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UPDATE: Under 36? Here’s how Italy plans to help you buy a house

Italy's government has announced that young people hoping to get on the property ladder can apply for the 'first home bonus' from June, a scheme offering tax cuts and help with mortgages.

Published: 21 May 2021 13:08 CEST
Updated: 28 May 2021 15:27 CEST
UPDATE: Under 36? Here's how Italy plans to help you buy a house
The Italian government wants to help more young people in Italy to buy their own home. Photo by Katy Cao on Unsplash

The text of the new decree law was published on Tuesday clarifying the details of the ‘first home bonus’ (Bonus prima casa), following an announcement last week by Prime Minister Mario Draghi.

People under 36 years old who want to buy their first home can submit an application to get financial help from 24th June, with the scheme lasting a year.

The scheme aims to eliminate VAT on taxes relating to deeds transfers and the mortgage on the purchase of a home, and help young homebuyers secure a mortgage – the high upfront cost of which is often cited as one of the factors behind the high number of people in Italy still living with their parents well into their 30s (and beyond).

Purchasing a property in Italy involves no small amount of added fees and taxes – in fact, many property experts advise buyers that they’ll need to budget as much as ten percent of the property price for additional charges.

Photo: Maria Ziegler/Unsplash

What help is available?

People under 36 – the classification for ‘young people’ in Italy – will benefit from two main types of help:

Firstly, there will be a raft of reductions on the taxes paid when buying a first home.

And secondly, taking out a mortgage is set to be made more straightforward, as the state will put down the deposit for young homebuyers.

EXPLAINED: How you could benefit from Italy’s Covid-19 financial support

That’s been made possible thanks to new funding from the ‘First Home Loan Guarantee Fund’ (Fondo di Garanzia Mutuo Prima Casa).

Firming up plans to help young people buy a home is the latest step following Draghi’s pledge to boost the country’s economy following the coronavirus crisis.

In a press conference earlier in May, he promised financial help would go to  businesses, young people and healthcare services.

Photo by Tiziana FABI / AFP

Who can access the first home bonus and how?

For those hoping to buy their first property in Italy with state help, the bonus will run until 30th June 2022 and people under 36 years old are eligible to apply.

It’s available to those who have an ‘ISEE’ – a social-economic indicator of household income – of up to €40,000.

Young people falling into this category can benefit from certain exemptions on registration, mortgage and land registry tax, saving up to €9,000 on the costs of buying a first home.

If you buy property from a private individual, the bonus cancels out registration, mortgage and cadastral taxes, meaning that only stamp duty, mortgage taxes and special cadastral taxes remain to be paid, amounting to a total of €320.

On the other hand, if you buy a house from a company, you won’t pay registration, mortgage and cadastral taxes and again, you’ll need to pay stamp duty, mortgage and cadastral taxes.

The difference in the second case is that VAT must be paid to the seller, but the buyer accrues a tax credit to spend equal to this VAT for house-buying costs.

In effect, it means if the purchase of the property is subject to VAT, it will be reduced to zero with the first home bonus.

READ ALSO: 

Further to that, eligible candidates will also be exempt from the VAT on stamp duty, which comes in at around 2% of the cadastral value of the house. That’s if you live in Italy full time – it’s 9% if you don’t.

Claiming tax credits

The tax credit can be used to deduct directly from these house-buying costs, or alternatively, it can be used as tax relief to deduct from the taxes on your personal income (IRPEF).

Notary fees, which are generally fixed for each part of the sale, will be halved. The notary checks that the property is legally registered and their fees can vary from town to town.

If buying a house through an agent, a notary does all the required checks and may be able to take care of the preliminary agreement as part of their service.

How about loans?

Included in the first home bonus is state help with the deposit, after a government decision to extend the First Home Loan Guarantee Fund.

It exists already and covers up to 50% of the total value of the property, but is set to be extended to 80% of the total value, of up to €250,000, without a deposit – and the banks get a state guarantee.

Watch out for the conditions

To access the bonus, it must be your first home and you’ll need to keep in mind that not all properties can benefit from the government help, including stately homes, villas, castles and places of historical or artistic value.

The decree text appears to state that you’ll also need to not reach the age of 36 in the year in which the deed is drawn up. So that means if you’re buying a house this year, you’ll need to be no older than 35 for the whole year. In other words, if you sign the deed for a house this year, you’ll need to turn 36 from next year onwards.

The home must also be located in the municipality in which you work, study or currently live.

And once the benefits have been used, you can’t sell the property for five years – unless you buy another house.

You also can’t access the bonus if you’ve already used it for a first home anywhere in Italy.

As some aspects of the process for claiming the bonus remain unclear, anyone hoping to benefit from the scheme is advised to contact a mortgage expert for further information.

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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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