning to stay in the property for at least ten years to offset the initial costs.