The Mediterranean has long been a playground for the wealthy so it’s unsurprising that countries on its northern shores are home to a growing number of branded residences, offering the latest in luxury living.
As an asset class, branded residences are far from a passing trend. The concept has been around for roughly 100 years and emerged in Europe at the turn of the millennium. They have proved their staying power and provide a compelling value proposition to purchasers and real estate developers alike.
Across the global sector, luxury brands dominate the market and that’s true of the Euro-Mediterranean region too.
There, the better-established operators are Kerzner International and Four Seasons, both undeniably positioned at the luxury end. The top ten brands in the region are hotel brands, which are expanding more aggressively and represent an 85% market share – approximately five percentage points above the global average. Notwithstanding this, there is space for more niche brands that may focus on a sub-region or a specific country. One example of this is Lefay, an Italian wellness brand dedicated to mountain and inland locations in Italy with one operational branded residences property and a further two under development.
Of the individual luxury brands, Four Seasons, One&Only and Six Senses are market leaders. Increasingly, however, developers are introducing upscale and upper-upscale brands into the marketplace that will appeal to an extended profile of buyers, as demonstrated by brands such as Radisson, Club Med and Swissôtel.
It’s not just about the beach
Famous for its beaches and nautical tourism, three-quarters of the branded residences in the Mediterranean are in resort settings. One of the most appealing value propositions for purchasers is five-star quality featuring professional management and servicing, together with the ability to offset the cost of ownership while not in residence with a rental programme. This makes branded residences the perfect holiday home. Nonetheless, there’s a growing trend for urban locations too, something we expect to spread out across the region as the market continues to mature.
The case for Italy
For decades, affluent buyers have prized real estate on Lake Como and in the secluded Tuscan countryside, but a tax regime introduced in 2017 could very well set the stage for an urban shift into such high-profile cities as Milan.
The tax regime allows non-domiciled Italian residents to pay an annual flat tax of €100,000 on foreign income with benefits that can be extended to additional family members. While taxes were once viewed as a key barrier preventing international investors settling over the long term, the regime has grown increasingly successful and now presents a new challenge: a lack of prime residential property. Enter branded residences.
Outlook
The growth of branded residences globally remains sustainable with 12% compound annual growth over the past 65 years. For the Euro-Mediterranean region this stands at 16%, remarkable growth driven by powerhouses such as Spain and Greece which will retain their dominant position based on a solid network and pipeline. The most impressive growth is projected for Cyprus which is forecast to grow 68% annually over the forecast period to eight branded residential developments by 2026.
Italy meanwhile presents in the lower quartile for historical growth, suggesting the sector is particularly undersupplied. The scene and the setting in Italy, coupled with its international appeal, provides a tremendous opportunity for branded residences in multiple sub-markets across the country.
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