Italy Investment Strategies

Italy is a strong property investment arena due to a number of interesting factors. Below is a detailed study of what Italy and its property market can offer investors today, together with information on the various investment strategies available.

General Factors

Italy is the fourth most visited country in the world, welcoming some 38.9 million tourists per year. Known as an international playground, Italy attracts tourists from many continents, mingling happily with holidaying Italians in fashionable resorts and cities. Italy is easily accessed from all over the world with a wide variety of direct budget flights arriving into major cities such as Rome, Venice and Milan, making it a popular short break destination. Richly diverse, Italy has everything to offer visitors, from lakes and historical cities in the north to unspoilt coastline and the simple rural life to be found in the south.

The ENIT International Observatory Survey indicates a significant growth in the tourism sector with tourism sales up by 21.3% in 2006 compared with the previous year. Domestic tourism has seen an increase in recent years, particularly in well trodden rural areas like Umbria and Tuscany. An improvement in the performance of the Italian economy is beginning to benefit domestic tourism and a new Italian trend is emerging; more short breaks are being now being taken to supplement the more traditional long August vacation.

The enlargement of the European Union is slowly boosting international travel to Italy and in many respects Italy still offers an emerging market status despite the fact that today Italy is the third favourite European destination for UK overseas property buyers. Traditional holiday hotspots in the northern half of Italy remain firm favourites, however many savvy investors are now focusing on a new emerging market in Calabria, southern Italy. Sitting in the toe of Italy's boot, this stunning, unspoilt part of Italy is easily accessible and the region is showing all the signs of a promising emerging property market; prices are amazingly low, the infrastructure is already being improved and low cost direct international flights are now welcomed at Calabria's airport, offering enormous potential for tourists and investors like. It is currently still possible to buy superb, affordable, off-plan frontline beach properties in Calabria, a phenomenon now unheard of in other more established European markets.

Economic Factors

In terms of GDP growth, Italy ranks sixth highest in the world and estimates for 2007 reveal an increase to 2% as opposed to 1.6% in the previous year. Tourism is a major economic driver in Italy, generating about 12% of the country's overall GDP.

As a member of the EU and the European Economic & Monetary Union (EMU), the country offers a well established, strong economic climate in which to invest. Inflation in Italy is relatively low at 2.1% (2006) and this rate falls well within the norms specified by EMU. Italy is a member of the G8 industrialized nations, therefore ranking among the world leaders. These factors serve to further increase investor confidence in Italy as a safe and stable economy in which to do business.

An economic gap exists between the northern and southern regions of Italy and, while GDP rate improves slowly in southern Italy, employment is on the decline as a qualified labour force continues to abandon this stunning rural area in favour of the more economically active north.

Needless to say, property prices in the north are higher than in the south with established tourist hotspots such as Tuscany, Florence and Rome fetching the highest prices, while growth rates are still strong at around 15% per annum. However, for those seeking a quieter and more affordable rural retreat, southern Italy proves to be an interesting new option.

The ongoing development of tourist infrastructure, including luxury developments, golf courses and the recent introduction of direct international flights to local airports at Reggio de Calabria and Lamezia, are sure signs of change ahead for the south. This is all encouraging news for enterprising property investors and today Calabria is widely considered to be a highly sought-after emerging tourist and property market, which is predicted to benefit from rapid economic growth once development has taken place.

Investors expect to see property prices continue to increase rapidly (currently as much as 20% per annum) in some of the beautiful new beachfront resorts. With prices still at an all-time low, buyers are wasting no time in seizing the opportunity to invest into southern Italy's promising emerging market before prices start rising.

Political Factors

Italian politics operate around the framework of a Democratic Republic, with the current head of the government being Prime Minister Romano Prodi. Indeed, Italy has come a long way since Mussolini, a fascist dictator from 1922. Mussolini's downfall in 1943 was followed by the appointment of Marshal Badaglio as prime minister and an armistice with the Second World War Allies was then announced. In 1946 the Italian Monarchy was abolished by popular referendum and today power is given to the government with two parliamentary chambers. Italy boasts an overriding mood of democracy and it is widely recognized amongst foreign investors that this country represents a modern and safe political climate in which to operate.

Elected by the Italian houses of parliament for a seven year term, the president of the Republic (currently Giorgio Napolitano) unifies the nation and performs many of the Monarchy's past duties, linking the judiciary, executives and lawmakers within the government. He is also the commander in chief of the Italian army.

There is a mistaken belief that Italy is rife with crime, much of it Mafia related. Certainly organised crime exists - from the Sicilian Mafia and Neapolitan Camorra to high-level corporate crime - but these isolated groups rarely have any impact on the ordinary people of Italy, or their visitors.

Natural Factors

Bordering France, Switzerland and Austria, Italy is ideally situated to cater for a huge northern European tourist market. Regular flights from Alitalia (Italy's national flag carrier), British Airways and Easyjet provide access to Rome, Venice, Milan and Pisa, while Ryanair flies to some of the smaller airports such as Calabria, Genoa, Trieste, Verona, Brindisi and Pescara.

Owing to its geography, the climate in Italy varies greatly from north to south. The north (Turin, Milan and Bologna) has a continental climate; hot summers and freezing cold winters, while from Florence towards the south, the climate becomes Mediterranean. 5,310 km of Adriatic and Tyrrhenian shoreline borders Italy and its islands of Sardinia and Sicily, creating a wide variety of coastal characteristics and local weather conditions. Higher altitudes are cold in winter and wet and snowy in winter. Tourists in Italy enjoy a great variety of activities from skiing in the snow-clad Alps, rambling amongst olive groves and bathing on the sandy beaches of chic resorts to visiting Italy's plethora of bustling historical cities such as Rome, Florence, Milan, Turin, Naples, Venice and Genoa.

Logistical Factors

Italy is well served by many airports, with Rome, Milan (Linate and Malpensa), Pisa, Naples, Turin, Bologna and Venice as the main hubs. From these, internal flights connect to the smaller regional airports, and to the islands of Sicily, Sardinia and Elba. Click here for a comprehensive list and links to Italian airports.

For investors in the emerging markets of southern Italy, direct flying time of only 2½ hours makes travel easy and affordable. Lamezia Terme Airport in the south, receives direct flights from many European cities. Ryanair flies direct to Lamezia Terme and Easyjet is also due to open a direct route this year.

Italy generally enjoys high European road standards. The infrastructure in the south is less developed but, with the increase of budget air links to the area and good roads connecting its airports and towns, buyers find the prospect of investing in this well served and increasingly popular market a highly attractive option. However, Italian drivers do have a reputation, so a diligent driving style when visiting is highly recommended!

Railways cover a larger relative area than those of the UK or the USA. They are cheap, clean, fast and efficient and come in a range of eight different classes of train, from Eurocity to Regionale trains. Click here for more information on timetables and travel cards. In the absence of rail travel, buses provide a wide range of efficient routes throughout the entire country.

Short Term Investment Strategy

Key Opportunity

Ranking high amongst the principal European foreign property investment destinations, over the years Italy has won the hearts of many a tourist, homebuyer and investor. As the property market develops, particularly in emerging areas such as southern Italy's Calabria and Puglia, we expects to see a surge of interest from overseas investors and holiday homebuyers in these particular regions.

In line with the development of southern regions of Italy, widely acknowledged as some of Europe's most exciting property hotspots, supply is not yet satisfying demand for quality holiday property. Outstanding modern resorts are under planning and construction across the Italian coastal areas, giving investors a wide choice of developments in which to employ their short term investment strategies.

Increased airline services to Lamezia International Airport link with other European airports and a strong infrastructure is in place to connect with all tourist locations in Italy. This makes for a ready-made market in which to invest in property and profit from the ongoing influx of foreign homebuyers and tourists.

All off-plan prices should always be a good deal lower than completed prices, allowing power for “flip” investments in which capital investors sell on the unit prior to project completion. In this way they take advantage of capital appreciation over the construction period, which is expected to be quite considerable (between 10% and 20% per annum), particularly in the emerging south. It is important to be aware that in Italy there are no industry standards to ensure the reassignment of contracts is permitted in off-plan projects and sometimes, though not always; investors will be charged around 1,000 EUR or a percentage of the purchase price in order to do so.


Average construction time for Italian off-plan development is between 18 months and two years. Short term investors normally look to profit from a promising market, selling on their unit to mid or long term investors approximately 14 to18 months after making their initial reservation, regardless of whether or not the project is yet completed.

Payment terms vary; good projects will often offer terms of 30% deposit with 70% upon completion, allowing short term investors to operate their strategy with minimum capital outlay. Meanwhile, the earlier the investment is made, the greater the eventual returns. In addition, by entering the project early, the investor gains the first choice of the best units which will always be first to attract buyers in the future.

Level of Complexity

Short term strategies offer the lowest level of complexity as the purchase has not yet been officially made; therefore, no property taxes or maintenance or management charges are due. This is a simple capital investment, often with no need to proceed to purchase contract or make any finance arrangements. Always check with the developer if there are any charges made to “flip”, or reassign your contract, and at what stage you are permitted to do so, before you proceed.

Risk Assessment

All investors must carefully assess the particular project and units they wish to invest in. In many cases a wide range of other projects will be under construction and a choice will need to be made. This will be need to be based of how a particular development or project will outshine its competitors in terms of appearance, location, on-site facilities and the unit itself. Investors will also need to consider issues such as the number of other units available within the particular development, predicted demand as well as competition for the type of property in they propose to invest.

To curb risk, a short-term investor normally seeks to buy the best possible unit, i.e. a corner unit, a penthouse or ground floor unit with a private garden, which will always sell in preference to a standard first floor unit.

Investors need to be clear how their exit strategy is to run. How will the unit be marketed and by whom? How much will the selling agents charge in commission?

Should a buyer not be found prior to completion of the property, investors must be confident they can cover payment to completion of the unit and adapt their strategy if necessary.

Short term “flip” investments are undoubtedly more risky than longer term strategies, but, with sound research and careful planning in place, off-plan purchase in well located Italian projects offers a sound investment with lucrative returns on investment.


Italian property offers the highest capital appreciation in its newer emerging markets located in southern regions such as Calabria and Puglia. More established property markets are also viable but these appeal to buyers with a longer term investment angle. At an estimated 15-20% per annum, capital growth is high in southern Italy. Shrewd investors have the opportunity to improve further on this figure by selecting prime resorts at pre-release pricing levels.

By reserving at pre-release stage, investors profit from discounted prices and, in many cases, these are subject to successful planning applications, allowing for additional pricing uplift. Reservations on this type of project allow for full refunds if necessary and secure escrow accounts in place to protect investors' funds. An earlier than normal reservation, affords the maximum possible returns on investment on any given project.


This short term investment strategy is purely based on capital outlay. In order to cover all eventualities, investors MUST be confident they can complete the purchase if necessary, even if using a buy to flip strategy. This covers all eventualities.


Tax on acquisition varies between Italian localities, with rates of up to 10% of the purchase price. However, at what stages this tax needs to be paid during the transaction is subject to the developer and local laws and is an issue that should always be clarified prior to signing up.

Capital Gains Tax on property sold within 5 years of purchase, as is the case with all short-term flip investments, are based on the Italian Income tax system. On returns of less that 100,000 EUR 23% tax is payable and 33% for gains over this amount.

We recommend research into any double taxation treaties in place between Italy and the investor's country of residence.

Medium to Long Term Investment Strategy

Key Opportunity

As the fourth most visited destination in the world, Italy is positively booming both in terms of its tourism and resulting real estate market. The absence of capital gains tax and growth figures in some areas of around 20% per annum are clear incentives for purchasers wishing to invest in a highly lucrative though safe EU property market. As always, investors who act the earliest on any given development are those that gain the greatest capital appreciation on their investments.

Investments in favourite tourist locations have been seeing steady capital growth at an average of 10% per annum, while the newer and now more affordable destinations in the south are predicted to yield double this figure over the short to medium term. Purchasers of investment property in Italy are attracted by its southern European location and evident lack of the kind of mass development to be found in some Mediterranean destinations. This factor is also an attraction for tourists who seek that certain Italian cachet of exclusivity that can be found nowhere else. Buy-to-let investments are a firm favourite amongst overseas purchasers, as are off-plan purchases on some of the latest low density new southern resorts just waiting to be discovered.

Off-plan prices are relatively low but are at their lowest in the southern regions of Calabria and Puglia, where you can buy a luxury 2 bedroom, 2 bathroom apartment for as little as 150,000 EUR (May 2007). In popular Tuscany, the same apartment may set you back 200,000 EUR or more. With capital growth at 10% per annum in more established property locations, it's clear to see why many investors are opting for the lower prices of the emerging south, now offering a more encouraging 20% growth rate on their investments.

Demand in the holiday rental market is high all over Italy's hotspot resorts and cities. With increased airline services to the emerging regions of Puglia and Calabria, as well as excellent services to all other more traditional tourist locations, Italy is well equipped to profit from a large influx of foreign homebuyers and visitors. Tourism success gives rise to strong rental yields; owners around the northern lakes, the Alps and the Dolomites profit from both summer sun and the winter ski season - a well-located, modern apartment can yield 588 GBP per week in rent, summer or winter, making for a great buy-to-let opportunity.


Average construction time on Italian projects, from project sales release to completion of construction, is approximately one year. Mid to long term investors look to hold onto their units after construction, normally for at least 18 months from initial reservation, either to rent it out and/or benefit from capital appreciation upon eventual resale. Many long term investors wish to generate significant and reliable rental income over a period of time as sustained rental returns are their main focus, followed by capital appreciation over time.

Capital appreciation is expected to continue to perform exceptionally well over the next 5 years, notably in the southern emerging markets, and the longer investors are able to leave capital in their purchase, the higher their potential returns will be. Tourist levels are high and the resulting strength in the buy-to-let market allows investors to reap in solid capital growth from their properties, all the while supplementing this income with high rental yields in key tourist locations.

Level of Complexity

In the case of off-plan purchase, full payment for the property needs to be completed at various stages of construction, prior to final completion of the purchase.

For mid to long term investors, all costs will be applicable, of around 10% of the purchase price while ongoing costs such as maintenance, community fees and utility bills will also need to be factored into the strategy finance plan. Bear in mind it's advisable to open a bank account in Italy in order to pay for the property's utilities and other ongoing expenses.

Some good arrangements are often to be made with property management and rental companies that are usually conveniently based on or near the site. These ensure that such ongoing costs are covered and that your unit is rented out regularly. Maintaining a property abroad can therefore become no more complex than an investment closer to home.

Key Risks

A medium to long term investment strategy entails much lower financial risk than a short term plan which relies on finding a buyer within a very short time frame. Provided the right investment is made on a quality, well located project with multiple facilities, establishing a rental market and eventually a buyer for your investment should not be difficult. However, as with any investment, patience and money is sometimes required until the end user is found.

As the third incoming destination in Europe after Spain and France, Italy's tourism growth bodes well for buy-to-let investors. In 2006 tourism figures increased by 21.3%, indicating an inevitable ongoing increase in the number of visitors to Italy in coming years. This of course translates to an increase in buyers and renters on the one hand, but brings with it intensified competition on the other. However, it is important to remember that the low-density nature of development in many of Italy's beauty spots ensures the property market should not become saturated.

By appointing independent legal representation, the client can be sure that all the necessary paperwork is in place before signing the purchase contract.

Property ownership in Italy is 100% freehold, leaving no room for ownership disputes.


It is interesting to see how returns have developed in Italy over recent years: According to IPD (Italian Property Index), in the five-year period between 1998 and 2002 Italian property prices rose on average by some 40% (an average of around 7% per year). Property prices in Italy's major cities generally increase more slowly (3.1% in the first half of 2003).

Today's figures of between 10 and 20% per annum show a market increase in Italy's investment climate. Italy is now regarded as a viable alternative to Spain, France or Portugal and as a result, the Italian property market is undergoing a growth period. Over the past ten years, property values in Italy have risen steadily in much-loved areas such as Tuscany, Florence and Rome where capital growth has reached around 10%. Meanwhile, in the new emerging property regions of southern Italy, lesser known secrets are beginning to emerge as highly profitable alternatives to more traditional locations, where annual growth figures of up to 20% are attracting many a shrewd property investor.

Italian property prices remain relatively low, compared with many other EU destinations. Capital gains tax is not charged on profits from Italian properties and is a big incentive to many investors, allowing them to receive maximum possible returns on their investment in Italy.

Increased worldwide exposure of Italy's property hotspots, old and new, will also have a positive effect on the Italian real estate market, bringing with it a further boom in tourist numbers. Meanwhile, the corresponding interest received from investors wishing to purchase property in Italy's rural regions and cultural cities will continue to boost the strong rental market in Italy, which currently attracts rental returns of approx. 5% in prime locations.


Finance is widely available for EU and non-EU citizens from Italian banks as well as Barclays European branches. A bank mortgage loan is one of the most widely used forms of finance for property purchase in Italy and banks will lend up to 80% of the property value. This is a long-term loan and is generally used to purchase or renovate a home. Recent changes in the law have made it easier for borrowers to cancel a mortgage loan.

Most mortgages in Italy are repayment mortgages where the borrower pays a combination of capital and interest back each month. Fees are usually clear and up-front and they will include a 1% arrangement fee, a 1% administration fee and a 2% registrations tax. Some lenders also charge an additional one-off set sum of around 100 euros. Current mortgage interest rates in Italy are 3.70% (August 2007).

Release of equity from investors' other properties, be it in their country of origin or in other investment locations, can also be an easy option to raise finance for a purchase in Italy.


The purchase of property in Italy is not a complex procedure and for the most part, a foreign national has the same rights in the buying process as any Italian citizen. However there is one exception; foreign nationals must pay an 11% purchase registration tax, while an Italian only pays a 4% purchase registration tax.

Various other taxes will of course be applicable regarding your investment in Italian real estate:

  • Registration tax (imposta di registro) is the main tax on property and is levied at between 0 and 10 % of the declared value.
  • Land registry - First home resident buyers of new or resale properties pay a fixed fee of €129.11. Meanwhile buyers of second homes and non-residents pay 11 % of the declared price as stated above.
  • Local community tax or rates, ICI, ('Ichy') is paid annually and is usually between 0.4 - 0.7% depending on the local authority and size of the property. This is usually paid in June and December.

Even as a non-resident your estate will pay inheritance tax. The amount will vary according to closeness of the relationship of the heirs to the deceased. We advise you to seek professional information on how to best deal with this tax.

Capital gains tax was abolished in January 1993, and this is now incorporated into the ICI tax (above).

A double tax treaty exists between Italy and the UK, protecting investors from paying tax on their Italian assets in both countries.

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