Covid-19 and the effect on real estate in Italy
A new report and infographic by the renowned Italian news outlet Corriere della Sera shows the increase in prices for housing in Milan, meaning that the real estate market in Italy is making a comeback. It states that the average cost of a new home in Milan is € 5,898 per square meter, up 1.1 %in the last six months.
The infographic (below) shows the price per square meter for each neighborhood of Milan.
Real estate sales in Italy decreased during the pandemic
The Covid-19 pandemic had a serious effect on the real estate market in Italy. There was a fall in sales in the first half of 2020, according to an Istat report in March 2021. Total sales amounted to 157,126 in the first quarter (-17.9% compared to the fourth quarter of 2019). [Source]
Data from The National Council of Notaries recorded a decrease in the sales of residential buildings at around -25% in Bologna and Florence and decreased sales of over 50% in Milan and in Verona. Many contracts fell through or were delayed due to the closure of many public offices.
Luxury property sales remained fluid
Although sales plummeted during the pandemic, the luxury property market in Italy moved forward at a steady pace. The Milano/Rome Report by Engel & Volkers reveals that the market remained fluid.
The pandemic had brought new needs for buyers. Many workers were forced to work from home and found that the kitchen table just wasn’t enough. The search for homes with larger spaces or an extra room to turn into an office became a priority for many families. After long periods of lockdown and staying indoors, homes with outdoor spaces, balconies and terraces were also high in demand.
The most popular neighborhoods in Milan were Brera, Pagano, Buonarroti, Fiera – Sempione, Porta Venezia – Indipendenza, Isola – Porta Nuova and Porta Romana – Medaglio d’Oro.
The pandemic also brought the return of many Italians who had been living abroad. Living in isolation in a foreign country was emotionally and intellectually challenging and although salaries in Italy are not what US or UK companies can offer, many Italians decided to return to be closer to their families.
Buying property in Italy
If you have been following the real estate market in Italy, you have probably come across the pre-pandemic news about the 1 euro houses. From north to south of Italy there are communities offering houses for 1 euro, but yes, of course, there’s a catch; you must book a property tour which costs about €400 to see the homes and the buyer must agree to invest from €20-30,000 to renovate the property. On paper, the cost of the house is one euro, but there are the additional costs of renovation, laborers and updated utility installations.
Despite the slower-than-usual service delivery, banks continue to operate in compliance with the anti-covid-19 regulations. Buyers wishing to invest in real estate in Italy for personal use or investment can take advantage of the low mortgage rates now on the market. In recent months, Gen Z consumers buying their first homes are leading buyers in the market.
The average amount for a mortgage requested is estimated at €143,423, an increase of + 4.5% compared to the same period last year.
Understanding taxes and mortgages
According to Abruzzoreality.com, when buying a property from a developer as your main residence – you pay 4% of the purchase price, plus 200 euros registration tax, 200 euros mortgage tax and 200 euros stamp duty. As a second home – you pay 10% of the purchase price (unless the property is classified as a luxury property, in which case you pay 22% of the purchase price).
To estimate your monthly payment, you will need the price (prezzo), deposit (importo richiesto), Mortgage Amount (importo del mutuo), Interest Rate (tasso di interesse) and the Term (durata finaziamento).
If you sell a house in Italy within five years of buying it and the sale price is more than the purchase price, you may be subject to capital gains tax on the difference (but, any costs for renovations can be used to offset the tax, provided that there are invoices for the work). In that case, you’ll be subject to capital gains tax. You don’t have to pay capital gains tax if you lived in the residence for more than half of the time you owned it.
If you are planning to buy or sell your home in Italy, you may want to talk to a real estate expert. Feel free to contact me for a referral.
Article by Celia Abernethy, MilanoStyle.com
Featured image Bellagio, Lake Como