Italian Real Estate: È Bello!

With its beautiful countryside and Mediterranean getaways, Italy has long been a favorite vacation destination with travelers across the world. The country’s popularity with tourists could make Italian …

With its beautiful countryside and Mediterranean getaways, Italy has long been a favorite vacation destination with travelers across the world. The country’s popularity with tourists could make Italian real estate a prime opportunity for investors.

Italy is located in Southern Europe, where it juts out into the Mediterranean Sea. The country shares borders with Austria, France, San Marino, Slovenia and Switzerland. Italy occupies a total of 301,230 square kilometers, making it just slightly larger than the U.S. state of Arizona (295,260 square kilometers). The peninsula is home to an estimated 58,147,733 people as of July 2007, according to the CIA World Factbook.

Why Italian real estate?

“Italy’s exquisite cultural patrimony, evocative countryside and ‘made in Italy’ craftsmanship all combine to preserve the value of Italian real property,” Donald J. Carroll, Esq.—special counsel to and member of Pirola Pennuto Zei & Associati in Rome and vice co-chair of the ABA Committee on International Investment in Real Estate—said in an e-mail interview.

The flourishing tourist industry in Italy provides a strong potential rental market for investors looking to buy overseas. In 2006, Italy ranked fifth on the World Tourism Organization’s list of top tourist destinations, with 41.1 million international arrivals. Southern Italy, in particular, has been of great interest to vacationers. Homes and apartments along the coast or in the relaxed country settings that tourists favor have the potential to provide substantial rental income.

“Among Europe’s main destinations, Italy was by far the best performer in 2006, after a number of weaker years. Arrivals were up 12 percent, following an excellent winter season at the start of the year, thanks in part to Turin’s hosting of the Winter Olympics,” according to a World Tourism Organization report.

And U.S. investors don’t need to worry about restrictions on property ownership because of their citizenship status. Foreigners enjoy the same property rights as Italian citizens, according to Marco Pessi, a partner with McDermott Will & Emery located in the Rome office. The only difference is that foreign nationals must pay an 11 percent purchase registration tax once the sale has been completed, while Italian citizens need only pay a 4 percent tax.

The Italian real estate market

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“After 10 years of significant run-up in prices in major markets and sought-after country properties, prices now have leveled,” according to Carroll. Properties in both rural and urban areas can prove profitable, though states that properties in rural regions of Italy have been especially popular in recent years.

Apartments are a popular choice when purchasing property in one of the larger cities, such as Rome or Milan. Apartments in areas such as Sardinia, Venice, Sicily, Milan and Florence are all popular among foreign investors, according to For those looking to cash in on the tourist industry, Carroll said that areas such as Sicily, Puglia and Campania are particularly attractive for investment.

Cost varies by location. Prices in Milan range anywhere from €8,000 per square meter for a city apartment to €24,000 per square meter for a penthouse with luxuries such as a terrace and swimming pool, according to a report from real estate agents Immobiliare Terelli & Partners. In Sicily “[p]rices, which have been rising as much as 20 percent a year, still seem reasonable, especially to north Europeans but even to Italians from Milan and Turin,” according to The International Herald Tribune. “Country and town properties are available for as little as €60,000, though for a building of particular architectural interest the starting price is nearer €250,000.”

In upcoming years, “[f]ocus will be on adding value—refurbishing, renegotiation of lease contracts, etc.—to existing portfolios rather than on new investments as these will make more economic sense,” according to Carroll. Pessi, on the other hand, believes that the future of the property market is still too hard to predict in the wake of the subprime crisis. Investors would be wise to proceed with caution, keeping an eye on the market, and perhaps put more energy into upgrading and renting a few properties rather than purchasing an abundance of homes.

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Purchasing Italian real estate

Once a property has been located, the first step is an agreement between the buyer and the seller, known as a Proposal to Purchase. This offer contains a specific timeframe in which the seller can accept the offer. The buyer pays a minimum deposit of 10 percent of the purchase price. The deposit can be higher than this, and it is not uncommon for the deposits to run up to 50 percent, according to The Proposal to Purchase is legally binding, according to “Investment in International Real Estate,” a Pirola Pennuto Zei & Associati publication. If the seller accepts, the buyer is obligated to complete the transaction and the deposit will be forfeit if the buyer withdraws.

“An alternative and recommended approach is to incorporate the terms of the Proposal to Purchase directly into the purchase and sales contract ensuring to allow a period in which the buyer has the right to carry out a full due diligence on the property and/or entity(ies) holding the property and the possibility of the buyer backing out should the due diligence point to there being some legal or tax problem associated with the property,” according to the publication.

The Preliminary Contract of Sale formalizes the buyer’s and seller’s agreement. This document provides details about the property, the buyer, the seller, the price, and any other terms of the transaction.

The entire process is overseen by a notary. In addition to the typical duties associated with a notary, this person will conduct the title search to ensure that the property is clear of liens and other problems, according to The notary witnesses the closing of the sale.

Investors should, of course, carry out proper due diligence before agreeing to purchase any property. This is especially important when purchasing property in a country with unfamiliar laws and regulations.

“Italian laws are complex [and] there are important concerns that go beyond clean title,” Carroll said. “For instance, a buyer needs to be certain that prior works carried out on a property have been done with proper permits and are in compliance with zoning regulations and that rights of neighboring landowners are respected….[S]evere penalties exist for failure to fulfill the obligation to purchase once the P&S is entered in to.”

After purchasing a home in Italy, investors can either try to sell for a profit, rent the property to some of the many tourists visiting Italy every year and/or use the property themselves as a vacation home. Many websites are available on which property owners can advertise foreign homes for sale or rent. Craigslist offers a section dedicated to Italy where advertisements are completely free of charge.


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