Real estate has long been considered the safest and most desirable investment in Italy. So much so that it took a few years for Italian investors to even acknowledge the recent drop in real estate prices. Italy has a long-standing tradition of real estate as the ultimate long-term investment and the idea is deeply rooted both in business and in society. While, in broad terms, this is still true, we need to take into account the global shift that has affected most markets and the forecast for the coming years. Is it still a good idea to invest in real estate in Italy? What are the costs connected to it? Why should you invest in Italian real estate? This practical guide will be answering these and other questions and, hopefully, allay your doubts regarding real estate investments in Italy.
Real estate prices are dropping: make the best of it
Many investors have been deterred by a prolonged drop in real estate prices. Their main concern, of course, is that they won’t be able to profit from their investments. There are, however, a few considerations that might help you shift your perspective on this matter. First of all, property prices have been dropping since 2007, which has made a considerable number of properties available to buyers that could not have afforded them only a few years ago. Experts disagree on whether or not real estate prices in Italy have hit their lowest and are about to rise again, or when that is going to happen, but it is reasonable to believe that this will be the case in a few years. Investors who are looking at long-time opportunities, therefore, should consider buying real estate now and then waiting for their properties’ value to raise. This is the perfect time to look for the ultimate deal before the prices rise again.
Italy is not the only Country to have experienced a drop in real estate prices. Why then should it be better to invest in Italy than elsewhere? For one, mortgage interest rates have been dropping just as steadily as property prices, which benefits both potential investors and their future clients. Another excellent reason to invest in real estate in Italy is the increasing popularity of short-term rentals (such as Airbnb listings). Tourism is the one industry in Italy that seems to know no crisis and short-term rentals, as opposed to hotel stays, are on the rise. This makes it particularly profitable to invest in real estate in popular tourist destinations – which means the vast majority of the Italian territory.
When investing in real estate, collateral costs can be almost as relevant as property prices. Most of these costs vary from region to region and from property to property, but they will generally include insurance, notary fees and stamp duties. Depending on the value and location of the property, you will also have to pay taxes on it and, it goes without saying, on any profit you make from it. What makes real estate a profitable investment is the fact that low mortgage interest rates effectively make it easy to finance, whereas loaning capital from a bank for any other kind of investment would result in much higher rates and therefore lower margin profits. In order for the whole operation to turn an actual profit, however, it is essential to have a clear idea of how the property will be used and exactly what costs the investor will have to meet in order to make that possible. Miscalculating anything from refurbishment costs to notary fees can result in loss of profit or in the investment remaining unfruitful for longer than anticipated. While real estate is still a relatively safe investment, it still also a long-term one and you might end up having to wait a few years before any revenue comes from it. If your resources allow you to make such an investment, however, and if you have enough patience to sit on your assets until they become profitable, however, Italian real estate might be the perfect investment for you.