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Many of you have probably heard of the “1 Euro houses” in Italy that made headlines worldwide. After reading about it, you have been wondering, “Is it worth buying property in Italy?” You’ve likely dreamed of buying a property abroad and reading about it had you realize that this dream can become a reality.
I’m calling all house hunters! As a native Italian owning property in Italy, I’m going to give you the complete guide of the pros and cons to navigate that decision!
Can I Buy a Property in Italy?
The first question you should ask is, “Am I even allowed to buy property in Italy?” There’s an easy way to find an answer, but it depends on your country of citizenship. The quick answer for American, Canadian, EU, and UK citizens is “Yes. You’re allowed to buy a property in Italy!”
If your country allows Italian citizens to buy properties on your land, then Italy will allow you to buy properties on their land. It’s called reciprocity treaties! The easiest way to find out is to Google, “Can [Australians, Argentinians, etc.] buy a property in Italy?”
Always remember that reciprocity is not required if you’re a resident alien in Italy (e.g., you have a residence permit for employment) or if you’re an EU citizen.
Important note: You might be allowed to buy properties, but the length of your stay in Italy is always subject to your Visa. For example, you’re an American, and you bought a house in Italy. You’re allowed to stay in the country for 90 days if you have no visa.
Learn more about visa requirements to travel to Italy to clarify any doubts.
Pros of Buying Property in Italy
You now know you’re allowed to buy a property in Italy, but what are the pros of buying a home in the Bel Paese? Buying a house is probably the largest purchase in your lifetime! So, let’s talk about the benefits of this massive financial decision.
One of the advantages of buying a home in Italy is extremely low taxation compared to the US’s tax, for example. If the home you buy is your primary residence (you live there for more than six months a year), you will pay NO PROPERTY TAXES!
Let’s dive into more detail on the taxes you will be required to pay if you do end up buying a house in Italy.
There are a few taxes to be paid at the moment of purchase:
1. Stamp duty: If you buy from a private seller, this tax will amount to 9% of the property’s cadastral value. But if you intend to become a resident within 18 months and use the house as your primary residence (and live there for more than six months a year), the tax rate will go down to 2%.
There’s an instance where you only pay €200 (roughly $240) for stamp duty if the seller is a company. In this case, though, you will need to include value added tax (VAT) to the purchase taxes and pay either 4% of the cadastral value for a primary house, 10% for a secondary one, or 22% VAT.
2. Land registry tax and mortgage tax: these two are a fixed-amount—and way cheaper. They both amount to either €50 (if you purchase from a private seller) or €200 (the seller is a company). No catches for these two!
3. Notary Fees and Agency Fees: These are not taxes, but you’ll always want to consider around 1% of the transaction value to go to the notary and 1-5% to go to the real estate agency (for this last one, only if you use their services).
Be sure to always do your due diligence on the house prices. It’s a good idea to reach out to a local real estate agent to familiarize yourself with the home’s standard purchase price. I recommend research on how to open an Italian bank account. Many Italian banks may be willing to assist in the Italian property purchase process.
Annual Property Taxes
Now that you have an idea of the taxes and fees associated with buying property in Italy, let’s see which taxes you’ll be required to pay annually. Don’t forget: if it’s going to be your primary residence, you won’t have to pay any property tax!
- IMU: It is the Italian property tax. If your property is your primary residence, you do not have to pay IMU. You need to register it in your Italian tax return or on your Italian ID, and you live there for more than six months a year. However, if the property is either your second house or your primary residence—but the government categorizes it as a luxury—you must pay IMU.
- TASI and TARI: These two are taxes collected for the services provided by your town hall like waste collection, road maintenance, etc. The specific amounts vary by location. Also, there are discounts for non-residents.
Even if you’re here mainly to decide whether to buy a property in Italy, I wanted to inform you of two expenses quickly you’ll need to consider when selling an Italian property: capital gains tax and real estate agent fees.
The first is only due if you’re selling a property you owned for less than five years. It amounts to approximately 26%. You’ll probably want to consult your accountant to see if you need to pay capital gains tax in Italy or your country of citizenship.
The real estate agent fees vary based on the transaction value and are only due if you use their services.
Lower Cost of Living
Now that you have a better idea of the taxation scheme let’s talk about another advantage of buying a home in Italy: the relatively low cost of living.
It is no surprise to many, but it’s worth highlighting a few facts so you can make an informed decision when buying a property in Bel Paese.
Let’s take the US as an example, and let’s dive into a few facts and numbers.
Generally, Italy is cheaper by a range between 20% and 60%:
- 20%-30% less expensive if you’re moving to big cities like Venice or Rome;
- 30-50% cheaper if you’re moving to a smaller town or, in general, in Southern Italy;
- More than 50% less expensive if you’re moving to rural towns, even if they’re in Sicily or the Naples area.
If you’re wondering why the simple explanation is Italian salaries are not as high as the US ones. This fact generally means a lower cost of housing, food, and entertainment.
And, with the icing on top, Italy has one of the best healthcare systems in the world! It is free for citizens and is inexpensive for non-residents.
Low Mortgage Interest Rates
According to FRED, the US has a 30-year average mortgage rate of 2.81% at the time of speaking. For the same length, you can get a mortgage rate in Italy of around 1.20% as of February 2021.
These low interest rates open many doors to those that want to buy properties and rent them taking advantage of the hot Italian tourism market with a million tourists a year.
Sunshine and Climate
What does sunshine have to do with your decision to buy a home in Italy? The answer lies between both a subjective and an objective fact.
Unless you like a winter-style day where it’s dark outside at 4 pm, you’ll probably be happier in a place where sunset comes way later in the day. It’s a subjective topic, but more light equals more time to go outside—and for many, that means more happiness!
So, assuming you prefer longer days, let’s come to an objective fact: if you live in London, your total annual exposure to sunshine is around 1,500 hours/year. On the other hand, buying an Italian house in Sicily can secure 1,000 more daylight hours a year (the average total annual sunshine in Palermo is around 2,500 hours).
This comparison doesn’t even consider the average temperatures! New York City gets the same total amount of sunlight as Palermo (2,500 hours/year), but that doesn’t mean the temperatures are the same.
So keep in mind these factors if you buy a house in Italy. Simple research of the average temperatures in your current city versus the Italian town you’re targeting can result in a more informed buying decision!
Cons of Buying Property in Italy
After having viewed a few advantages of buying a property in Italy, let me walk you through a few cons you might want to consider.
If you read about the homes for sale in Italy for 1 Euro that made headlines worldwide, you probably already know the catch. Most of the deals require purchasers to commit to investing in renovations for these old village houses.
While the total renovation cost is not usually in the hundreds of thousands, most require between €10,000 and €60,000 (about $12,000 to $70,000), which is still a monetary cost you want to consider. Of course, you’ll have to add the time required to coordinate such a project in a country you are probably not that familiar with too.
Here’s my final take: If you are well aware of the renovation part and you even enjoy doing it yourself, take it as an excellent project to complete and press forward. You won’t regret it, and you can find online many stories of people being extremely satisfied with that choice.
But if you get a headache just by hearing the word “renovation,” you’re concerned about the language and culture barrier, and if you’re looking for a turnkey property, then those €1 homes in Sicily are not for you.
At that point, you can go on the real estate market in those same villages and buy well-maintained properties. There are plenty of good deals for less than €50,000 and amazing deals for around €100,000 ($120,000 as of today) in small Italian towns.
An obvious but easy-to-forget cost that you will need to take into account is the flight expenses. You and all your family members will likely need a flight ticket to get to your new home in Italy.
While it is an added cost for each stay/vacation you spend in Italy, you can easily offset it by lowering living costs. You’ll still need to make your trip long enough, or the flight ticket will impact the final bill.
Example. You and your wife own a house in Chicago and spend, excluding mortgage, $2,000/mo. You buy a flight for Palermo, Sicily, where you own a villa. The total flight cost for two is $1,500. Once there, you usually spend $1,000/mo, and your stay is six months long.
|6 months of Chicago expenses||$12,000|
|6 months of Palermo expenses||($6,000)|
Congrats! You’re going to save $4,500. But you’d have lost $500 if you only stayed a month (using these same numbers).
Gas and Tolls Expenses
We’ve earlier talked about how cheaper the cost of living in Italy is. However, when you buy a car, you’ll begin to ask, “Why is gas and tolls on the list of cons then?” The hard truth is that traveling by your car in Italy will cost you way more than, say, in the United States.
Gas is among the very few things that are generally more expensive in Italy. You’ll want to keep that in mind if you expect to travel a lot during your stay in the Bel Paese.
As a rule of thumb, always consider gas prices in Italy between €5.50 and €6.50 per gallon (€1.45 and €1.70 per liter). Diesel in Italy is slightly cheaper and a more popular fuel. As of today, it costs around $5 per gallon (€1.3 per liter).
Regarding tolls, you need to know that most of the Italian highways (called Autostrade) are not free. For example, a car ride from Florence to Rome on the A1 (Autostrada 1) will cost you €17.60 (about $21.00). Include gas, and the roundtrip will cost you a total of €85 (a little over $100).
What if you don’t take the highways?
Generally, you might not want to do that. It will take you way longer, and you’ll probably drive on roads not well maintained as the Autostrade, which means a higher cost of gas.
However, I’ll mention that not every car ride will cost you a toll. When driving between small towns, you’ll seldom pay those. You’ll want to go on Autostrade only when driving between big towns.
As a native Italian living in the US, but with family and properties still in Italy, I wanted to present you with a clear picture of what buying property in Italy means, mostly if you read about the “1 Euro house.”
I’ve gone through the pros, such as taxation, lower cost of living and mortgage interest rates, and climate. However, I didn’t spare you from a few cons like renovation works, gas and tolls, and flight costs.
Keep in mind that anyone can objectively measure these points. For this reason, I didn’t talk of advantages like the great food within walking distance. Or, you may also wish the quiet—at times bucolic—the pace of living in Italy.
I challenge you to find more of these subjective points in your journey towards buying property in Itlay.