There are many magazines on the market that help to bring together people who have a love for foreign travel, and a fascination with the possibility of living abroad. Many readers take that a stage further and look to purchase a property so they can really live la dolce vita. But what happens when plans change a few years down the line? Does the dream always have a happy ending or can it rapidly turn into a nightmare?
Susan and Malcolm had a dream of owning a home in Italy and, for the last 13 years, they’ve done just that. Their idyllic two-bedroom cottage is set in a quaint Umbrian village and enjoys views over the countryside to Lake Trasimeno in one direction and to the fabled hilltop town of Cortona in the other.
Malcolm said “We’ve had some great times here, with family and friends too, but now we want to sell up and move on, travel around a bit, see other places and help our two boys out financially”. Their plan sounds reasonable enough but the problem is their property has been on the market for over two years without a sniff of an offer, despite lowering the asking price several times.
A few miles away David, a semi-retired English academic, has successfully rented out his fully serviced 12-room villa for the last seven years. Having finally achieved his ambition of clearing the mortgage last year he put the villa on the market with the intention of buying two smaller places with the proceeds, one in Italy and another back ‘home’ in England. Looking to take life a little easier, he said “This has been a great little business but the last few years have been tough. I’m too old for all of this, or will be very soon, and I had hoped it would be attractive as a going concern. Bookings are up for this year and this will be an excellent season. I just hope it’s my last one – I want to put my feet up!”
So far David has had only one viewing with no indication of any offer forthcoming. With asking prices around £70,000 and £600,000 respectively, these two properties are clearly at opposite ends of the buying spectrum. Are these owners just unlucky or is this part of a worrying trend?
Donatella, an estate agent based in Castiglione Del Lago, thinks it’s a tough selling market just now. “You do need a bit of luck but, outside of the big cities, it’s always been like that. In a rural area it’s always been a strange market. You can have a great property at the right price and nobody seems interested while at the same time poorer quality homes that are well overpriced can sometimes sell quickly. Also, Italians don’t like to reduce their asking price!”
At a nearby estate agency in Passignano sul Trasimeno the owner, Loretta, agrees with her colleague. “I would say that generally it is slower to sell right now, but there are signs of the market picking up. 2013 was better than 2012 and the trend is continuing albeit slowly. We are seeing English, American, Belgian and Scandinavian buyers becoming more active, and Italians are starting to look again too. They have the money but in recent years they’ve been too scared to buy because of the economic crisis”.
The Economist House Price Index shows exponential growth in Italian house prices between 1997 and 2008. A slower drop off followed, with a slight recovery in 2010 before the downward trend resumed. Donatella’s experience echoes these figures as she observed “The real bargains were to be had in the 90s. Prices were probably generally fairer for a while after that as Italians realised the true values of their properties but then greed kicked in and prices were too high from about 2006 onwards”.
When things slowed down it wasn’t just the sellers who suffered. Loretta added “Many estate agents went out of business. In the boom years it was all too easy to sell houses and make big commissions. Then it became too difficult and many businesses simply failed”.
It’s often noted that the Italian property market is different to those in France, Spain and even the UK as it didn’t have the same level of expansion and was therefore more resilient. Tight controls on building, particularly in the countryside, meant that restoration was the bigger attraction.
However, Italians have long tended to prefer new builds and the younger buyers in particular have been moving into condominium style developments in towns rather than traditional or restored rural properties like their parents. Changing demographics and circumstances, like couples separating or divorcing for instance, have also resulted in a greater tendency to rent rather than buy.
Donatella agrees with this and said “The types of houses that Susan and Malcolm, and David, are trying to sell are more likely to appeal to foreign buyers, who are only now starting to return in numbers. The fact is that a good property, in a good area, on sale at a good price is still not guaranteed to sell quickly. It’s always been like that, there’s a huge element of luck involved”.
One factor arguably working in favour of these sellers, and others who bought some time ago, is the exchange rate movement over the last 15 years. In 2000 the value of £1 peaked at just over €1.75 while today (at time of writing) your £1 only buys around €1.25. Put simply, that means that to buy a €100,000 property in 2000 cost £57,143 while selling today at €100,000 would yield £80,000, an apparent profit of £22,857. Of course that over-simplifies the whole calculation as it ignores inflation and other relative price movements, but on paper at least it still represents a healthy profit of 40% on the purchase price, due only to currency fluctuation. That may provide sellers with some price flexibility or “wiggle room” but, to benefit in any way, first they have to sell.
For David, and for Susan and Malcolm, their only option is to wait it out and hope that luck will be with them and that someone soon will fall in love with their properties in exactly the same way they did all those years ago. The general message for all foreign homeowners in Italy is to start thinking about your exit strategy early and seek good advice, as there are no quick fixes and no guarantees.
So be aware, for some, la dolce vita may leave a bitter aftertaste.
Please note that the names of all the homeowners and estate agents have been changed to protect their privacy