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When it comes to buying a new property timing is critical; not only so you can get the best value for your money but also so there’s a wide availability for you to choose from. Getting it right is crucial because, for many people, buying a property is one of the biggest investments they will ever make and it can impact their quality of life for many years to come.
There are many ways that the lives of people have changed since the outbreak of the 2020 Covid-19 Pandemic, which swept the world and hit Italy particularly hard. The Italian economic outlook was looking somewhat bleak in 2019 but since the widespread lockdowns of 2020 the already fragile situation was made far worse.
Analysts have calculated that the economic impact of the lockdowns in Italy were among the worst in the European Union which has led to a significant reduction in the purchasing power of the average person in the nation as well as rising food prices.
However, how has the property market been impacted by the events of the last few years? Is it a good time to buy property in Italy and what can you expect from future trends in the country?
The Overview of the Italian Property Market.
Since the Covid-19 Pandemic lockdowns have started to ease in Italy, the European Union and elsewhere in the world, there has never been a better time to start thinking about buying a property in Italy. As a result of the lockdowns and the slow down of market activity the prices of property have fallen considerably while the availability of properties is very high.
Internationally, Italy has an extremely competitive property market which attracts buyers who are looking for a solid investment as well as Expats who are relocating to the country to take advantage of the comparatively low prices. It’s not only the property prices which attract foreign buyers but also, particularly for Expats and Immigrants, the relatively low cost of living which affords an excellent quality of life.
In the Italian domestic property market, as a result of major government investment in city projects, many people from the rural parts of the country are moving to the more built up urban parts of the country. The new government investments in the cities have improved the overall quality of life and the newly introduced tax incentives have helped to further drive this trend.
This means if you were looking for a rural property, or a property in one of the many towns and villages in Tuscany and other regions, you can find some incredible bargains.
In short, the market in Italy is ripe for investment and so if you’ve been considering relocating to the country, or buying a property to invest in, it’s time to stop sitting on the fence and start taking more active steps to begin the process.
Real estate agents in Italy were closed for the majority of the lockdowns in the country however they have officially reopened and the glut of properties on the market are beginning to go back on sale at lower prices than before the lockdowns began.
Estate agents are also offering virtual tours of the properties on their books as well as video conferencing and digital documentation options so you can even start the process of house hunting before you arrive in the country.
Post Pandemic Price Cuts In The Italian Real Estate Market.
Since the beginning of the lockdowns in Italy the overall demand for property reduced drastically; partly because people were not allowed to view them but also because many people’s jobs and futures were put at risk and the last thing they were thinking about was buying a home.
This led to the number of properties that were sold in 2020 compared to 2019 falling by more than 100,000 as well as over 20,000 property sales being cancelled at the last minute. The increase in supply and decrease of demand led to significant reductions in property prices right across Italy, particularly in rural parts of the country.
On top of the falling prices, interest rates have also been coming down in Italy. Since 2016 the average annual mortgage interest rates have fallen from nearly 2% to just 1.25% in 2020.
The combination of depressed property prices and low interest rates make 2021 and 2022 ideal times to purchase a property in Italy.
The Value Of The Euro.
The Euro has suffered in recent years and consequently it is currently weak against many other currencies. Property prices in the EU, and Italy, are even more favorable if you are transferring money from a foreign bank account, such as from a US dollar account.
This means that property prices are relatively cheaper than they would be if you were buying the property using a Euro Dollar bank account which has been a major magnet for American investors.
American Interest Rates Are Low.
Interest rates in the US are at record lows which means that if you are planning to take out a loan to buy a property in Italy the costs will be lower than in previous years. You can leverage these lower rates on the loans to buy a property that might otherwise have been just out of reach or simply to save on the costs of your repayments.
If you are taking out a loan while the interest rates are low it’s always better to try to find a lender who is offering a fixed rate repayment scheme, as opposed to a variable rate, so you can continue to benefit from the lower rates over time. NOTE: The American economy has changed a lot since I wrote this article. The interest rates are raising, but it is still relatively low compared to the other major economies.
The Availability of Property in Italy.
The availability of property in Italy is at an all time high with more properties coming onto the market all the time. The pandemic has put a great deal of pressure on people’s finances in Italy and the result of this is that many are choosing to sell second homes while others are even putting their only home on the market and moving into rentals.
In other cases people are deciding to sell their homes and return to live in their family homes to save on the costs of accommodation. Italy is a very family orientated country and so when economic times are tough it’s a natural option for many to simply return home to live with their families.
All this is excellent news for potential buyers with the number of properties currently available helping to keep prices in the market low.
Italy has been introducing strict new environmental and energy efficiency requirements for homeowners to help the transition to a greener economy. As part of the overall scheme the government is also offering tax deductions of up to 110% of the total costs of upgrading a property to the necessary standards.
The tax deductions are designed to help people meet the requirements and change attitudes towards the often costly upgrades to their homes. This effort to improve Italy’s sustainability is costing the government money at the outset however it has been calculated that the new jobs the renovations and upgrades will provide means that the costs can be recouped in taxes and future growth of the ailing economy.
Once again, this will help new property owners upgrade their property to the environmental standards without costing as much as it might otherwise have.
Many homes in Italy are hundreds of years old and their energy efficiency status can be quite poor compared to newer builds. The types of installations and sustainability upgrades that are covered by the tax deductions include, but are not limited to:
- Walling and roofing insulation work to lower utility bills.
- Upgrades for more energy efficiency cooling and heating systems.
- Structural improvements for earthquake resistance and protection.
- Installation of electric car charging ports and related infrastructure.
The Ecobonus scheme in Italy officially begins on the 1st July in 2020 and will cover costs until the end of 2022; which means that if you buy a property in this window you can benefit from the tax deductions. As a foreign buyer you can reclaim the tax deduction as soon as you are paying taxes in the country.
Is There Any Reason Not To Buy Property In Italy Now?
While the property market in Italy is extremely good for foreign buyers at the moment there are still some considerations that you need to take into account before you make a decision to get ahead with a purchase.
If you’re planning to buy a property in Italy as an investment then you should be aware that it may be a long time before the property market starts to pick up and the prices start to rise again. As a long term investment you can be fairly sure to make a good return on any purchase that you make, particularly in popular regions such as Tuscany, however in the short term the prospects don’t look so good.
To compound this, as a result of the weak economy the rental prices in Italy are lower than what they were. This means that if you are planning to buy a property as an investment and collect the rental income to pay off loans and create a passive income you’ll get less than you might have thought. Rentals in many parts of the country can begin at only $350 per month for a small apartment so the rental income may not create a significant passive income for you.
Another consideration to keep in mind if you are buying a property as an investment or to live in on a part time basis, is that the tourist industry in Italy has taken a massive hit during the recent lockdowns. Restrictions on international travel and fears among people of travelling during a pandemic have left the tourist industry in tatters in Italy and elsewhere in Europe. So for the foreseeable future you should not expect to be able to leverage the types of returns on your investment through tourist rentals as you would have been able to do a few years ago.
However, one thing you can be sure of is that Italy has not lost its charm and once the world has overcome the problems that the pandemic has caused tourists will soon be flocking back to Italy to enjoy its culture, heritage and incredible scenery! Once again, this means in the long term you can expect the rental market to start providing a reliable annual income if you choose to rent your property during the tourist high season.
Essentially, if you’re buying a property in Italy primarily as an investment you need to know if you’re looking for a long or short term return. As a short term investment it may not be the best option for you however as a long term investment the potential returns are incredibly appealing.
The Italian Property Market Is Ideal For Expat Buyers.
If you’re a foreigner who is looking to move to Italy or simply to buy a property as an investment then there has never been a better time to take the leap and start your house hunting! Properties in Italy are seriously undervalued at the moment and if you can get into the market quickly then you will be able to snap up some incredible bargains.