With the Western world groaning in economic turmoil, you might think now was a terrible time to buy a home in Italy. Certainly many others have come to this conclusion, and the bubbling stream of foreign buyers in Italy has dried up to a thin trickle. Estate agents report far fewer buyers, prices stuck in suspended animation, and properties taking much longer to sell. Result? A buyer’s market. The strongest buyer’s market Italy has seen in a decade. If you’ve long been thinking about buying a home in Italy, now could be a very good time to go ahead and do it. You can take lots of time choosing your perfect property without competition snapping at your heels. And far more importantly, vendors are much more open to offers below the asking price than they have been for a very long time. [Time of writing is late 2008.]
Despite what you might fear, Italian property remains good value. Crucially, it’s likely to retain far more of that value than property in many other Western countries – including the UK and US. According to a recent report by the Italian research institute Nomisma, Italy’s property market is likely to weather the current economic storm much better than many nations. Why? Because even during the international property boom-time of the last ten years, Italian prices rose with much more constraint than those of other Western economies. And a more level-headed boom usually ensures a less destructive bust. To quote Nomisma, “The readjustment in property values is expected to be far less traumatic” in Italy than elsewhere.
Furthermore, while other nationalities might have borrowed willy-nilly, Italians normally have lower levels of personal debt than us Brits or Americans, and Italian banks have been far more cautious in granting mortgages – so the country is extremely unlikely to see a dramatic financial crisis (like the one recently rocking the US) with a flood of repossessed homes glutting the market and further lowering house prices. Neither are Italians choosing to ‘walk away’ from homes with mortgage payments that have grown uncomfortably – as opposed to unaffordably – high, as a disturbing number of Americans are also choosing to do, thus putting further pressure on US banks and lenders.
Note that the property boom of the last decade did not trigger a major rash of new building in Italy, as it has done in other warm countries popular with foreign buyers. So there will be far fewer piles of new apartments standing empty here. Italy has long had strict limits on new seaside building, for example – resisting the impulse to make an absolute fortune on beach sales and instead wisely safeguarding the country’s geographical charms. That foresight is already paying off, with existing coastal homes protected from any big drop in value through overabundance.
Let’s look at some of Nomisma’s more detailed number-crunching. They say that from January to June 2008 Italian property sales tailed off and prices saw their lowest rise of the past decade, growing at about 2.1%. Throw the inflation rate into the equation, and this is actually a price rise of only 1.1%. At the same time, offers around 12% below the asking price were commonly accepted for resale homes (and around 5% below for new-builds). The margin between asking price and sale price is generally at its greatest in Italy’s south, where offers of up to 15% below the advertised price are commonly being accepted. Nomisma points out, however, that the southern Italian market is, on balance, performing better than the north. As for the immediate future, Nomisma predicts that Italian property prices will remain static from now into early 2009. Consider the inflation rate again, and this means that property prices will effectively decrease slightly over that period.
Of particular interest to lovers of Venice or Florence who have long fantasized about owning an apartment in either of these peerless cities but have always been deterred by their high prices, Venezia and Firenze are two of four cities singled out by Nomisma as having already seen a slight decrease in real prices this year. (The other two are Milan and Bologna.) So now might be a good time to think about starting a leisurely property-hunt here, before prices start rising again. Venice and Florence remain two of the most visited cities in the world, each welcoming many millions of international travellers every year, and offering a virtually year-round holiday rentals market.
Often in life, it pays to buck the trend. Just because lots of other people are hesitant about buying abroad right now, it doesn’t mean that you should be too. There are countless reasons to buy in Italy – the climate, the lifestyle, the food, the people... Now you can add two more: vendors suddenly flexible on price, and property values prudently shored up against collapse. If only things were this good in every Western country!