Silvio Berlusconi’s resignation makes way for a new government with high hopes of saving Italy from its financial crisis. But what will be the impact of the crisis on the housing market?
Though house prices in Italy were reported up 0.5% y-o-y to H1 2011 (Bank of Italy), in reality house prices actually declined after inflation, by 1.2% y-o-y. Housing sales (seasonally adjusted) also fell 6.6% over the same period, according to Nomisma.
Yet the Bank of Italy remains optimistic, reporting signs of a steadying housing market towards the end of 2011. Real estate agents expect more sales mandates over the next few months. Note however that these forecasts were made before the peak of the crisis, and before Berlusconi’s resignation.
Italy’s GDP growth was 0.8% during the year to Q2 2011, supported by net exports and a slight improvement in domestic demand. Not so bad – but much worse list ahead, because of the crisis.
GDP growth of 0.6% is expected for the full year 2011, with even lower economic growth forecast for 2012.
Though house prices in Italy were reported up 0.5% y-o-y to H1 2011 (Bank of Italy), in reality house prices actually declined after inflation, by 1.2% y-o-y. Housing sales (seasonally adjusted) also fell 6.6% over the same period, according to Nomisma.
Yet the Bank of Italy remains optimistic, reporting signs of a steadying housing market towards the end of 2011. Real estate agents expect more sales mandates over the next few months. Note however that these forecasts were made before the peak of the crisis, and before Berlusconi’s resignation.Italy’s GDP growth was 0.8% during the year to Q2 2011, supported by net exports and a slight improvement in domestic demand. Not so bad – but much worse list ahead, because of the crisis.
GDP growth of 0.6% is expected for the full year 2011, with even lower economic growth forecast for 2012.
Analysis of Italy Residential Property Market »
RENTAL YIELDS
Last Updated: Jun 03, 2011
Both Rome and Milan are expensive places to buy apartments in, with prices above 5,000 Euros per square metre. But rental yields are relatively unattractive, at between 3.4% and 5.0%
TAXES AND COSTS
Last Updated: Sep 19, 2011
Rental Income: Nonresidents are taxed on rental income earned in Italy. The rates range from 23% to 43%. Personal allowances for spouse and family are not available to nonresidents, but certain deductions may be granted.
Capital Gains: Capital gains are not taxed if the property was held for more than five years. Otherwise capital gains are considered as ordinary income and taxed at progressive rates.
Inheritance: Inheritance taxes are levied at 4% to 8%, depending on the relationship between the deceased and the beneficiary, with non-taxable threshold amounts.
Residents: Residents are taxed on their worldwide income. at progressive rates, from 23% to 43%.
Capital Gains: Capital gains are not taxed if the property was held for more than five years. Otherwise capital gains are considered as ordinary income and taxed at progressive rates.
Inheritance: Inheritance taxes are levied at 4% to 8%, depending on the relationship between the deceased and the beneficiary, with non-taxable threshold amounts.
Residents: Residents are taxed on their worldwide income. at progressive rates, from 23% to 43%.
BUYING GUIDE
Last Updated: Mar 26, 2007
Total round-trip transaction costs in Italy range from 10% - 22% of the property value. Registration tax is 3% for main homes and 7% for second homes. Non-resident buyers pay a fixed registration tax of 7%. The real estate agent’s commission is between 4% and 6% plus, 20% VAT; typically split between buyer and seller.
LANDLORD AND TENANT
Last Updated: Dec 09, 2007
Because of strongly pro-tenant landlord & tenant laws, the rental market is shrinking.
Rents: Rents can initially be freely negotiated, but increases are restricted. Landlords can only increase the rent after the initial 4-year contract.
Tenant Security: Tenants have the right to controlled rents, and effectively eight years or more of security of tenure. A landlord may only serve a disdetta - a registered letter of notice which must be sent at least six months before contract expiry - to coincide with the end of the standard 4 years. Failure to do so automatically renews the contract for another 4 years.
Rents: Rents can initially be freely negotiated, but increases are restricted. Landlords can only increase the rent after the initial 4-year contract.
Tenant Security: Tenants have the right to controlled rents, and effectively eight years or more of security of tenure. A landlord may only serve a disdetta - a registered letter of notice which must be sent at least six months before contract expiry - to coincide with the end of the standard 4 years. Failure to do so automatically renews the contract for another 4 years.
ECONOMIC GROWTH
Last Updated: Nov 15, 2011
Mario Monti steps in
The new Italian government headed by the former European Commissioner Mario Monti is expected to limit the damage from the euro zone debt crisis, after former Prime Minister Silvio Berlusconi resigned on November 12, 2011.Berlusconi, who for 17 years dominated Italy and was the longest-serving post-war Prime Minister, had been in political decline this year, dogged by corruption allegations and sex scandals.
Monti, a respected economist hailed, must now restore market confidence.
"In a moment of particular difficulty for Italy, in a turbulent situation for Europe and the world, the country needs to meet the challenge," declared Monti.
Before Berlusconi resigned, Italy’s senate approved a 2012 budget including an austerity plan to cut the budget deficit to 1.4% of GDP in 2012 and balance the budget in 2013, according to Economy Minister Giulio Tremonti.
The deficit, nonetheless, was only 4.6% OF GDP in 2010, below earlier predictions of 5% of GDP. It was also down from last year’s 5.4% deficit. The government is confident that it will be able to comply with the EU deficit limit of 3% of GDP by 2013.
Italy’s economy is expected to expand by 0.6% in 2011, lower than IMF’s previous estimate of 1.3%. Italy’s 2010 GDP growth of 1.3% growth lagged other major European economies such as Germany (3.5%), UK (1.8%) and France (1.6%).
Italy’s credit ratings were recently downgraded by rating agencies due to their struggles to improve their finances amid euro zone debt crisis:
- Fitch Rating cut its credit rating from A+ to AA-
- Moody’s downgraded its rating from Aa2 to A2
- Standard & Poor’s Ratings Services cut its long- and short-term sovereign credit rating from A+/A-1 to A/A-1
Recently, Italy sold €5 billion (US$6.8 billion) of one-year bonds at 6.09% interest rate, the highest in 14 years, aiming to calm the markets.
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