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Overseas Property in Italy

A

Alessandro

New Member
In the last decade Italy - like the majority of the European countries - has faced a serious financial crisis with significant consequences on the real estate market; this circumstance has been completely new for the Italians who had been traditionally used to invest in real estate as a secure escape and profitable long-term horizon for their savings.
Actually the counter-value of the market is the lowest since the early seventies.

Residential property price dropped about 30%, with specific hits of -50/70% in some Regions in the South, Center and North-East.
The related domestic rental market also shows significant decreases, mainly linked to the loss of purchase power of the population; Exceptions are represented by the Milan market, an international modern city able to attract investments and young quality immigration.
Property tax has generally increased, but the owner of the "first home" (Prima Casa) is exempted to pay any tax.
Rental Tax can be elected as 21% (Cedolare secca - Flat tax) of the year rental income.

The average timing to conclude a deal stays between 3 and 12 months, depending on the eventual issues disclosed by the legal due diligence and/or the length to get a mortgage; Banks in fact are still prudent to lend money on the property market, as still the national economy didn't recover completely.

On the other hand Italy is between the world top 3 countries with the highest private saving, so the market can be potentially still very liquid and promptly reactive in case of recover.
Plus it has to be noticed the country presents "genetic" giant touristic potential, which makes of it a strong Vacation Rental market for the all year round.
The legal system is very strict and the purchaser can buy properties safely.

When it comes for a foreigner (non resident) to buy a property in Italy, the real problem is represented by the impossibility to get a mortgage from a local bank; very few exceptions can be observed, but still an inconsistent number to be considered a solution for the buyer.

This means the purchase with the traditional method (actually the only one proposed abroad) is a conservative solution mainly addressed for the cash-buyer.
Recently a new Rent to Buy Law has been approved and totally implemented in the legal system, offering this way an alternative and more convenient solution to own a property in the Bel Paese.
This juridical instrument may also match the needs of the property Investors, generally characterized by a business profile rather than the classical one of the "second home buyer".

Other interesting opportunities can be found in the property auction/ foreclosure, off-plan development and other cases of Vendor finance, but indeed these segments of the market are business oriented niche suitable for specific kind of investors.

I believe the real estate market is set to recover for the traditional regional well performing economy, while distressing scenario will be still present in the areas with a marginal economy.

In other words investing today in the Italian real estate market can be a remarkable opportunity, but it is needed a strong knowledge of the territory and a modern approach in the purchase (alternative buying solutions).
 
L

Lee Filkins

Administrator
Staff member
Premium Member
One thing to consider is will the property be a holiday home or a permanent residence. At first you may think that they would both have different considerations, but there’s very little to separate them.

Obviously for a holiday home two of the most important things to think about are proximity to an airport and transport links and, importantly, security is an issue during the weeks when it will be unoccupied.

If you are choosing to locate permanently consider if you need to find work. Your chance of obtaining employment will be increased if you are closer to a major town or city. If you are hoping to set up a business this will require serious consideration; will there be the same demand for English language lessons in rural Basilicata as for holiday accommodation in Sardinia?

But before you make any decision, consider this, many holiday home owners eventually become full time residents when they decide to retire.
 
N

nmb

Well-Known Member
I see you mention a "rent to buy" law - this sounds very interesting. Is this open to foreign investors? Do you have any details?

It is ironic when looking at a recovering Italian real estate market because in some ways it feels like a buyers market with many investors waiting until it recovers even more before they buy. Then there will be more competition and not as much scope to negotiate a better price. As you mentioned, if we compare and contrast historic prices it is evident that current valuations offer great long term value - surely now must be the time to start picking up Italian real estate?

While France is the most visited country in Europe from a tourism point of view there is no doubt that Italy is still a favourite amongst tourists, especially romantics :)
 
Last edited:
P

Phil1979

New Member
Forum Partner
In the last decade Italy - like the majority of the European countries - has faced a serious financial crisis with significant consequences on the real estate market; this circumstance has been completely new for the Italians who had been traditionally used to invest in real estate as a secure escape and profitable long-term horizon for their savings.
Actually the counter-value of the market is the lowest since the early seventies.

Residential property price dropped about 30%, with specific hits of -50/70% in some Regions in the South, Center and North-East.
The related domestic rental market also shows significant decreases, mainly linked to the loss of purchase power of the population; Exceptions are represented by the Milan market, an international modern city able to attract investments and young quality immigration.
Property tax has generally increased, but the owner of the "first home" (Prima Casa) is exempted to pay any tax.
Rental Tax can be elected as 21% (Cedolare secca - Flat tax) of the year rental income.

The average timing to conclude a deal stays between 3 and 12 months, depending on the eventual issues disclosed by the legal due diligence and/or the length to get a mortgage; Banks in fact are still prudent to lend money on the property market, as still the national economy didn't recover completely.

On the other hand Italy is between the world top 3 countries with the highest private saving, so the market can be potentially still very liquid and promptly reactive in case of recover.
Plus it has to be noticed the country presents "genetic" giant touristic potential, which makes of it a strong Vacation Rental market for the all year round.
The legal system is very strict and the purchaser can buy properties safely.

When it comes for a foreigner (non resident) to buy a property in Italy, the real problem is represented by the impossibility to get a mortgage from a local bank; very few exceptions can be observed, but still an inconsistent number to be considered a solution for the buyer.

This means the purchase with the traditional method (actually the only one proposed abroad) is a conservative solution mainly addressed for the cash-buyer.
Recently a new Rent to Buy Law has been approved and totally implemented in the legal system, offering this way an alternative and more convenient solution to own a property in the Bel Paese.
This juridical instrument may also match the needs of the property Investors, generally characterized by a business profile rather than the classical one of the "second home buyer".

Other interesting opportunities can be found in the property auction/ foreclosure, off-plan development and other cases of Vendor finance, but indeed these segments of the market are business oriented niche suitable for specific kind of investors.

I believe the real estate market is set to recover for the traditional regional well performing economy, while distressing scenario will be still present in the areas with a marginal economy.

In other words investing today in the Italian real estate market can be a remarkable opportunity, but it is needed a strong knowledge of the territory and a modern approach in the purchase (alternative buying solutions).
An interesting and helpful post. I have been considering buying an overseas property and have read there was a similar drop in the market in Spain too (giving good opportunities if you buy in the right location). I would be looking to buy in either Spain or Italy ideally (as a holiday rental). I had no idea the purchase process was so long though! 3 to 12 months is a very long time. Is it that long if you are a cash buyer?

What exactly is Rent to Buy?

I will have around £40-£50,000 to invest. Do you know how Italian property compare to Spanish properties in terms of purchase price (in similar coastal locations for example)?

Thanks for the advice
 
A

Alessandro

New Member
Well,
actually i'm a specialist of the Rent to buy for foreigners.

About negotiation.. let's leave it to the negotiator :)

Hopefully won't sound like missing respect for the French cousins, but i'm afraid tax in Paris are still too high and the country is currently facing an unstable period due to wild immigration and political uncertainty.

Main difference between Italy and France from a touristic point of view... France owns 3-4 world spots, Italy much more and spread along the whole country..
 
A

Alessandro

New Member
Spain and Italy, although both of Latin origin, are different targets and cultures.
The fundamental of Spanish economy are much weaker than the Italian one, even of these days!!!
Spanish property market will remain an hotspot overseas destination, but still unstable in the long term; Italy may sounds a bit more complicated to decode but in the long run guarantee better performance.

Rent to Buy is just a genial invention to allow the buyer to do everything with a minimum effort :)
 
A

Alessandro

New Member
With 40-50.000 GBP you can fond some nice staff in Calabria close to the sea
 
L

Longterminvestor

Administrator
Interesting, what is the average rental yield in Italy? I prefer to look longer term, building cash flow and capital growth along the way.
 
A

Alessandro

New Member
Average between 4% and 5% gross.
A short term rental property management can perform much much more without such a bigger effort.
 
P

Phil1979

New Member
Forum Partner
With 40-50.000 GBP you can fond some nice staff in Calabria close to the sea
Thanks for the tip :) Can you talk me through how the buying process differs from buying in the UK? And would you always recommend buying through an agent (as opposed to buying a property through Rightmove's Oveseas section for example?) I know when buying overseas there can be pitfalls when it comes to land ownership, is this the case in Italy too?

Can you also talk me through how Rent to Buy works please? Is a smaller deposit required for this type of purchase?
 
A

Alessandro

New Member
Actually i can provide all the details you're looking for Italy rather than UK.

R.E. Agent won't be mad at me, but i believe the majority should do indeed a better job than only propose a property to by (into their portfolio); so to answer your question i'd say YES but only if the approach of the Agent is analytic and enough explanatory of the "bigger drawing", meaning the whole contest where the property is, why should be a good investment according with your criteria, and so on.
Concerning the Legal aspects there's always chance to find complicated situations, but a good legal consultant can certainly advise weather to buy or not.

Rent to Buy is the new jewel into the market!!! A small deposit is just fine in order to achieve the Rent to Buy friendly Vendor; the chances to negotiate are significant and if you are into it many advantages can be gained.
 
P

PostBrexitInvestor

Member
Personally I see France, Spain and Italy as good recovery plays going forward. Do you think Italian real estate has more potential that France and Spain? I read your comments above and it is looking as though Italy has been overlooked by investors.
 
A

Alessandro

New Member
I personally believe these 3 countries are different and also the related market confirm that;

- Spain has the weakest economy if these 3, so needed to faster implement reforms against recession. Spanish crisis directly comes from the real estate bubble from America.
According with the current macro economical/political scenario, I personally see Spain as a short-medium term investment target.

- France has a stable and strong economy but facing a period of strong political instability and somehow social disorder; Investing in the French top destinations is certainly a good option but it is needed a consistent budget.
It is certainly a strong vacation rental market; Taxes quite high.
I consider France a long-term investment target

-Italy is the eternal promise who has finally reached the so called break-even point.
I've already pointed about Italy above.
Italy is a medium-long term investment target.

By the way, each of these countries has some niche markets which might be very convenient.
 
P

Phil1979

New Member
Forum Partner
Actually i can provide all the details you're looking for Italy rather than UK.

R.E. Agent won't be mad at me, but i believe the majority should do indeed a better job than only propose a property to by (into their portfolio); so to answer your question i'd say YES but only if the approach of the Agent is analytic and enough explanatory of the "bigger drawing", meaning the whole contest where the property is, why should be a good investment according with your criteria, and so on.
Concerning the Legal aspects there's always chance to find complicated situations, but a good legal consultant can certainly advise weather to buy or not.

Rent to Buy is the new jewel into the market!!! A small deposit is just fine in order to achieve the Rent to Buy friendly Vendor; the chances to negotiate are significant and if you are into it many advantages can be gained.
So you really need the same things in place as buying in the UK... a good estate agent and a good solicitor.

With Rent to Buy, do you actually own the property?
 
A

Alessandro

New Member
Actually in Italy there's also the Notary which will be in charge for the public redaction of the Contract and related Filing.

With the Rent to Buy you'll own the property when the transfer of the ownership will be completed, meaning when the sale price will be totally paid.

On the other hand, in the while the Buyer is 100% legally protected by the integral Filing (Transcription) of the Rent to Buy Contract in the competent "book" (Coservatoria),exactly like in a Preliminary Agreement.

So the buyer will have the strongest legal protection and could act consequently as the owner.
The buyer will have a total juridical control over the property during the whole duration of the Rent to Buy agreement.
 
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