Italian property market update - property price increases in Italy

September 20th 2007

Extracts from recently published reports and data, show a continued growth in the Italian property market

A recently released report issued by the FIAIP (Italian Federation of professional estate agents), identifies a number of changes in the Italian property market.

House prices continue to rise in Italy but are showing some signs of slowing down. The reported 6.3% house price growth in 2006 was lower than in previous years: 10.6% in 2003, 8.7% in 2004 and 7.1% in 2005. However, the slowdown is largely attributed to the increase in mortgage rates and the growth is still impressive when taking into account the potential decline in the worldwide economy.

Property prices in Italy have increased in the first half of 2007 and are expected to climb further in the second half of 2007, according to a study by Nomisma which focused on 13 large Italian cities. These results put the southern Italian regions at the top of the list for increases, where profitability levels are also high and well above the average registered in the whole of Italy. The FIAP report showed marked increases in prices in the regions of Calabria, Puglia, Piedmont, Umbria, Veneto, Marche, Abruzzo and Emilia Romagna. Puglia for example, showed significant increases, with prices from 750 to 2000 euros per square metre. The National Vice President of the Italian Tourism Sector commented; “We have seen prices increasing in almost all regions and a notable interest in second homes and investments”.

The FIAP report comments that small houses (up to 60 sqm) are still the most requested with the 80.9% of the market. Medium sized properties (60 to 120 sqm) follow with 14.7% and large properties over 120 sqm taking the remaining 4.4%. The large property segment is dominated by foreign buyers.

There is certainly no slowdown in the number of buyers with an marked increase in the number of purchases / sales in the first half of 2006.

Overall, the market forecast indicates that the property market in Italy will remain stable for the next two years. This follows a period of steady growth for over 8 years, registering positive price movements in both residential and commercial property. Compared to other forms of investment, property in Italy is still an attractive option for good returns and the market has still got huge potential to grow. The key factors which keep attracting buyers to Italy are:

• Stable economy

• No capital gains tax on property profits for properties kept over 5 years

• Favourable rates for euro mortgages

• Abolishment of inheritance tax for properties which are valued below 1 million euros

• Very low council taxes

• Strong rental demand for property

• Increased accessibility

Sources:

Homes in Italy, Italy office, Padova

Nomisma Economic Research Institute, Bologna

F.I.A.P –

REPORT SETTORE TURISTICO I SEMESTRE 2007