Real estate in Italy: the market on the way to recovery

Mainly due to the criticality of the COVID 19 situation and the post-pandemic crisis of the world economy, even the Italian real estate market, despite tending towards stability, has suffered a considerable blow with decreases in sales volumes in the sector equal to -15,5% in the first quarter of 2020 and with a peak of -27.2% in the second quarter, according to the Italian Revenue Agency.

Although the presence of volatility linked to this period of uncertainty cannot be denied, the advent of a favorable and concrete change did not take long to manifest itself.

In fact, according to the financial stability report of the Bank of Italy released in April 2022, residential property prices have developed steady growth in all European countries since July 2021 and the value of houses has stabilized at higher levels. more than a quarter compared to the last half of 2019.

More than 181,000 homes have been purchased in Italy during the first quarter of 2022, with increases in real estate value of + 14.1% compared to the same quarter of 2021. Milan is the city with the most marked growth rate (+ 36%), followed by Palermo (+ 15.5%), Bologna (+ 11,1%) and Florence (+ 10,2%). Finally, Rome (+ 6,4%), which is the city with the largest volume of sales counting over 9 thousand transactions. (Figures derived from the press release dated June 7^th 2022, Italian Revenue Agency).

As regards the average price per square meter of the main municipalities updated to May 2022 (statistical source: Immobiliare.it), we find Milan in first place (5,074 € / m²) then Florence (3,915 € / m²), Venice (3,515 € / m²), Rome (€ 3,345 / m²), Bologna (€ 3,098 / m²), Naples (€ 2,583 / m²), Turin (€ 2,025 / m²), Genoa (€ 1,603 / m²) and Palermo (€ 1,374 / m²).

A gradual recovery of the housing market is therefore underway and, although the increase in prices is more contained compared to other European countries, the financial risks are quite limited, and this change goes hand in hand with the improvement of the quality of life of Italian families.

Among the main factors that could support this positive turnaround in the long term and that favors real estate investments in Italy, we can include:

• The exemption from the mandatory requirement to possess the Covid-19 Green Certification (green pass) to enter Italy, issued by the Ministry of Health and valid from June 1^st 2022, as well as the removal of quarantine for travelers from outside of the EU, implemented from March 1^st
• The introduction of the 1-year elective residence visa and the long-term Schengen tourist visa (5 years). To apply for an elective residence visa, the foreign citizen must reach an annual income of not less than 31,000 euros and confirming the availability of accommodation in Italy to be used for residential purpose.

For the renewal of this elective residence visa, it is necessary that the applicant does not interrupt his / her stay in Italy for a continuous period of more than six months. In addition, after 5 years of regular stay, it is possible to apply for the EC long-term residence permit, which is permanent and entitles the holder to equal treatment equivalent to that of EU citizens.

For periods of less than 90 days it is instead possible for non-EU nationals to apply for a long-term Schengen tourist visa, for which it is necessary to prove that the purchase of a property in Italy has been finalized, and to have been in the Schengen area previously on at least one occasion. Foreign citizens can also apply for business visas valid for 6 months to carry out scouting of properties upon presentation of a letter of intent and an official invitation from a duly registered Italian real estate agency (also in this case, the 90-day limit applies).

• The establishment of the special tax regime for new residents, for which a foreign resident who transfers his / her tax residence to Italy can opt for the payment of an annual flat-rate tax of € 100,000.00 on his / her foreign income regardless of actual amount of the latter and is entitled to this facility for 15 years. This sum must be paid in a single installment by June 30^th of each year and the taxpayer’s dependent family members can join the scheme by paying an additional € 25,000 for each member of the family unit. It should also be mentioned that this facility also covers inheritance tax (for property located in Italy) and asset transfer tax (for assets from third countries).
• The existence of bilateral agreements between Italy and various signatory states, including the U.S., which define the mutual right to purchase property without restrictions and under the same conditions as a local citizen.
• The proposal of attractive state incentives such as housing sales projects at the base price of 1 euro with renovation costs to be borne by the buyer, to bring period buildings and small semi-uninhabited towns in the countryside back to life.

Given the favorable data of the last period and the commitment of the Italian government to further increase the attractiveness of the Italian economy for investors, the real estate trend remains positive and, after all, it’s also easy to foresee sustained growth in the second half of 2022.

The Italian real estate market therefore represents an interesting investment opportunity. To mitigate legal and taxation risks, it is recommended to contact qualified professionals with experience in the market, who can carry out the appropriate real estate due-diligence checks and support you during all phases of the investment transaction.