I remember sitting in the offices of a big mover and shaker in the Italian property industry discussing the repercussions of Lehman Bros last year and whether the soon-to-be-sworn-in Barack Obama would have any impact.  His response was a motto: ‘There wouldn’t be so many wolves if there weren’t so many sheep.’ It made me smile ever so slightly being sat, as I was, across the table from one of the biggest, although admittedly infinitely likeable wolves you could ever meet.  

But it made me think about Pinocchio – the quintessential Italian story.  Watch Roberto Benigni’s film version set in Umbria and you will get a true insight into the Italian psyche.  Shortly before his experiences with a whale and a land of donkeys, Pinocchio is conned out of his bag of gold coins by a very charming cat and fox – they tell him to invest in a hole in the ground for an enormous, guaranteed return, and so he does. They return and promptly steal the lot.  We then witness a hysterically desperate wooden top jumping around the countryside.  Does this sound familiar?

No doubt there are cats and foxes circulating in the Italian property industry. Unfortunately, when conducting initial conversations with clients enquiring about property search services in Italy I do sometimes feel like the very first cat the newly feline-averse Pinocchio encounters after his painful experience.  Despite this, I will now give you two very good reasons to look carefully at the residential property market in Italy in 2010, you may feel I am either a cat or a fox, but if you do, I reserve the right to call you a wooden top.

Market resilience

Unfortunately statistics have a very bad reputation, but here are a few worth taking note of:  according to the most recent FIAIP market report for residential property bought for holiday use in Italy, values rose for top-end holiday properties by between 9 and 27% between ’04 and ’09.  
The same kind of properties fell by only -0.6% during 2008. The first half of 2009 saw a drop of between 0.85% to 1.25%, again at the top end.

The conclusion would seem to be that if this market can prove so robust during the worst economic downturn in living memory then it is a resilient market indeed.  When making this point to one journalist, he pointed ou that ‘buy in Italy and you won’t lose your money’ isn’t the most captivating headline.’ However, looking at FIMAA’s study of annual variations in prices for holiday homes in all regions of Italy published in August 09, in some regions prices have even risen ever so slightly (+0.1% to 0.3%), others have remained stationary and the ones where prices have fallen have been in the region of maximum 1.1%.

In the last quarter of 2008, I was advising that quality homes in areas like Tuscany, Venice, the northern lakes were not going to see a wholesale collapse in price, and, at best, buyers could hope for slightly more leverage on discounts once negotiations began.  However, foreign (UK) buyers were not to be persuaded.  But what has happened this year?  Talking to one top-end property broker in Florence very recently they found that in Q2 of 09, buyers started to realise the market wasn’t going to collapse and in fact Q3 proved very busy, but not with UK/US buyers, who started the year expecting a collapse and have not been seen since in any great numbers.

In the latest Nomisma report on the Italian property market, published on November 27, the indications are that March-April saw the market hit bottom, and that while sales volumes are still low (down 15% compared to 2008), things are ever so slightly improving.  Overall, prices for residential property fell by 1.6% in the last six months, which for the year is placed at -4.1%, contrast that with -30% for the US and UK in the same period.  
                                           
So, what’s the message here?  Basically, if the residential market, and especially the holiday home market, have proved so robust during the last 12 months, Italy remains a sound place to buy a holiday home from a numbers point of view.  Leverage on price is there, although don’t expect sellers to knock 30-40% off the moment you leap out of your rental car.  Industry operators are feeling a little more confident about 2010, expecting improved volumes and prices dipping no more than 1 or 2% before starting to increase again in 2011 (the latest Nomisma report forecasts between 1.1% and 2.5-2.7% for the next 12 months), all of which suggests that the next 12 months could be an attractive moment to buy.

‘Cheap’ Italy

Pinocchio came unstuck of course because although he had a bag of gold coins, once the cat and the fox had had a chat, he was convinced he could become truly rich investing in their hole in the ground.  Do not buy in Italy using the same rationale.  As detailed above, the market, historically, doesn’t lose hugely, in fact pre-crisis, it had a healthy habit of going up, but not spectacularly.  Buy in Italy because you actually want to enjoy visiting/living in the country.  

It’s often felt you need George Clooney’s disposable income to do so, and indeed to go shopping for a villa on Lake Como, best put aside €5-10 million.  However, surprisingly, you could actually buy something you could enjoy for much less.

I sourced a beautifully restored property, including guest accommodation, totaling 350m2 in its own grounds, 5 minutes from the above-mentioned lake.  The seller, at the time, wanted €400,000, having already spent about the same restoring it.  It now returns €3000/week in holiday rental.

In the colline piacentine, an old farmhouse of 200m2 to restore, on the side of a hill looking down on Bettola, with 6000m2 of land, asking €160,000.

In the ski resort of Carona, a picturesque village in the valley of Brembana, you could buy a new apartment in a very nice ‘chalet-style’ development right on the chair lift but still walking distance from the village center, for under €100,000.  What makes this attractive is, apart from the price, it’s about an hour from an international airport and 25 minutes from what will soon be a 7-star spa resort.   

Even in Tuscany, there are still areas where prices are relatively cheap, if you know where to look.

Paul Hudson is a buying agent with specialist knowledge of the market in Italy (+39 338 9414596 or +44 (0) 800 622 6745)