Many people have a dream of owning a property abroad and despite the fall in sales of Spanish and Portuguese properties and the rise in demand for holiday homes in Bulgaria and Croatia, the Italian market remains constant: in 2012 and 2013 more holiday homes in Italy were purchased by German and English buyers.
Buyers Guide – So, if you are looking to buy yourself a slice of Sicily or a bolt-hole in Bari, here are six things to consider before you start your search.
Region
Whether you’re looking for a holiday home or a permanent residence, make sure you do your research. Italy’s twenty regions are a diverse mix of mountains and valleys and dusty plains and lush grasslands, so finding the one best suited to your needs should be your first priority. For example, Florence has an average winter temperature of two degrees compared to Positano’s nine degrees. Summer temperatures in Calabria can exceed a blistering 32 degrees in comparison to Lombardy’s average of 23, and in May Puglia on average has 37 mm (1.5 inches) of rain, whereas Sicily only experiences a quarter of this.
If you’re partial to a spot of skiing then Piemonte or the mountains of Abruzzo would be an ideal place to start your search. If you’re more of a holiday resort lover, then maybe the Venetian lido or Le Marche’s coastal towns will be better suited.
The only way to truly decide upon any region is to visit it, and once you have made a decision then revisit at different times of the year; a coastal town may seem exciting when full of beach umbrellas and holiday makers, but how will you feel about it when the tourists have left? The mountainous Abruzzo has charming, ancient villages to explore on a sunny June afternoon, but only those who truly love the place will still see the charm on a dreary February morning.
Holiday Home or Residence
One thing to consider is will the property be a holiday home or a permanent residence. At first you may think that they would both have different considerations, but there’s very little to separate them.
Obviously for a holiday home two of the most important things to think about are proximity to an airport and transport links and, importantly, security is an issue during the weeks when it will be unoccupied.
If you are choosing to locate permanently consider if you need to find work. Your chance of obtaining employment will be increased if you are closer to a major town or city. If you are hoping to set up a business this will require serious consideration; will there be the same demand for English language lessons in rural Basilicata as for holiday accommodation in Sardinia?
But before you make any decision, consider this, many holiday home owners eventually become full time residents when they decide to retire.
Location
What type of property would tick all your boxes? Some people will be content with an apartment and sea view, whilst others may prefer a townhouse on a piazza or a rural retreat.
Pay close attention to the type of house that you think will suit you as you may find your requirements change during your search. A townhouse that’s tucked up a cobbled vicolo may have a traditional charm, but consider how far away the nearest parking spaces are. If you want to come completely absorbed into everyday Italian life, then a townhouse may be ideal, but don’t forget to factor in the sound of late night revelry during the summer festivals.
A rural property has its own pros and cons: a positive is the tranquillity and, if you’re lucky, spectacular views coupled with the opportunity to grow your own produce. However, on the downside is the prospect of being snowed in during winter, the distance from local amenities and periods of isolation.
Habitable or Restoration
A house for restoration may seem a bargain in comparison to a new build, but before you even consider viewing anywhere, sit down with a calculator and start doing your research.
A tumbledown farmhouse on a hillside may make a perfect restoration project, but will it be cost-effective? Look out for those hidden costs such as converting its use from a previous farming property to an urban residence. Make sure you check the land boundaries and if anyone has a contract to work it: it won’t help your relationship with the locals if you suddenly tell Nino that, despite a long-standing agreement, his family can no longer grow their artichokes on your land.
If you have decided on the locality where you wish to buy, make enquiries at the comune (council) offices about the cost of obtaining work permission and any restrictions. I personally know someone who had to repaint the outside of their house as the colour they had originally chosen was not on the council’s list of acceptable colours.
Habitable in Italy has a completely different meaning than the English or American definition; in Italy, habitable can refer to anything with a roof and four walls, it may not mean the building has windows and it certainly won’t indicate that all services are connected.
One thing to also point out is, if you view a property that is furnished, make sure you ask what is included in the purchase price. More often than not, when vacating a property, the vendor will, apart from the bathroom’s sanitary ware, remove everything including the light bulbs. If you want the kitchen fittings, then you’ll need to negotiate a price and have the purchase written into your contract to buy.
Community
Italian people are mostly hospitable towards foreigners and welcome both the increased financial support they bring to the community and the development of redundant properties.
If your grasp of the language is limited, then it might help to consider more populated areas where the possibility of meeting local people with working knowledge of your native language is higher. In more rural locations, if you need the security of your native language, make an important part of your search the need to enquire if there’s an expat community nearby. Maybe consider joining one of the many forums online and use this to determine if the area you have selected has any pockets of expats nearby.
Renting
Finally, to be doubly sure you’ve made the right decision regarding location and house type, it’s a good idea to rent for a period of time that is longer than the usual two-week break, and if this isn’t possible, most definitely rent out of season. Renting will give you the opportunity to truly experience the day-to-day life around you, whilst giving you the opportunity to make friends, which in turn may lead you to discover your dream house in Italy. This said whatever and wherever you choose to buy, the important thing is to enjoy the experience.
Transaction costs are moderate to high in Italy
How high are realtors’ and lawyers’ fees in Italy? What about other property purchase costs?
| Transaction Costs | ||
| Tax | Percentage | Who Pays? |
| Registration Tax | 3.00 – 7.00% | buyer |
| Value Added Tax (VAT) | 4.00% – 22.00% | buyer |
| Land Registry Tax | 1% | buyer |
| Notary Fee | 1.00% – 2.50% | buyer |
| Legal Fees | 1.00% – 2% (+ 22% VAT) | buyer |
| Real Estate Agent’s Fee | 1.50% – 4% (+ 22% VAT) 1.50% – 4% (+ 22% VAT) | buyer seller |
| Costs paid by buyer | 9.05% – 32.82% | |
| Costs paid by seller | 1.83% – 1.50% | |
| ROUNDTRIP TRANSACTION COSTS | 10.88% – 37.70% |
How difficult is the property purchase process in Italy?
There are no restrictions on foreign ownership in Italy.
Any money remitted from outside Italy for purchasing property, should be officially documented to ensure that the proceeds of any resale can be repatriated.
The first step to purchasing property in Italy is to hire a real estate attorney, to protect your interests. Although the real estate transfer process is a regulated process, it is potentially biased against the buyer. Keep in mind also that Italian law provides for pre-contractual liability. In the event that you feel aggrieved by the seller’s unfair behavior, you can file charges to be reimbursed for expenses.
Once you have chosen the property, make an offer. You must pay 1% of the purchase price as a gesture of good faith. Unfortunately, an offer of purchase is only binding on the buyer; the seller may still consider other offers. It is best to specify a time limit in the offer document, so as not to be left hanging by the seller.
The preliminary contract
Italy Riviera propertiesIf the seller accepts, the deal becomes binding on both parties. A preliminary contract or a compromesso is then drawn up by the seller, his attorney, or real estate agent, containing the sale price, the amount to be paid as deposit, the completion date, the land boundaries and details of the property, and any other relevant clauses (i.e. water rights and rights of passage).
Upon signing of the compromesso, the deposit is raised to 10% to 20% of the sale price, depending on what has been agreed. In the event that you decide not to pursue the purchase, the compromesso will be forfeited or the seller may seek legal action to enforce the purchase. On the other hand, if the seller backs out, he will be liable to pay double the amount you have given as deposit.
The notary performs due diligence
Closing usually takes six to eight weeks. The notaio or notary public has the responsibility of performing due diligence – although he is chosen by the seller, he acts for both parties. When the title search has been conducted to your satisfaction, pay the final balance and sign the deed of sale or rogito (witnessed by the notaio). This requires you to present a valid identification document, and your tax code.
The notaio will issue you a copy of the deed and present copies to the tax office and Land Registry. The necessary government duties must be paid for the sale to be officially registered. Registration protects the property from third parties charging any other interests against it. The notaio will also ensure that the utilities have been transferred to your name, and inform the local police of the change of ownership within 48 hours of signing the deed, in compliance with anti-mafia laws.
It takes an average of 15 days to complete all the four procedures needed to register a property in Italy.
Footnotes to Transaction Costs Table
The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.
Registration Tax:
For old properties, registration tax is 3% for those buying their main home, under law 1089/39. The home must be located in your present or future comune of residence (or in the comune where you have or plan to have your main place of business) and it must not be classified as a ‘luxury’ home.
The registration tax for nonresidents and those buying second homes is 7%, so if you’re planning to become a resident in Italy, do so 18 months before buying your home. The tax is calculated on the declared value of the property and not on the purchase price.
Registration tax on the purchase of building land is 8%. Registration tax on the purchase of agricultural land is 10%.
Land Registry Tax:
Land registry tax is payable on all property transactions. Resident buyers of their first home pay a fixed fee of €168, whether the property is an old property or newly-built. Buyers of second homes and nonresidents pay 1% of the declared price of the property.
Cadastral Tax:
1% or a fixed fee of €168 for new properties. Fixed fee of €168 also applies if the property is their main or only residence.
Land Registry Tax (imposta catastale)
Land registry tax is payable on all property transactions. Resident buyers of their first home pay a fixed fee of €129.11, whether the property is an old property or newly-built. Buyers of second homes and nonresidents pay 1% of the declared price of the property.
VAT:
Buyers of new properties do not pay registration tax and instead are liable to pay Value Added Tax (VAT), which ranges from 4% to 22%.
VAT is levied at 4% for first-home resident buyers, at 10% for second-home and nonresident buyers, and at 22% on luxury homes with a rating of A1 in the Property Register. New properties are defined as those dwellings sold within five years of completion of construction or restoration.
The VAT rate will be increased to 24% in 2016, and then to 25% to 2017, and then to 25.50% in 2018.
Notary Fees:
Notary fees generally range from 1% to 2.5% of the declared value of the property. The cost of a notary is based on a property price list prepared by the Bar Association and varies according to the town council (and is subject to 22% VAT).
The notary fee is payable when you sign the final contract. There are widely varying estimates and everything is up for negotiation, but €2,000 for a property costing €50,000 up to €3,500 for property costing €500,000 might be typical, including the cost of the fee of the conveyancer (geometra) which is levied depending on work, and can itself vary from €500 to €3,000.
Legal Fees:
Conveyancing is usually performed by a lawyer (avvocato) and the legal fees are usually around 1% to 2% of the declared price of the property. Legal fees are subject to 22% VAT.
A preliminary contract or a compromesso is drawn up by the seller, his attorney, or real estate agent. Hence, the buyer may opt out of paying the legal fees. The buyer is in any case protected by the public notary. The public notary is much more important than generally believed, he is obliged to check carefully all documents and if they are not 100% correct, no contract at all, so the buyer is very protected.
Agent´s Fee:
The standard agency fee, regardless of the type of property (commercial, residential, or land sales), is between 3% and 8%, and is usually shared between buyer and seller. The agency fee is payable at the signing of the preliminary contract.