With political and economic difficulties to face, including possible property tax hikes at home, Russians are considering lower-priced properties in Italy, says Knight Frank
Political and economic difficulties in Russia mean that buyers of Italian property are looking for cheaper options, says a leading global agent.
And it is just as well, as many Russians are facing increased property taxes at home, says a property law specialist.
But a weaker euro has led to interest in Italian property rising among British and United States buyers and demand from Chinese and other Asian buyers is also increasing, says Knight Frank.
Rupert Fawcett, a Partner in Knight Frank Italy, says that buying property in Italy is primarily a lifestyle choice rather than a short-term investment, which helps make the market more resilient.
More property buyers are turning to Italian cities and sales are rising, but prices are predicted to be flat over the next few years.
Mr Fawcett says, “There has been increased interest this year in city living with an upturn in inquiries for Rome, Venice, Milan and Florence. Rome has returned positive growth in the last quarter for the first time in several years, Venice is showing increases at the upper end and all cities have seen increased sales activity. We expect prices to remain stable in these locations over the next year, but we do not expect any price increases for at least the next few years.
“In other areas there continues to be pressure on prices due in part to the availability of a large amount of stock which means buyers tend to deliberate for longer when searching for the perfect property. However, correctly-priced properties in the best locations are finding good interest and, in some cases, multiple offers. Where vendors remain reluctant to reduce prices buyers are often not even enquiring, let alone viewing,”
Italy continues to face challenging market conditions with Europe again coming under the spotlight recently over its muted economic growth and with some of Italy’s banks faring badly in the latest stress tests, he admits. “However, the food and culture, the wine and architecture and la dolce vita remains a permanent feature and continues to draw buyers wanting a slice of Italian life.”
The number of Russians looking to buy had dropped and those still interested are looking at lower-priced options, he says.
“Political uncertainty in Russia has seen a definite fall in the number of Russians looking to buy in Italy, especially at the upper end of the market (€5million-plus) most notably around parts of Sardinia and coastal Tuscany, but there has been an increase in Russian interest at lower price points especially in Liguria. The influence of British and US buyers has also increased as both the pound and dollar strengthen against the euro.”
But the hosting of the Universal Exposition in Milan, from May-October 2015, is set to generate increased investor interest in the country.
“We have already seen rising interest for both commercial and residential property from China and other Asian markets.”
Another sector attracting increased demand is the semi-commercial vineyard market, with buyers seeking a holiday home that will also generate income.
A change in the Russian Tax Code relating to property tax on individuals has been made, which is expected to hit prime property in Moscow and St Petersburg, says a real estate law specialist.
The idea is rather than basing the tax on the inventory value, it will now be calculated as close to its real market value as possible, using the cadastral value, which in many cases will be more.
The legislation will not come into force until 1 January 2015, says Natalia Stenina, Head of Real Estate and Construction Practice at legal specialist, the Pepeliaev Group.
The law defines the maximum level of tax rates, up to 2% of the cadastral value of the property, although the exact rates will be left to individual councils throughout Russia, with Moscow, St. Petersburg and Sevastopol establishing their own rates.
Depending on the property and circumstances involved, various exceptions and amendments are proposed, along with certain tax reliefs.
“However, it is apparent that individuals will face an increased tax burden as a result of the change in the way the tax base is assessed. This will be especially true for high-value property, and this will have a major impact on the real estate market in Moscow and St Petersburg in particular,” she concludes.
By Adrian Bishop, Editor, OPP Connect