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PROPERTY

What’s wrong with the Italian property market?

New figures show that while property prices across most of Europe are rising, the Italian market seems to be lagging behind. But it's a bit more complicated than that.

What's wrong with the Italian property market?
Medieval buildings in central Florence: apartments here may be pricey, but it's not the case everywhere. Photo: Depositphotos

What’s going on with Italian property prices? Nothing new, you might say. But a snapshot of the market reveals some curious trends, which we’re attempting to make sense of.

Overall, the latest data from Italian statistics agency Istat shows that property prices in Italy are stalling in contrast to most other member states.

Italian house prices have fallen by 0.4 percent year on year. Not exactly a dramatic drop, and better than the -1.2 percent recorded this time last year. But this goes against the trend across Europe, where house prices are up by 4.3 percent on average; the figure identical in both the Eurozone and the whole of the EU.

According to Istat: “Of the member states with data available, the highest annual increases in house prices in the third quarter of 2018 were recorded in Slovenia (+15.1%), the Netherlands (+10.2%) and Ireland (+9.1%), while prices fell in Sweden (-2.1%) and Italy (-0.8%).”

So what’s happening in Italy?

As the map below shows (click here for the interactive version) there are of course some pretty big price differences from region to region, as well as within regions.

The map, using data from July 2019, shows the average asking price per square metre of all property posted on the popular home search website.

It shows the highest prices by far were found not in Rome but in the Valle d'Aosta region, where the price per square metre was three times that of property in Molise, where prices were lowest.

A map created by home search website Immobiliare.it shows how prices per square metre vary across Italy's regions. Screenshot: Immobiliare.it

But most importantly, experts point out that there are very big market differences between different types of property, meaning it’s not entirely true that Italian real estate is depreciating. 

Short-term rental prices are soaring and new-build properties are recording rising prices. And prices in Italy's cities have been famously high – and rising – for a long time now, following a more familiar trend.

In fact, in the third quarter of 2018 the value of new homes grew by 1.2% compared to the same period of the previous year. And in the second quarter the increase was 1.4%.

But the Istat figure is a country average, taking in everything from the newest luxury city-centre apartments to crumbling, historic homes in the country's growing number of near-abandoned vilages.

Look closely, and you'll see that older houses are the ones losing value. And they're losing it to such an extent that the country still ends up with a negative growth figure – even if the market is not completely stagnant.

There are apparently many factors, and would-be homebuyers struggle with everything from rising poverty to high taxation.

But the quality of the older properties on the market is one problem that seems to be weighing the market down.

“Firstly, in recent years the price of these properties had grown too much. And there’s the fact that Italians do, on average, very little maintenance on their homes,“ Maurizio Sgroi, economic journalist and author of the blog The Walking Debt, told Repubblica.

Even the briefest look at houses for sale in smaller Italian towns and cities reveals that the vast majority of houses available have not been renovated for decades, boasting appliances that belong in a museum, terrible energy efficiency ratings, and often, serious structural issues.

READ ALSO: Why Italy is 'giving away' 100 historic buildings for free

Houses in places like Rome will sell anyway, but “in smaller provinces, the price of a house that has never been renovated just collapses,” says Sgroi.

The price and hassle of major renovation work is off-putting for many who, the figures appear to show, prefer paying more for a new property.

Another problem for buyers is that nicer properties will often be turned into bed and breakfasts or rented out on Airbnb, Repubblica writes.

Sadly ,not all houses for sale in Italy look like this one. Photo: depositphotos

“In reality, in our country only those who can really afford it are buying property: those with stable jobs, those who are selling a property, or parents buying property for their children,” says Sgroi.

He also points out that interest rates on mortgages right now are at a all-time low and, despite improvements in the market since 2015, sales are still a long way from pre-crisis levels.

The figures paint a picture of a depressed market, though in some ways it is more accessible to young first-time buyers than in many other European countries – if they can find a house worth buying, that is.

One first-time buyer, 30-year-old Emanuele Reale, tells The Local Italy how he’s just bought his first home in a small town near Siena, Tuscany, for 123,000 Euros.

The previous owner had paid 180,000 Euros for the house in 2011 and put it on the market last year for 155,000, but right now buyers like Emanuele are able to bargain hard.

And experts aren't expecting the market to pick up any time soon.

One estate agent in Arezzo, Tuscany, who didn’t want to be named, says that he doesn’t expect house prices locally to increase “in the next two or three years, at least not for older properties, of which we have very many.”

Sgroi, too, is pessimistic: “In Italy most over-65s own one or more properties. When these people pass away, a generation of Italians will inherit.”

“But this stock of houses is destined to end up on the market anyway, because not everyone can afford to keep them, and because there will be more houses than there will be people who inherit them. The result? Property prices will fall again.”

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Member comments

  1. Thanks for the useful information.

    As someone on the outside looking in, it is hard to see past the macro trends into the details, which is what is needed in order to make decisions.

    I’m not presently in a position to fund the kind of down payment they require, or move to Italy (although that is more my relationships than my work, which is largely mobile), but this kind of information is helpful in deciding whether I even want to consider buying a home in Italy in the mid to long-term future.

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PROPERTY

‘It’s so frustrating’: My 25-year Italian property renovation nightmare

When US-based Davide Fionda embarked on renovating his mother's Italian property, he couldn't have imagined the obstacles and the timescale in store.

'It's so frustrating': My 25-year Italian property renovation nightmare

Building a home in Italy was almost inevitable for Davide, as he’s been visiting the same area in the Le Marche region, where his Italian-born mother grew up, since he was five years old.

Although he lives in Boston, US, and speaks with a charming East Coast twang, he’s also an Italian citizen and has long dreamed of having his own place to stay for the summer.

He began making this dream a reality back in 1997, when a barn that had been in his mother’s family for generations, in the village of Schito-Case Duca, was damaged by an earthquake.

“My mother, who had both her mother and sister in Italy, decided that it would be really nice for us to build our own new home instead of relying on family to host us each time we visit,” Davide said.

“The goal was simple. I would acquire the barn from my mom, renovate it and move in for the summers, as I’m a college teacher and can spend time in Italy,” he added.

“Simple” the goal may have been, but the project itself proved anything but, as Davide came up against unforeseen bureaucratic problems, legal hiccups and personal disappointments.

READ ALSO: The hidden costs of buying a home in Italy

As a former entrepreneur in his professional life, he said he’s “used to getting things done”, owning five companies and selling three.

But conquering Italian property renovation is his biggest challenge to date: “Never in my life have I had so many complications as I’ve had with this house,” he told us.

The earthquake-damaged barn. Photo: Davide Fionda

“In the beginning, I knew exactly what I needed and the costs to carry out the project. My mother was, and is still, living in the United States: the project started when she was approached by her godson, who is a geometra (civil engineer), to help her rebuild this barn.

“I started with what I could control. I sat down with an architect and we created a design. I did research on furniture and fixtures. But then the problems started,” Davide said.

His mother wanted a simple design: an open plan house with floor-to-ceiling windows facing the mountains, spanning two floors – a ground floor and a first floor for the bedrooms.

When they went to look at the progress in 2004, he said they were “horrified” at what they saw.

Instead of windows across the front as we asked for, with views of the spectacular Gran Sasso mountains, he took the entire view with two hallways for entering the property and for the bathroom. The bedrooms upstairs were unusable,” he added.

Davide describes himself as “not a typical Italian”, at two metres in height ,and says he always looks for suitable showers and beds when visiting Italy.

It was one of the reasons building his own home was so attractive, as he could custom-make it to fit his needs.

READ ALSO: What taxes do you need to pay if you own a second home in Italy?

But when they viewed the build, he discovered the first floor had ceilings of just one metre and 40 centimetres – not liveable for most people, never mind someone with Davide’s towering frame.

The results didn’t match the renovation plans that had been filed with the comune (town hall) – they wouldn’t have been approved otherwise, as Davide discovered Italian regulations deemed this height of ceiling in a bedroom uninhabitable.

He said he grew up with the geometra and knew him well, saying they were “best friends”. However, on raising the problems with him, Davide said the building professional “refused to fix the house”, adding, “he took my mother’s money and built a house with no bedrooms”.

He said his mother decided to stop construction after spending almost $100,000 on a house that they “could not live in”, adding that they “returned many times over the years to see the shell of the building that we thought we were going to call our home”.

READ ALSO: My Italian Home: How one ‘bargain basement’ renovation ended up costing over €300K

Faced with a stalled project and unsure what to do next, Davide tried to sell the property but got nowhere. He said the “market wasn’t right” for selling it, so he considered his options for fixing the botched renovations to date.

His Italian property project has been stalled for over two decades. Photo: Davide Fionda

Then, eventually, in January of this year he decided “he was sick of looking at it and it was time to act”.

He intended to use Italy’s Bonus ristrutturazioni (Renovation bonus), which allows homeowners to apply for a 50 percent tax reduction on carrying out renovation work.

On asking for professional opinions on whether the house qualified for this bonus, he said he asked five different people and got five different answers.

In the end, he discovered it was eligible and so he could, in theory, proceed with his latest plans.

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The aim is to create his mother’s original vision – an open plan space with huge windows overlooking the mountains and bedrooms on the first floor – but habitable this time.

Since the beginning of this year, however, Davide has been stuck and hasn’t made progress.

Setbacks have included trying to get a permit to renovate the house, which has proved difficult since the first geometra reportedly didn’t update the changes to the building.

This thorny issue goes back to exactly who owned the house, as Davide told us it had been sectioned off and parts of the house were owned by various members of the family.

The building headaches roll on for Davide. Photo by Martin Dalsgaard on Unsplash

“Italian law makes you want to rip your hair out,” he said.

Getting the deed in his name has been a huge obstacle in itself, as his mother wasn’t the sole owner and some parts of the land that belonged to her were never recorded.

It’s meant months of waiting while archives have been searched and deeds have been drawn up and transferred, made all the trickier by coordinating it all from thousands of miles away.

Plus, the house category was never changed to a residential one, listed previously as farmland and therefore illegal to live in.

It’s just more unexpected bureaucracy for a project that seems to have no end.

“It has been months and months of all these twists and turns, it’s so frustrating,” he told us.

“This has been a 25-year nightmare,” he added.

A partly restored, but unliveable barn for Davide now. Photo: Davaide Fionda.

Although Davide had originally planned to sort out the more practical parts of the project by the end of May, with a ticket booked to Italy to choose the windows, he’s still stuck in the paperwork part and can’t move forward.

Nothing has happened since January. Three or four times I said, ‘screw this’. But it’s not in my DNA to give up,” he said.

Although he has a strong will, the house has taken its toll on him.

Every time we go, this house stares us in the face and it’s upsetting. Family always ask us, ‘when are you going to finish the house?’ It’s a real source of heartache,” he told us.

From this point, he hopes the paperwork will be completed by August and then he can meet with the contractors to get the process started.

That in itself was a tall order, due to the construction demand and shortage of building companies Italy is currently experiencing.

READ ALSO:

It’s a problem made even more challenging by the fact that he’s based in the States and had to find a company that would apply for the credit for the bonus on his behalf.

Despite it all, he’s hopeful that he will get the house they dreamed of by next August and says he’s learned a lot about renovating property in Italy.

For other would-be home renovators, he advised people to “adjust their timeframe expectations” and expect “anything to do with land or real estate to take forever”.

So what is his secret for not giving up, despite the rollercoaster of events and emotions?

It seems he’s holding on to his vision of blissful summers in il bel paese.

“The beauty of Italy is to be, sit in a town square and have conversations,” he told us.

“It’s a beautiful thing.”

See more in The Local’s Italian property section.

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