Understanding the Italian Real Estate Market

Intro

How many times have you thought, ‘I’d vacation more if I didn’t have to pay for a hotel!’ As fun as a hotel stay can be, there’s no place like your home away from home. Now, how many times have you dreamed of taking that European vacation you always planned, but you’re not necessarily into hotels or the backpacking idea? Wouldn’t it be great to find an alternative solution? Why not make it an Italian Villa?! I imagine that’s why you’re here in the first place.  The solution is easy enough. But first, it might be smart to consider a few things. This post is intended to share some things about Italian culture that influences today’s real estate.

A second home is not really home if you don’t feel connected to it or its surroundings. In fact, most investors don’t feel good about investing out of their own area due to alienating feelings and lack of knowledge. That doesn’t mean it is not possible, but before you select your new Italian getaway/investment, it is best to perform sufficient research to become a truly informed investor.  

A good conversation about any market consists of demographics and statistics to help gain an overall picture of what impacts the growth and changes that take place within it. My intention is not to list 100 facts that will surely be forgotten but to provide some takeaways necessary to really connect to the mentality that a future Italian investor needs to have. I advise talking to your financial and legal specialists and to do deeper research than that which can be found on this site before making any big purchase. The most influential facts are discovered on your own.

Italian People

Italy, as most people know, has a rich history and culture. The element that has the greatest influence on any culture is its people. Italian people appreciate food, beauty, and relaxation which makes it the perfect getaway destination. I’m typically not one to generalize a group of people, but here I might do just that.

Chances are you have heard about some Italian stereotypes whether by watching TV, movies, or perhaps knowing an Italian personally. Out of all the stereotypes I can think of, I think the most accurate is perhaps their inability to speak without using their hands. While living here I’ve learned hand signals for emotions that I didn’t even know I had! It truly is a work of art.

Jokes aside, to really understand what effect Italian people can have on real estate, we need to look deeper into what exactly these people do on a daily basis. To help you, I’ve broken them down into separate categories. Check them out in the following lectures.

Community

A community is both the physical location and general behavior of the people who live and/or communicate together. Looking at Italy as a physical location, in size, it would rank about 5th if compared to the 50 US states. Considering its population of 60 million people, this places it #1, being 50% more populated than the most populated state: California. So you can imagine how dense the country is. These 60 million people are sewn into the tapestry of beaches, vineyards, and mountain ranges through towns centered on Catholic churches and cathedrals connected together by a pinwheel of streets and toll roads.

Communities have their own laws, celebrations, and even, dedicated saint. Each town is a living personality. Its people take pride in their traditions and dialect. Italy’s population is centralized around its large municipalities which provide the majority of work opportunities to Italian residents.

How does real estate impact a community? In the US you can see examples of how a public schools location influences the surrounding area. Additionally, having stores and public services nearby can increase property value while being too close to a busy intersection can diminish it. The condition of the properties near your future investment can increase or decrease the value of your own property.

Italy has a long history and what is considered new construction here may not seem new to you. If a villa or condominium was built within the last 15 years it will potentially be considered new construction to most people. It is common to find abandoned projects or empty buildings, built in the early 21st century, that have never been lived in. Throughout Italy, it is also common to see a property that was built recently at the flank of one that was constructed more than 100 years ago.

There is a large general real estate market that provides work to a myriad of real estate agencies. Working through a real estate agent, many people find the home of their dreams. In the same neighborhoods, you can find properties on auction that have been lost due to bankruptcy resulting from loss of jobs or tax evasion. There are numerous benefits both financial and legal that come from buying on auction that we will detail in a later post.  

Entertainment

Another major point of interest is the miles of Italian coast that provide entertainment and serenity as well as serving as the principal interest for tourists from all over the world. Among the topic of increased property value and tied directly into its coastal cities begins our conversation about entertainment. Italian people love entertainment. An evening’s festivities are centered around a great meal whether at home or out on the town.

Italians like to make social connections over dinner conversation or getting out of the house to walk around the neighborhood or commercial centers. A visit to any coastal city exemplifies this as residents exit their homes to walk along the boardwalk each evening to breathe in the fresh air of the sea. This evidences a focus on health both physically and psychologically. Other major interests are music and dance, especially in younger age groups.

Education

Having little experience regarding education in Italy, I will briefly share some things I have noticed. Italy’s school system is structured differently than that of the US. Students are required at a young age to choose a field of study that most American students wouldn’t choose until graduation from High School. A quick example is this: A 13 or 14 year-old will choose their school based on what the school offers. Someone wanting to be an electrician would attend a separate school than a student hoping to become an optometrist.

Another point is the age at which students finish is typically a year after an American student; if the student hadn’t failed that school year. Additionally, the failure rate is much higher than my personal experience being from a smaller town. Perhaps this is merely due to my proximity to a larger metropolitan area if it not applicable to Italy in general.

One benefit I can see is that finishing high school with a specialized degree gives you the opportunity to become an expert in your field at a much earlier age. This makes transition into the job market potentially more fluid.

Job Market

After working so hard we finally reach retirement. The thing we are all striving for. Which, if we are being honest, is the whole basis for your motivation to read this content. Much like other first world countries, Italy has set up a pension system to support those in retirement, which is just over 20% of current Italian residents. These retirees have ranging fixed incomes based on their past work and can be seen walking, gardening, and conversing throughout Italy’s countless villages. Italian retirees receive healthcare benefits and are the pumping heart of a strong pharmaceutical industry.

With a stagnating population due to a low birth rate, changes need to take place to continue to support the ever-growing number of retirees.  Many Italians are looking to make extra income online or by investing in properties in order to offset the potential future pension difficulties.

Many businesses cater to the needs of this large demographic, including that of the real estate industry. Most retirees own a home and spend much time and dedication maintaining the value of their home by hiring professionals, as ‘incentivized’ by Italian law, for repairs and maintenance. Italy is not a place where you see retired people working as customer service greeters or grocers. The main difference, as I  see it, between retirees with a good pension or not, is seen in whether they can afford to pay for in-home care, which is common in many regions throughout Italy.

Italy has always been a big interest to celebrities and serves as an escape from the cares of the world. Others have made Italy a crucial part of their new life during retirement enjoying the health benefits and tranquility that comes with Italian residency. In fact, you can too! All it takes is some hard work and preparation. To discover what it takes to retire in Italy check out this free guide.

Competing Markets

While talking about community, I mentioned that there is a strong real estate market and hinted to that of the auctions. If it hasn’t been clear at this point, I am a big proponent of property auctions. I have and will continue to purchase investment properties through this channel. Though they have been around for decades, a low percentage of the Italian population takes advantage of the price advantage. And we’re talking about 60-85% investment savings!

Trying to think about the reason behind the low participation rate at these auctions, the only logical conclusion I can ascertain is that the general public are convinced that their desire for the newest Iphone, or BMW, outweighs their need to sustain themselves in the future. Even saving what to most would be a down payment on a conservative home in the main real estate market, could be equivalent to never having to pay rent or a mortgage again with the right investment. I am a personal success story of turning $45k cash into 4 cash-flowing properties. I’d love for any of you to do the same! Just ask me how.

Market Generalization

That’s it for today. We are about to jump into the actual process, so there is much more to come. Remember, markets are nothing more than a categorization of information, products, and people. As you narrow your results by comparing demographics throughout Italy’s regions, remember that you live in a market that has many of the same aspects that can be found here in Italy. Residential, commercial, and industrial real estate can be found in both Italy’s general market as well as it’s property auctions.

Italian residents are much like you and have the same basic needs and desires. If you find yourself struggling to make a property decision due to the inability to imagine life in Italy, or general fear, just do what I do; continue your search. Dig a little deeper and I am sure you can find the answers you are looking for.