Is the Italian Property Market Returning to Form?

It is the opinion of some that Italy’s real estate market, which has not been the strongest performer in recent years, is now returning to form. However, the …

It is the opinion of some that Italy’s real estate market, which has not been the strongest performer in recent years, is now returning to form. However, the matter is something of a contentious one with many investors remaining skeptical about the health of the sector at present.

Certainly, the Italian real estate sector itself seems keen to convey the image of a market that is returning to full health. Last month, an industry-sponsored lunch was held in Cannes, France to try and attract investment. Attendees were greeted by a sign which simply read "Italy’s Back," and Italian National Association of Construction Companies President Paulo Buzzetti said in a speech that "the time has come to go back to investing in Italy."

The speakers at the lunch also took great pains to outline the measures taken by the Italian government to stimulate the sector and promote a healthy climate for investment. Nonetheless, many investors came away from the event unconvinced.

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There’s no denying that things are starting to look up, however. 2014 saw investors pick up Italian properties worth a total of €5.5 billion (almost £4 billion). This is a 10% increase on 2013, when investment property purchases totaled €5 billion (3.6 billion). A number of major firms have been among those active in Italian real estate, such as AXA Real Estate Investment Managers and Blackstone Group LP.

Furthermore, the measures taken by the government to make Italy a more attractive place to invest have certainly made a difference. In particular, key legal reforms have made the Italian system noticeably more favorable towards landlords. For instance, commercial tenants do not have the same freedom to leave at any time as they traditionally have if the total value of rent exceeds €250,000 a year, providing extra security for landlords of high-value commercial lets.

At the same time, however, there is a feeling among investors that Italy still has some way to go. In particular, many feel that further legal reforms are necessary to provide a hospitable environment for investment. Notably, the difficulty of achieving foreclosure in Italy’s court system at present is something that receives its share of criticism, particularly as this can make banks more reluctant to provide distressed loans. Furthermore, some feel that the process for approving developments is in need of reform.

Neither is Italy home and dry yet economically. Sales volumes are still well below pre-crisis levels, having totaled €8.2 billion back in 2007. Furthermore, the Italian economy as a whole continues to turn in lackluster performance compared to many other, comparable European nations.

In short, it may be that Italy is on the way back. It may even prove that those investors who do get in now will reap the benefits of recovery. But the matter is far from cut-and-dried and nothing is at all certain, making the country’s real estate industry at best optimistic in proclaiming that "Italy’s back."

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