In 2009, Britain’s prestigious Royal Institution of Chartered Surveyors singled out Italy as one of the best places to invest in real estate because its property market, not undermined by cheap credit, has avoided the boom and bust seen elsewhere in Europe and the US.
To quote international realtors Knight Frank: "Historically, property prices in Italy have always held." In stark contrast, average prices in the US fell a record 18.2% in the year to November 2008, with Las Vegas values plunging by nearly 40%, according to the 20-city Case-Shiller index.
Italian tax changes have brought down the costs of buying a property in Italy by up to 15%. Also considering Italy’s historic allure, it makes this an opportune period in which to invest in Italian property. However, as with any real estate purchase, there are straightforward measures you can take to ensure everything goes to plan.
1) GET TO KNOW ITALY
Most overseas investors still flock in their droves to pricy Tuscany. Instead, try other regions such as Puglia, Sicily and Calabria, all with spectacular beaches and landscapes but far cheaper than Tuscany. Before taking the plunge, spend a weekend in a couple of areas to get a feel for them and find out how close train stations, stores, restaurants, etc are.
2) FIND A GOOD REALTOR
This is one occasion to be grateful for Italian red tape. All realtors must be professionally licensed and qualified, insured and registered at a Chambers of Commerce. Check their website and letterheads to ensure they belong to one of the following respected organizations: FIAIP (Federation of Professional Estate Agents), FIMAA (Federation of Mediators and Agents) or AICI (Italian Association of Estate Agents).
3) BE REALISTIC
It’s possible to pick up a stunning property for Euro 250,000. But not if it’s advertised at Euro 500,000. Italian property prices have not gone into the freefall seen in some other countries, so expect discounts of no more than around 10%.
4) KNOW WHAT'S RIGHT FOR YOU
Frances Mayes’ bestseller Under The Tuscan Sun inspired a generation of UK and US investors to try renovating an Italian countryside ruin. If doing so, it’s vital to be aware of the time, effort and money involved – up to Euro 1,000-1,500 per sq m for a complete restoration. Other common mistakes involve taking on property with far more bedrooms, outside land and facilities than you strictly need. Swimming pools and vineyards require regular upkeep.
5) KNOW THE BUYING PROCESS
Once buyer and seller agree a price, the buyer makes an offer with a deposit of around 5%. If the buyer’s surveyor and/or lawyer give the go-ahead, both parties then sign a sales contract (compromesso) and agree a timetable. The buyer puts down a second downpayment, taking his total deposit to around 30%. Pulling out at this stage carries severe financial penalties for both sides.
The final stage sees both sides sign a final contract (rogito) in front of a notary. At this stage the buyer settles in full with the seller, usually via an Italian bank draft. He will therefore need to have a fiscal code from local tax authorities, permitting him to apply for a bank account.
6) GET A LAWYER
For most buyers the Italian legal process will completely unfamiliar, so hire an independent bilingual lawyer with expertise in the Italian real estate sector. At all costs avoid signing documents on your own without knowing what you are committing yourself to.
Another consideration: any unpaid mortgages and loans or third-party claims on the house? Plans for a new highway just 400 yards away? Was the property built with complete planning permission (a problem in parts of Italy but of vital importance when you want to sell). All are vital background checks your lawyer will perform.
7) BUDGET FOR EXTRA COSTS
Purchasing a previously inhabited home will typically mean an extra 7-10% in fees and taxes, rising to 12-15% for new-build properties.
For previously inhabited homes, 3% of "cadastral value" is payable if the buyer becomes an official Italian resident with 18 months, otherwise it rises to 10%. Cadastral value is decided by the Land Registry and depends on factors such as location, floor space, number of rooms, etc. It is usually less than half the purchase price.
For new-builds, 4% VAT is payable if the residency is obtained within 18 months, otherwise a 10% rate if incurred. Other additional costs may include to Euro 2,000-5,000 for a notary,
Euro 500-1,500 for a surveyor, Euro 150-200 per hour for a solicitor and 3% of the purchase price to the estate agent.
8) USE A FOREIGN CURRENCY SPECIALIST
Over the course of 2009, the Sterling-Euro exchange rate veered between a high of £1/Euro 1.185 and a low of £1/1.059 over the course of 2009. Therefore, a Euro 750,000 home would have cost a UK-based buyer £77,250 more at the bottom of the market compared to its peak. Hence, the importance of using a specialist currency exchange firm, who can set rates for future transactions and guard against currency changes. They also offer much better rates than a bank that can add up to a £30,000 difference on a £750,000 transaction.
9) CONSIDER RENTAL POTENTIAL
Letting out your Italian property is an obvious way to fund your investment. But make sure you are within easy reach of transport hubs. If targeting the non-Italian market, aim for a maximum 60-90 minutes from the nearest airport. If buying in a large town or city, ensure buses and trains are within easy reach. Properties near the coast will have excellent rental potential and will maintain their value because of stringent restrictions on new building in these areas.
10) SPEAK SOME ITALIAN
Try to master some basic Italian phrases, even if you only plan on being in the country for a few weeks each year, as it will help you to assimilate yourself in your local community. Unlike say, the Netherlands or parts of Scandinavia, don’t expect the majority of locals to speak English – especially in more southern regions such as Calabria and Sicily. And remember that your efforts at Italian, no matter how basic, will endear you to Italians.
Adriana Giglioli writes for Italy real estate website Homes and Villas Abroad.
To quote international realtors Knight Frank: "Historically, property prices in Italy have always held." In stark contrast, average prices in the US fell a record 18.2% in the year to November 2008, with Las Vegas values plunging by nearly 40%, according to the 20-city Case-Shiller index.
Italian tax changes have brought down the costs of buying a property in Italy by up to 15%. Also considering Italy’s historic allure, it makes this an opportune period in which to invest in Italian property. However, as with any real estate purchase, there are straightforward measures you can take to ensure everything goes to plan.
1) GET TO KNOW ITALY
Most overseas investors still flock in their droves to pricy Tuscany. Instead, try other regions such as Puglia, Sicily and Calabria, all with spectacular beaches and landscapes but far cheaper than Tuscany. Before taking the plunge, spend a weekend in a couple of areas to get a feel for them and find out how close train stations, stores, restaurants, etc are.
2) FIND A GOOD REALTOR
This is one occasion to be grateful for Italian red tape. All realtors must be professionally licensed and qualified, insured and registered at a Chambers of Commerce. Check their website and letterheads to ensure they belong to one of the following respected organizations: FIAIP (Federation of Professional Estate Agents), FIMAA (Federation of Mediators and Agents) or AICI (Italian Association of Estate Agents).
3) BE REALISTIC
It’s possible to pick up a stunning property for Euro 250,000. But not if it’s advertised at Euro 500,000. Italian property prices have not gone into the freefall seen in some other countries, so expect discounts of no more than around 10%.
4) KNOW WHAT'S RIGHT FOR YOU
Frances Mayes’ bestseller Under The Tuscan Sun inspired a generation of UK and US investors to try renovating an Italian countryside ruin. If doing so, it’s vital to be aware of the time, effort and money involved – up to Euro 1,000-1,500 per sq m for a complete restoration. Other common mistakes involve taking on property with far more bedrooms, outside land and facilities than you strictly need. Swimming pools and vineyards require regular upkeep.
5) KNOW THE BUYING PROCESS
Once buyer and seller agree a price, the buyer makes an offer with a deposit of around 5%. If the buyer’s surveyor and/or lawyer give the go-ahead, both parties then sign a sales contract (compromesso) and agree a timetable. The buyer puts down a second downpayment, taking his total deposit to around 30%. Pulling out at this stage carries severe financial penalties for both sides.
The final stage sees both sides sign a final contract (rogito) in front of a notary. At this stage the buyer settles in full with the seller, usually via an Italian bank draft. He will therefore need to have a fiscal code from local tax authorities, permitting him to apply for a bank account.
6) GET A LAWYER
For most buyers the Italian legal process will completely unfamiliar, so hire an independent bilingual lawyer with expertise in the Italian real estate sector. At all costs avoid signing documents on your own without knowing what you are committing yourself to.
Another consideration: any unpaid mortgages and loans or third-party claims on the house? Plans for a new highway just 400 yards away? Was the property built with complete planning permission (a problem in parts of Italy but of vital importance when you want to sell). All are vital background checks your lawyer will perform.
7) BUDGET FOR EXTRA COSTS
Purchasing a previously inhabited home will typically mean an extra 7-10% in fees and taxes, rising to 12-15% for new-build properties.
For previously inhabited homes, 3% of "cadastral value" is payable if the buyer becomes an official Italian resident with 18 months, otherwise it rises to 10%. Cadastral value is decided by the Land Registry and depends on factors such as location, floor space, number of rooms, etc. It is usually less than half the purchase price.
For new-builds, 4% VAT is payable if the residency is obtained within 18 months, otherwise a 10% rate if incurred. Other additional costs may include to Euro 2,000-5,000 for a notary,
Euro 500-1,500 for a surveyor, Euro 150-200 per hour for a solicitor and 3% of the purchase price to the estate agent.
8) USE A FOREIGN CURRENCY SPECIALIST
Over the course of 2009, the Sterling-Euro exchange rate veered between a high of £1/Euro 1.185 and a low of £1/1.059 over the course of 2009. Therefore, a Euro 750,000 home would have cost a UK-based buyer £77,250 more at the bottom of the market compared to its peak. Hence, the importance of using a specialist currency exchange firm, who can set rates for future transactions and guard against currency changes. They also offer much better rates than a bank that can add up to a £30,000 difference on a £750,000 transaction.
9) CONSIDER RENTAL POTENTIAL
Letting out your Italian property is an obvious way to fund your investment. But make sure you are within easy reach of transport hubs. If targeting the non-Italian market, aim for a maximum 60-90 minutes from the nearest airport. If buying in a large town or city, ensure buses and trains are within easy reach. Properties near the coast will have excellent rental potential and will maintain their value because of stringent restrictions on new building in these areas.
10) SPEAK SOME ITALIAN
Try to master some basic Italian phrases, even if you only plan on being in the country for a few weeks each year, as it will help you to assimilate yourself in your local community. Unlike say, the Netherlands or parts of Scandinavia, don’t expect the majority of locals to speak English – especially in more southern regions such as Calabria and Sicily. And remember that your efforts at Italian, no matter how basic, will endear you to Italians.
Adriana Giglioli writes for Italy real estate website Homes and Villas Abroad.
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