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ECONOMY

What will happen to Italy’s property market in 2021?

In the second year of the pandemic, how will property prices and mortgages be affected in Italy? Here's what the experts say.

Published: 8 January 2021 16:49 CET
Updated: 11 January 2021 15:41 CET
What will happen to Italy's property market in 2021?
More outdoor space is now top of house-hunters' wish lists due to the pandemic. Photo: AFP

Despite some difficult months in 2020 and ongoing uncertainty, there is now “cautious optimism” about the outlook for the Italian real estate market in 2021.

How has the pandemic affected the Italian real estate market so far?

Data from the Italian Revenue Agency shows there were 374,545 residential property transactions completed in 2020: a decrease of -13.9% compared to the same period in 2019. 

In the first nine months of 2020 property prices in Italian cities fell by -1.1% on average, compared to 2019, according to a recent joint report by Italian estate agencies Gabetti, Professionecasa and Grimaldi.

However, property prices in areas outside regional capitals rose, in many cases for the first time in years, as property experts say people are increasingly looking for larger homes in quieter areas.

“Non-capital municipalities grew most of all, by +8.1%, compared to an overall decline for the capital city municipalities (-6.7%),” the report stated.

READ ALSO: ‘Reversed trend’: Property in southern Italy is now in demand due to the pandemic

Average times needed to complete a sale remained stable, at an average of 4.5 months, as did the final discounts at the end of negotiations, with buyers getting around 12% off the asking price on average.

“Italy’s real estate market has withstood the impact of the pandemic well, under the pressure of changed housing needs triggered by the crisis, and with interest rates at historic lows,” explained Vincenzo De Tommaso, Head of the Studies Office at property portal Idealista.

“Estate agents have been able to adapt to changing circumstances by finding a way to work even in conditions of social distancing thanks to the help of technology,” he said. “We have witnessed an increase in advertisements with virtual tours and agents have started to hold open house events with live streaming.”

“The prospects for 2021 are marked by cautious optimism,” he added. “At the first signs of economic recovery, the real estate market has always been quite quick to recover.”

READ ALSO: 

Things are also looking up for the international property market, as Lake Como-based real estate expert Sara Zanotta told The Local.

Her agency, Lakeside Real Estate, was among those which adapted to the coronavirus restrictions by conducting virtual tours.

“After the first months of the emergency, that have obviously been tough for everyone, from July the Lake Como property market has undergone a real boom,” Zanotta said.

“We had international clients – unable to fly to Italy but still willing to find a property in our region – buying properties from abroad with virtual tours.”

Plus, she explains, following the first lockdown in Italy the agency saw a sharp rise in the number of Italians looking to purchase second homes “intended both for personal use and as a source of income“.

“The proximity of the lake to the big cities, especially Milan, has led to a good induced activity in recent months: compared to the same date in 2019, the increase in Italian customers to date has seen an increase of +45%.”

“Many of the stalled properties on the market were sold within a few months after the first lockdown,” she added. “We’ve reached an encouraging point where demand exceeds supply.”

Prices remained steady for the most part and rose only in certain prime locations, she said.

How will things change in 2021?

The pandemic has of course changed many peoples’ priorities when it comes to housing, and new government incentives may also be influencing choices in 2021.

The report by Gabetti, Professionecasa and Grimaldi says demand is growing for the following:

  • “Multifunctional homes, with larger dimensions and modular spaces adapted for remote working.

  • Outdoor spaces, terraces or gardens.

  • Condominium services, such as garage, gym, or multifunctional rooms.

  • Greater use or purchase of second homes, thanks to the rise of remote working (presumably even after the emergency) and the increased propensity to spend holiday periods in one's own home.”

The report also notes that government financial incentives included in the May 2020 Relaunch Decree “have created important development opportunities for the real estate sector which will materialize particularly in 2021”.

These include tax deductions of up to 110% for specific energy efficiency and anti-seismic works, the installation of photovoltaic systems, and systems for charging electric vehicles.

“This is quite interesting as it speeds up the requests for properties in need of huge renovations,” noted Zanotta.

“Enquiries for this kind of property will increase in 2021 by up to +45%,” she predicted. “From July 2020 to December 2020 these requests increased by +32% on the same period in 2019.”

There are now financial incentives for those buying a quirky old Italian property in need of serious TLC. Photo: Christophe Simon/AFP

What about mortgage rates?

Mortgage rates have been on a downward trend in Italy for some time. Renato Landoni, partner at investment firm Kiron Partners, said this won’t change in 2021 despite economic concerns. “The European Central Bank will maintain an accommodative interest rate policy as long as the level of inflation remains below 2 points,” he said. 

“No particular changes are therefore expected in 2021; rates will remain low and mortgages will be affordable, especially with regards to the fixed rate.”

He added that banks would remain “competitive in relation to mortgage offers”.

READ ALSO:  

Roberto Anedda, Vice-President of mortgage company MutuiOnline.it, told Idealista that “Many problems in the economy have not yet come to a head“.

“We’re still struggling with the long-term effects of the pandemic,” he said. “2021 will still be a year of uncertainty, but at the same time it is expected that it will not be as dramatic (as 2020).”

“In recent months there have also been positive factors; many Italians see buying a property as an excellent way to protect their savings from a crisis.”

See more in The Local's Italian property section.

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PROPERTY

Five expensive mistakes to avoid when buying a house in Italy

Italy may be known for property bargains, but the purchase process itself isn't cheap - and certain mistakes can make it far more costly for buyers.

Published: 27 June 2024 11:05 CEST
Five expensive mistakes to avoid when buying a house in Italy

There’s always a lot to keep in mind when buying property, but the Italian purchase process may be quite different to what you’re used to in your home country.

As well as involving high taxes and fees, it’s likely to be more complex and formal in some ways – and this can lead to potentially costly pitfalls.

The Local spoke to three Italian property law experts at legal firm Mazzeschi to find out what foreign buyers should be aware of before they sign anything. 

1) Check your estate agent’s contract

If you use a real estate agency in your Italian home search, normally you’ll need to sign a contract with them. That contract should stipulate their fees, their duties, and their tax information.

There is one other thing in the contract which potential buyers must look out for: an exclusivity clause, meaning the potential buyer may use only that estate agent in their property search for a set period of time.

“Usually in Italy estate agents like using this exclusivity clause. It is normally the same for sellers as it is for buyers. It means you cannot have another estate agent and usually contracts say this, “says Caterina De Carolis, Lawyer at Mazzeschi.

READ ALSO: How to avoid hidden traps when buying old property in Italy

“If the time frame is not yet up, and the potential buyer uses another agency, they may still be liable to pay the agency fee for the initial estate agent they entered their contract with,” she adds.

Some contracts might not have an exclusivity clause. It’s always worth double-checking.

“If you use another agency to find a house, you’ll be liable to pay the agency with the exclusivity clause in the contract around 2-5 percent of the house’s sale price,” says De Carolis.

“The exact percentage is always in the contract.”

2) Make sure to agree on a price beforehand

This rule is universal, and may sound obvious. But there are costly consequences in Italy if the price is not formally agreed and written down.

Lawyers at consultancy firm Mazzeschi urge their clients to make sure the full price of the property is declared in the transfer deed (l’atto di trasferimento).

This is because if you resell at a market price higher than your purchase price, you are subject to pay a capital gains tax called plusvalenza. Plusvalenza is the difference between purchase and sale price.

Checking the price of the property beforehand will save you in the long run. Photo by Kirill KUDRYAVTSEV / AFP.

3) Don’t change your mind – it will cost you

If the potential buyer has signed a binding proposal (proposta vincolante) – the process before a preliminary contract is drawn up – it becomes less straightforward to withdraw from the purchase.

“This is because the binding proposal in Italy is a lot more formal,” says Mario Mazzeschi, Head of and Attorney at Law of Mazzeschi Consultancy. 

The binding proposal works similarly to an offer. When the potential buyer puts forth their offer, the potential seller decides whether or not to accept. The period of time for this part depends on the proposal drawn up.

READ MORE: Five things non-residents need to know about buying property in Italy

If, before the time is up, the potential buyer decides to withdraw their offer for any reason, they will likely lose their deposit.

“This deposit is usually around 5-10 percent in most cases, so the buyer will have to pay that,” says De Carolis.

“If the buyer decides to withdraw, they are usually liable to pay the seller twice the amount of the deposit.”

If the proposal is not accepted by the potential seller, the potential buyer pays nothing.

4) Don’t pay anything before the preliminary contract is signed

With the exception of the above, buyers are advised not to pay anything until the preliminary contract is signed. The preliminary contract allows both parties to set out clear guidelines.

“The buyer should check with a lawyer before signing the preliminary contract as it will save them in the long run,” says Mazzeschi.

A notary should be present at this signing, adds Giuditta De Ricco, Lawyer at Mazzeschi Consultancy.

“Notaries are public functionaries. They are never on the side of the buyer or the seller, but for sure a notary is needed.”

“They are completely neutral and often it is wiser and safer for the potential buyer to put their deposit into the notary’s escrow account so the notary can transfer the money to the potential buyer.” 

5) Have the property checked beforehand

While the notary will normally check the paperwork before the sale goes through, you’ll need a different professional to check the property itself.

It may then be in the buyer’s best interest to hire a contractor themselves (this will normally be a qualified geometra, or surveyor) to get the structure of the building checked out and detail any faults or repair work needed.

This should be done before the negotiation stage, as unless there is something specific in the preliminary contract you may lose anything you have paid by pulling out of the purchase at this stage.

“The only way out of this after signing a contract is if you can prove the seller acted maliciously,” says Mazzeschi.

Key vocabulary

Transfer deed – l’atto di trasferimento

Binding proposal – proposta vincolante

Notary – notaio

Preliminary contract – contratto preliminare di vendita

Final contract – atto di vendita or rogito notarile

Deposit – caparra

Surveyor – geometra

Estate agent – agente immobiliare 

Please note that The Local cannot advise on individual cases. For more information about how you can buy property in Italy, contact a qualified professional. 

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