Italian Luxury Property Market Not Affected By New Real Estate Tax
News Posted On: 22 November 2012
Property buyers are more cautious when it comes to investing in Italian real estate due to the challenging financial outlook in the country. However, the wealthier individuals from across the world still believe that it is among the best hotspots for second homes. Unlike some of the other European countries such as Spain, Italy has not experienced a real estate market bubble before the outbreak of the economic crisis in 2007. Although official reports suggest a 10.5 per cent drop since the peak prices in Q2 of 2008, real estate analysts say that prices have actually decreased by 30 per cent over the past five years.
The global research team from Knight Frank conducted an analysis according to which, team member Kate Everett-Allen said that Italy’s credit crunch during 2008-2009 was well coped by the nation’s banks. However, strains were found to appear two years later due to the deepening of the continent’s debt crisis.
Italy still regarded as a top second home destination
The prime residential real estate market in Italy has performed better than the mainstream property market. The market is worth over three million Euros and is doing well in terms of sales. However, some markets like Florence, Umbria and Tuscany are not performing as well in the price bracket of 450,000 Euros to one million Euros, as investors are relying heavily on finance. Everett-Allen said that the demand for properties worth below one million Euros remains strong nonetheless, and that a large number of international buyers consider the Italian market as a dream second home location.
A drop in the Euro’s value in the first six months of 2012 barely made a difference to sales volumes, but the improvement in interest from buyers from non-EU nations was significant when the Euro’s value was 1.20 when compared against the pound, according to Everett-Allen. The research conducted by Knight Frank revealed that most of the buyers came from wealthy nations, and these suitors were known to be showing interest in multiple residences across the globe. The new technocrat government headed by Mario Monti introduced a new IMU tax towards the end of 2011 in efforts to improve the luxury real estate market sales.
Why the new tax will not have a significant impact on buying decisions
While the new tax laws are not expected to have a deep impact on Italy’s luxury real estate market, this will be the first time that Italians and non-resident owners of second homes will be charged a tax on their properties. Everett-Allen explained that there are two main reasons as to why they don’t expect a significant effect on the luxury residential real estate market. The first one is that the amounts are still relatively small. The rate of tax to be paid by home owners will be 0.4 per cent on the value of the property, and a rate of up to 1.06 per cent will be charged on second homes. Secondly, the changes in tax laws still leave property charges and purchase costs in Italy looking more favourable to investors when compared to some of the other prime locations like Spain.
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Written by Les Calvert
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