Europe’s Revival, Prime Gains & Tuscany Trends
Plus, what are the risks that lie ahead?
3 minutes to read
Renewed optimism
The recent shift in sentiment towards Europe has been striking.
Falling inflation and interest rates, rising real incomes, and Germany’s move towards a more flexible fiscal policy have all contributed to a more positive sentiment.
The European Union’s increasing willingness to position itself as a stable geopolitical force amid heightened competition between the US and China has further strengthened its global standing.
Investors are taking note. European equities delivered their strongest quarterly performance in decades in the first quarter of 2025, outperforming the S&P 500 by 18.4% in dollar terms, the widest margin in over 30 years.
The European Central Bank (ECB) has also moved to lower interest rates more quickly than other major central banks, in part because of weak economic growth, but this is supporting both consumer confidence and investment activity.
Add to this the ongoing negotiations aimed at resolving the Ukraine conflict and it has left the region in a stronger position than many anticipated at the start of 2025.
The Euro surged 14% in the first four months of 2025 hitting a three and a half year high on 21st April.
However, several challenges remain:
• Addressing significant public deficits, particularly in Germany and France
• Managing a stronger euro, which could make exports less competitive
• Cutting red tape to improve business efficiency
• Maintaining competitiveness in key technologies, such as AI
• Navigating US protectionist policies and increasing competition from China
What Does This Mean for Prime Housing?
These shifts are likely to drive further safe-haven inflows into Europe’s prime property markets.
The region’s transparent and mature real estate sector, its education and lifestyle offer, combined with easier access to cheaper debt, is set to enhance its appeal for both domestic and international buyers.
Prime prices
Knight Frank’s latest Prime Global Cities Index highlights a strong correlation between prime property price growth and economic performance across Europe.
In the year to March 2025, Lisbon (5.7%), Madrid (5.5%), and Dublin (4.7%) led the continent in luxury price gains, reflecting the robust GDP growth expected in Iberia and Ireland this year.
This resilience stands out amid a challenging macroeconomic environment, with these southern markets outperforming their northern counterparts.
In contrast, cities such as London and Vienna are experiencing flat or negative prime price growth, mirroring weaker or contracting economic output.
Spotlight on Tuscany
According to Knight Frank’s new Tuscany’s prime residential insight report, the region is showing steady growth.
Italy now has 40,010 individuals with net worths exceeding $10 million, including 573 billionaires.
Over the past decade, the number of foreign residents in Tuscany has increased by 11.2%, with Lucca experiencing a 27% rise in prime property prices over five years and 6% growth in the past year. Florence recorded an annual price increase of 4.3%.
Areas like Siena and Val d’Orcia, where prime property prices average around €5,000 per square metre, are attracting more interest amid economic uncertainty.
Factors such as Italy’s flat tax regime and a 70% tax exemption for highly skilled foreign workers are contributing to demand, particularly from buyers in France, the US, and Northern Europe.
Enhanced international flight connections and quality educational institutions also support Tuscany’s appeal as a location for property investment and relocation. Read the full analysis here.
In other news…
Investors are still betting the Euro’s rally is still in its infancy (Bloomberg), European markets exhale as China climbs down from trade war (Bloomberg) and Americans want to move to Europe (Financial Times).