As founding members of the EREN network and active participants, we would like to spotlight a case study on the European Real Estate market and in this particular case on Italian properties.
The 17th-century saw the start of the Grand Tour – a time when young English aristocrats would flock to European centres of art and culture. High on the agenda was Italy, where a typical itinerary took in the Byzantine splendour of St. Marks Square in Venice, Rome’s Colosseum, the Uffizi Gallery in Florence and the palaces of Naples.
Indeed, the very word ‘tourist’ derives from the Grand Tour. Although no longer the preserve of the privileged, Italy today remains a cultural hub for those drawn to its classical heritage – and not only tourists, but increasingly for those on a quest to purchase property abroad.
Country and economy
The fall of the Roman Empire ultimately gave rise to the Italian city state where a sophisticated system of banking and trade flourished. Taking a broad historical sweep – and to name but a few – Italian notables such as the Medicis, Michelangelo, da Vinci and Verdi spring to mind, or in a more modern context, Primo Levi, Fellini, Visconti, Armani . . .
Italy today is seen as a thriving international centre of style, art and design. But for a number of reasons, the economy is inclined to wobble. For instance, on the one hand the country has been constrained by tight EU imposed fiscal policies. On the other, Italy has a huge north/south divide where much of the more industrial north subsidises the more agricultural south. Following the sluggish 1990s, GDP growth had picked up by 2000. But this was not to last long. Throughout 2005 economic growth was slow, with 2006 much the same, but according to the OECD the economy is set to pick up in 2007.
Italy’s housing market presents a mixed picture. “In 2005 real house prices grew by 2%,” reports Professor Michael Ball in his annual Royal Institute of Chartered Surveyors ‘European Housing Review 2006’. This contrasts with the longer time span from 1998 to date of property price growth at a whopping 87%, says research analyst James Kingdom at Colliers CRE.
Italy continues to be one of the principal European destinations for international property buyers, but there are changes afoot in the type of property being bought.
While foreign buyers have traditionally been drawn to the private residence market, Italy is now experiencing a demand for properties within developed and managed enclaves in both town and country. “Developers are responding to this shift accordingly, so look out for an increasing number of such schemes coming onto the market over the next three years,” says James Price, partner at Knight Frank.
Benedetta Viganò, partner at Giorgio Viganò Realty and founder member of the newly launched European Real Estate Network (a pan-European network of independent brokers), divides the property market into tourist locations such as Tuscany, Lake Como and seaside areas including Capri, to the cities of Rome, Milan, Florence and Venice. “Such destinations appeal to foreign buyers for a clutch of reasons – history, culture, tradition, integral to which,” asserts Viganò, “is the addition of excellent food and wine.”
From restorations to new developments, the lure of Tuscany remains unabated. And there is plenty of choice. If you are after a period conversion with all the mod cons, a 16th-century villa and ‘borgo’ (small settlement) have been converted into one to four bedroom serviced apartments, some with two reception rooms, all in a parkland setting – swimming pool, gym and tennis courts – overlooking the regional town of Lucca. Prices are from €260,000.
Many a foreigner chases the rural dream of restoring a dilapidated farmhouse. In top end Tuscan ‘Chiantishire’ is a 500-year-old woodland property that requires complete restoration for a hefty €500,000. The good news is that it is set on six hectares of land and a short hop from historic Siena.
Some 14km from Siena and originally built as a watchtower is Torre Chigi, converted into a private tollhouse in the 15th century. This one-up one-down luxury accommodation is surrounded by two acres of organic olive groves, woodland and an infinity swimming pool. The price tag is €702,000 from Savills, who also have for sale a medieval villa outside the Tuscan ‘village of towers’, San Gimignano. For €3m you get a single 1,000 square metre residence that also functions as five independent apartments. The villa’s antique furniture is an optional extra.
In neighbouring Umbria is a recently launched development of 68 new low-rise, one and two bedroom apartments. Built in the local rustic style and set on 13 hectares within a 7,000-hectare nature reserve, amenities include swimming pool and tennis courts. Of interest for those flying from the UK is Ryan Air’s new route from Stansted to nearby Perugia. For sale through Premier Resorts with prices from €160,500.
The Marche region is almost the same as Tuscany and Umbria, says Viganò, but costs a lot less. Just 18km from the coast, the hilltop borga of Casa Serafina dates back to the 16th century. The property has been converted into 22 apartments, each with a private garden, patio or balcony. Vaulted ceilings and stone walls converge with all the modern conveniences and amenities, from thermal and acoustic insulation to tennis courts and swimming pool. Prices start at €150,000 from Giorgio Viganò Realty.
At Lake Como in the north – a long time favourite foreign property destination – Knight Frank is selling a large flat in a lakeside period villa with a wine cellar for €480,000. Or between Lake Como and Parma in the mountainous setting of Borgotaro is an ‘incredible’ modern house with all the feng shui and eco credentials imaginable, for sale through Giorgio Viganò Realty for €650,000.
Moving south of Naples, a further Giorgio Viganò property at Positano on the Almalfi coast is a spacious four bedroom period house with a swimming pool and expansive sea views priced at €3m. Capri prices, notes Kingdom of Colliers CRE, are nearly three times as much as in Milan.
Demand for property in Milan and other cities like Rome and Florence is high. Colliers CRE Milan development of 1,000 studio to two bedroom apartments, selling from €130,300, are being snapped up like hotcakes. But Viganò points out that the cities of Lucca, Verona and Genoa are rapidly gaining the attention of international buyers and, as a result of the 2006 winter Olympics, Turin has gained considerable interest as an upcoming hotspot. She says: “With properties about 50% cheaper than in Rome, Turin is good value for money.”
Pitfalls and practicalities
Property purchase procedures in Italy are fraught with legal quirks. The Italian market still lacks a certain degree of transparency, says Kingdom. “For example, price skimming – when the sale price is lowered before being officially registered, thus avoiding excess tax in lieu of an additional tax free payment – is still a major issue.”
Similar to leasehold in the UK, the ‘diritto di superficie’ allows someone to build on a piece of land, yet not own the land itself. Property is normally sold on a freehold basis but this ‘absolute’ ownership may not always be what it seems in terms of, say, public access.
Of prime importance is the first stage of purchase, the ‘compromesso’ (the promise of purchase), which is an agreement between buyer and seller detailing what is being sold, who is selling, who is buying, how much for and so forth. This preliminary sale contract binds both seller and buyer. Although a lawyer is not compulsory by Italian law nor used as common practice by Italians, Knight Frank advises foreign buyers to engage a bilingual lawyer.
As a percentage of the purchase price you can expect to pay on average 10% to 12% to cover notary, registration and other transaction fees. “A prerequisite to buying a property for any foreigner is to have an Italian bank account,” says Viganò.
Should you wish to restore an old property, be warned that obtaining planning permission can be a lengthy process.
Finally, beware that capital gains tax can be substantial if you sell your property prior to five years of ownership. After five years your liability is zero.
European Real Estate Network
Giorgio Viganò Realty
Guardian Weekly © Guardian News and Media Limited 2006
by Saundra Satterlee