2007 Review
2007 saw the lowest rise in property values since the recent property boom in Italy started almost 10 years ago. After significant, extended growth, we’re now seeing a slowdown which has, however, been expected. The local mortgage market has similarly witnessed a slow in growth as the Central European Bank has increased interest rates. A noticeable trend that has been emerging is buyers purchasing property more for their own use as opposed to investment, which has also had an effect on the market dynamics. In the coming months of 2008 the buyer’s market is definitely set to continue, with the buyer retaining the upper hand in sale negations.


Commissions for those buying increase
Due to the overall slowdown in the property market sellers are being asked to pay a higher commission while buyers can usually bank on getting a discount. The current leveling off in demand has meant estate agents are having to spend more in time and advertising. Since the market started to slow a couple of months ago, property sellers are being asked to pay 2-3% more in commission, taking the fee to up to 5% on the final sale value for the seller. This situation is expected to continue for 12-24 months. In essence, it’s a good time to buy, you have the choice of the market and estate agents are willing to give an attractive discount on buyers’ commissions and the leverage to ask a discount of 10-15% on the property price. However when dealing with a quality product at the right price in the right location a discount may not be given, especially as the very top end of the market often has its own dynamics, performing well even when the rest of the market is at best stable.

Stats:
Top discount 20%
Average 10-15%
2-3 years ago 5-7%

Highest commissions
4% seller / 4% buyer asked by the Toscana Group
source – Il Sole 24 Ore

Rental yields - Shops offer better returns than houses!
Boutiques, bars and warehouses have been returning 7-8% gross as opposed to 4% for apartments. Industrial property yields 8.5%

With a modest investment of around 200,000euro industrial property, suitable for small business activities, at 1,800 to 2,000euro/m2 (new build) can be bought that in the current market situation will yield 8-8.5%.

The demand for large open spaces, even basements, sheds and warehouses has become evident in all the large cities as well as many of the larger provincial towns like Lecco, Pisa, etc.

Where to buy
The key places for foreign investors to buy are in what can be termed ‘cities of art and culture’, for example Florence or Venice, but also the capoluoghi like Como, Bergamo or Siena. The average age of foreign buyers is put at 50-60; the British are the number one property buyers in Italy, followed by the Germans and then Americans. The average property for British or American buyers is estimated at 80 m2 and costing between €300,000 - €500,000.

The most frequently requested type of property for this region or the most sought after is either in a ‘città d’arte’, like, for example Venice, or a single-family house with land. Additionally, properties in tourist areas or by the sea are popular requests.

Foreigners are not buying in any noticeable degree in Lombardy, but should be, due to the wide variety of things the region has to offer, from skiing to the lakes through to its vast amount of ‘città d’arte’, as well as being superbly served by excellent infrastructure.

TO WATCH:
Places where there hasn’t been a huge rush of UK buyers, are they still off the radar?

Oltrepo Pavese is described by locals as a ‘little Tuscany’: An area where the only thing grown is grapes. With lots of tiny hamlets and rolling hills, covered in vines, along with the odd castle here and there, it presents an attractive alternative to Tuscany. Very popular with, above all, the Milanese, who have traditionally been the main second homebuyers, the northern edge of the area could well become a commuter belt for Milan, as improved infrastructure means the city is 45 minutes away by car. In this case expect property prices to move. Currently, at a conservative estimate, prices are easily half of those in Tuscany.

Bergamo was not so long ago one of those almost unheard of medieval walled towns, now more firmly on the international map with the development of its airport, Milano-Orio, flights come in from Glasgow, Leeds-Bradford, Liverpool, Luton, Stansted, Manchester, Newcastle, Dublin and Shannon, principally with Ryanair, who view it as their Italian hub, and Jet2. The historic center, the città alta, is not only beautiful but offers real, long-term investment prospects.

Bormio Terme and Santa Caterina Valfurva: Bormio is a beautiful spa town with outside hot pools in use even in the winter, close to Livigno for tax-free shopping. With its old historic center, and positioned on the edge of Lombardy and Trentino alto Adige, it’s within easy reach of the slopes. Santa Caterina Valfurva is hotly tipped due to its altitude, excellent ski facilities and proximity to Bormio; expect this location to become more popular with a consequent rise in property values.