Barbarians at the Cancello

Germans flock to the warmer climate of Italy’s distressed market | “This is a good time for foreigners to buy”

Alessandra Migliaccio, Chiara Vasarri, and Dalia Fahmy

International buyers of Tuscan palazzi or villas on the Adriatic have rarely had it so good. A two-year recession coupled with a 42 percent plunge in mortgage lending has shut many Italians out of the market. Uncertainty surrounding a new tax on primary residences has also caused some locals to put off purchases. The result: Residential sales in Italy dropped almost 26 percent last year. Yet sales of second homes to buyers from abroad rose 14 percent, to €2.1 billion ($2.8 billion), according to research institute Scenari Immobiliari. “This is a good time for foreigners to buy,” says Francesca Andreini, owner of Case e Ville, a Siena real estate agency, adding that asking prices can drop by as much as 30 percent during negotiations.

Germans have been particularly active. “I’d say 60 percent of our closings are with Germans, which is much higher than in previous years,” says Yasemin Rosenmaier, a broker with German firm Engel & Völkers who plies her trade in Cernobbio, on the shores of Lake Como. “Why? Fear of inflation, the uncertainty on the financial markets, fear of what happened in Cyprus.”

Several German buyers declined to be interviewed for this story, perhaps because they don’t want to flaunt their wealth. The average price for Italian homes sold to foreigners was about €500,000 last year. That’s a high price for Italians, who on average earn €19,655 a year, according to Finance Ministry data. Germans make 36 percent more, or €26,791. While the north-south income gap has long been a European reality, some prominent Italian politicians have accused German Chancellor Angela Merkel of impoverishing their country with her demands for austerity (page 66). Italy’s economy will shrink 1.5 percent this year, according to economist forecasts compiled by Bloomberg, while Germany’s is poised to expand 0.5 percent. German unemployment was 6.9 percent in April, close to a two-decade low, while in Italy the rate is more than 11 percent.

Italy’s already weak housing market worsened after former Prime Minister Mario Monti introduced a tax on homes, known as IMU, in December 2011, as part of an effort to shrink the country’s huge deficit. His successor, Enrico Letta, suspended the next payment of the levy, due in June, and said he’ll work with Parliament to review the tax. Ex-Premier Silvio Berlusconi wants it repealed outright and has threatened to withdraw his People of Freedom party’s support of the governing coalition if the tax stays in place.

Marco Rognini, group sales manager for Engel & Völkers in Italy, says his German clients have become savvy shoppers, looking beyond Tuscany, where prices run higher. The country’s main selling point hasn’t changed, Rosenmaier says: “Italy is the country of sunshine. Italy is not Germany.”

The bottom line Sales of second homes to foreigners were up 14 percent in Italy in 2012, despite a 26 percent drop in the overall market.


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