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ECONOMY

What will happen to Italy’s property market in 2021?

In the second year of the pandemic, how will property prices and mortgages be affected in Italy? Here's what the experts say.

Published: 8 January 2021 16:49 CET
Updated: 11 January 2021 15:41 CET
What will happen to Italy's property market in 2021?
More outdoor space is now top of house-hunters' wish lists due to the pandemic. Photo: AFP

Despite some difficult months in 2020 and ongoing uncertainty, there is now “cautious optimism” about the outlook for the Italian real estate market in 2021.

How has the pandemic affected the Italian real estate market so far?

Data from the Italian Revenue Agency shows there were 374,545 residential property transactions completed in 2020: a decrease of -13.9% compared to the same period in 2019. 

In the first nine months of 2020 property prices in Italian cities fell by -1.1% on average, compared to 2019, according to a recent joint report by Italian estate agencies Gabetti, Professionecasa and Grimaldi.

However, property prices in areas outside regional capitals rose, in many cases for the first time in years, as property experts say people are increasingly looking for larger homes in quieter areas.

“Non-capital municipalities grew most of all, by +8.1%, compared to an overall decline for the capital city municipalities (-6.7%),” the report stated.

READ ALSO: ‘Reversed trend’: Property in southern Italy is now in demand due to the pandemic

Average times needed to complete a sale remained stable, at an average of 4.5 months, as did the final discounts at the end of negotiations, with buyers getting around 12% off the asking price on average.

“Italy’s real estate market has withstood the impact of the pandemic well, under the pressure of changed housing needs triggered by the crisis, and with interest rates at historic lows,” explained Vincenzo De Tommaso, Head of the Studies Office at property portal Idealista.

“Estate agents have been able to adapt to changing circumstances by finding a way to work even in conditions of social distancing thanks to the help of technology,” he said. “We have witnessed an increase in advertisements with virtual tours and agents have started to hold open house events with live streaming.”

“The prospects for 2021 are marked by cautious optimism,” he added. “At the first signs of economic recovery, the real estate market has always been quite quick to recover.”

READ ALSO: 

Things are also looking up for the international property market, as Lake Como-based real estate expert Sara Zanotta told The Local.

Her agency, Lakeside Real Estate, was among those which adapted to the coronavirus restrictions by conducting virtual tours.

“After the first months of the emergency, that have obviously been tough for everyone, from July the Lake Como property market has undergone a real boom,” Zanotta said.

“We had international clients – unable to fly to Italy but still willing to find a property in our region – buying properties from abroad with virtual tours.”

Plus, she explains, following the first lockdown in Italy the agency saw a sharp rise in the number of Italians looking to purchase second homes “intended both for personal use and as a source of income“.

“The proximity of the lake to the big cities, especially Milan, has led to a good induced activity in recent months: compared to the same date in 2019, the increase in Italian customers to date has seen an increase of +45%.”

“Many of the stalled properties on the market were sold within a few months after the first lockdown,” she added. “We’ve reached an encouraging point where demand exceeds supply.”

Prices remained steady for the most part and rose only in certain prime locations, she said.

How will things change in 2021?

The pandemic has of course changed many peoples’ priorities when it comes to housing, and new government incentives may also be influencing choices in 2021.

The report by Gabetti, Professionecasa and Grimaldi says demand is growing for the following:

  • “Multifunctional homes, with larger dimensions and modular spaces adapted for remote working.

  • Outdoor spaces, terraces or gardens.

  • Condominium services, such as garage, gym, or multifunctional rooms.

  • Greater use or purchase of second homes, thanks to the rise of remote working (presumably even after the emergency) and the increased propensity to spend holiday periods in one's own home.”

The report also notes that government financial incentives included in the May 2020 Relaunch Decree “have created important development opportunities for the real estate sector which will materialize particularly in 2021”.

These include tax deductions of up to 110% for specific energy efficiency and anti-seismic works, the installation of photovoltaic systems, and systems for charging electric vehicles.

“This is quite interesting as it speeds up the requests for properties in need of huge renovations,” noted Zanotta.

“Enquiries for this kind of property will increase in 2021 by up to +45%,” she predicted. “From July 2020 to December 2020 these requests increased by +32% on the same period in 2019.”

There are now financial incentives for those buying a quirky old Italian property in need of serious TLC. Photo: Christophe Simon/AFP

What about mortgage rates?

Mortgage rates have been on a downward trend in Italy for some time. Renato Landoni, partner at investment firm Kiron Partners, said this won’t change in 2021 despite economic concerns. “The European Central Bank will maintain an accommodative interest rate policy as long as the level of inflation remains below 2 points,” he said. 

“No particular changes are therefore expected in 2021; rates will remain low and mortgages will be affordable, especially with regards to the fixed rate.”

He added that banks would remain “competitive in relation to mortgage offers”.

READ ALSO:  

Roberto Anedda, Vice-President of mortgage company MutuiOnline.it, told Idealista that “Many problems in the economy have not yet come to a head“.

“We’re still struggling with the long-term effects of the pandemic,” he said. “2021 will still be a year of uncertainty, but at the same time it is expected that it will not be as dramatic (as 2020).”

“In recent months there have also been positive factors; many Italians see buying a property as an excellent way to protect their savings from a crisis.”

See more in The Local's Italian property section.

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PROPERTY

Five pitfalls to watch out for when buying an old house in Italy

Tempted to snap up a little slice of Italy at a bargain price? The older the house, the more potential issues you'll need to be aware of.

Published: 29 March 2024 10:17 CET
Updated: 29 March 2024 12:03 CET
Five pitfalls to watch out for when buying an old house in Italy

Italians themselves may have very little interest in buying or fixing up Italy’s many unwanted old houses, but international visitors are often swept away by the charm of these rustic buildings in romantic settings.

It’s easy to see why. The quirky structures, period details, and picturesque surroundings – not to mention low asking prices – inspire countless people worldwide every year to investigate buying an Italian home of their own, often as an investment or retirement property.

MAP: Where in Italy can you buy homes for one euro?

International interest in cheap Italian property has only intensified in recent years, with dozens of idyllic villages advertising ‘one euro’ homes and other low-cost property offers aimed specifically at foreigners.

Savvy buyers are aware that non è tutto oro quel che luccica (all that glitters is not gold), and quickly realise that these long-neglected buildings really cost somewhat more than one euro to buy and renovate. Still, some of The Local’s readers tell us these offers are worth taking advantage of.

But whether you’re looking at spending a couple of thousand euros or much more on your dream Italian property, there’s always a lot to consider – including some issues that you’re unlikely to experience when buying a home in your home country.

These unexpected issues can turn the Italian dream into a bit of a nightmare, and sometimes lead to buyers having to abandon a purchase, losing money in the process.

But if you’re aware of potential pitfalls in advance, you’re far more likely to be able to complete the purchase process with no major problems at all.

Property taxes and fees

Of course you’ll be expecting tax as part of the property purchase process, but Italian property taxes are particularly steep.

Experts say the total cost of buying in Italy will add approximately ten percent to the purchase price, and advise prospective buyers to budget accordingly.

There’s stamp duty, which is between two and nine percent of the cadastral value (valore catastale) of the property, with a minimum threshold of €1,000 even on the cheapest homes. Plus VAT at four or ten percent, land registry tax, and, if applicable, mortgage tax.

You can also expect to pay between one and five percent of the purchase price as a fee to the estate agent. In Italy agents work for both the buyer and seller – and collect compensation from both parties once the deal is done.

Then you’ll likely need a couple of thousand euros for the notary, plus a similar fee for any other agents you use, such as a mortgage broker, plus legal fees if a lawyer is involved.

See more about the ‘hidden’ costs of buying property as a foreigner in Italy.

Bickering relatives

It may sound unbelievable to non-Italians, but it’s not unusual to find that even the smallest old properties, or parts of them, are legally divided up between dozens of family members due to Italy’s inheritance rules.

One buyer The Local spoke to found herself having to deal with 22 people, all relatives, who each turned out to own a share of a small property she was buying in Mussomeli, Sicily; one of the first places in the country to sell off old properties for a euro.

Toti Nigrelli, the mayor of Mussomeli, said “having to negotiate the sale with multiple owners” was normal.

While this buyer impressively managed to negotiate the deal with all 22 parties, in many cases similar sales fall through because relatives – distant cousins, great-aunts, long-lost nephews – are often not on good terms, disagree over the sale, or can’t be traced.

At the very least, you will need to check the property’s records carefully to make sure there are no surprises in store – such as long-lost relatives who might turn up to claim the property back after you’ve bought it.

A trullo house before renovation in Cisternino, Puglia. AFP PHOTO / GIUSEPPE CACACE

Illegal builds

Another thing that often astounds foreigners who buy property in Italy is the enormous number of illegal builds – homes that were built entirely without permits – on the market as well as the even greater number of houses featuring modifications which were never officially approved or recorded.

Illegal housebuilding in Italy is often thought of as a decades-old issue, but recent data shows that, in 2021, 15 houses were built illegally for ever 100 authorised. Illegal building is twice as common in the south of the country as in the north, and thousands of cases are detected every year – though few people are ever prosecuted.

If you buy a house with undeclared modifications, the buyer is usually held responsible for paying to regularise the paperwork with the town hall. If you catch this issue early enough – and not all sellers or estate agents will inform you about them – you may be able to negotiate for the seller to cover these costs before you make an agreement.

If however you end up unknowingly buying a house built without the correct permissions, or if you never regularise any unauthorised changes, the property will likely prove very difficult to sell on.

This is one of many reasons why buyers need to carefully check the catasto (land registry or cadastral records) of a property themselves, and have a notary check everything is in order.

Conservation rules

When you initially view and fall in love with that charming stone house in the historic centre of a gorgeous Italian hilltop town, rules and regulations are probably not the first thing on your mind.

But it pays to know that old homes featuring frescoes, loggias or ancient stone cellars, as appealing as they are, are often protected by Italy’s cultural heritage authority – meaning more red tape for their owners.

One reader was forced to give up her dream of buying a portion of a two-floor 1700s building in the village of Civita Castellana, Lazio, because it needed renovation work to make it livable – but the frescoed walls, decorated fireplaces and elegant stonework entrance were vincolati (under restrictions) due to Italy’s historic conservation rules.

READ ALSO: Tuscany or Basilicata? How Italy’s international property market is changing

In many cases, this means renovation work can’t be carried out at all, or will be subject to reams of paperwork and close monitoring from authorities known as the sovraintendenza belle arti. To make things trickier, rules can also vary by local authority.

If you think a property you’re interested in might be subject to these rules, it’s always wise to consult the local sovraintendenza at an early stage. And of course, you’ll want to get hold of the records of the property from the catasto (land registry).

Resale prices

The high taxes and costs involved in buying and selling a property in Italy are often said to be one reason why, for most Italians, the concept of climbing the property ladder doesn’t really exist in the way it does in some countries.

Italy’s property market is unusual in Europe in that house prices on average are relatively stagnant. With the exception of some types of property – such as new-build apartments and luxury homes – overall prices have risen little over the past decade.

This is partly because the Italian market is weighed down by a large volume of old, neglected properties in need of major work – hence schemes like the one-euro sales and the (formerly popular but now-unavailable) 110 percent ‘superbonus’ for renovations.

But overall, if your main motivation for buying an old Italian home and renovating it is profit, you’ll need to consider that the resale potential may not be what you’d hope. The exceptions to this are at the pricier end of the market, in most major city centres, and in tourist hotspots.

See more in The Local’s Italian property section.

Do you have any more tips on buying a property in Italy? We’d love to hear from you in the comments section below.

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