It may still be “La Dolce Vita” in Italy today as it has been for decades. With the US housing market in ruins for a good percentage of its inhabitants, it is interesting to note that there are countries in the world where owners and investors keep their heads above water. One of them, about the size of California and with a similar topography, namely Italy, has seen favorable property appreciation in most of its regions. This beautiful country ‘il bel paese’ has not seen the “crash” in home prices that the US market has experienced because lending institutions have been very conservative over the years in their lending practices. In addition to the typical screening a prospective buyer must go through to be approved for a loan, the lender will generally not make loans on more than one property, unless the buyer is a large corporate entity with substantial assets. Most of those assets cannot be leveraged. Surprised? Hardly. That’s part of what got America into big trouble. With these conservative practices, it’s no wonder why there are no short sales or REO (bank owned) properties for sale across the country. This has had a positive effect on current property values. Italian mortgage rates have been closer to 6-7% APR for fixed loans for some time, and the maximum repayment period is similar to the US at 25 years. 80% financing is also available from various Italian banks, with loan terms similar to those in the US.
As with property anywhere in the world, location, location, and location are paramount to your ability to appreciate. Buying low and selling high is still a desired outcome. Proximity to beaches and access to resorts, large cities, historical sites, excellent restaurants, and transportation hubs will have a positive effect on property value. In Italy, property in a good location can generate an average appreciation of 5-7% per year. There are cases, of course, where a property bought in the right place at the right time can still appreciate by as much as 25%.
Europeans love their summer beach vacations, sometimes staying up to four weeks in one place. Rentals for these vacationers can average $1500 per week over the four months of the “holiday season”; good pocket change for investors. Property management companies are plentiful and offer competitive rates. Surprisingly, there are still some great property deals in beach towns, some work is required.
As the Russian writer Nikolai Gogol wrote after a stay in Italy: “Once you have been in Italy, you will forget about other lands. If you have been in Paradise, you will no longer need the land. (…) Europe compared to Italy is like a cloudy day contrasted with a sunny day.” I have certainly witnessed this first hand.
