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We might
find ourselves in troubled economic times, but it doesn’t mean we’ve
stopped dreaming about owning a home in Italy. Credit difficulties and
an unfavourable exchange rate have sharply reduced the number of Brits
buying themselves a piece of la dolce vita over recent years, but financial factors have done nothing to diminish our
desires. We still ardently want that home in the Italian sun.
Where there’s a will there’s a
way, they say. Thus a small but increasing number of British
italophiles are beginning to investigate alternative ways of buying
property in Italy, and a similarly small but growing number of estate
agents are finding ways to meet their needs. For many buyers, it’s no
longer comfortable to take the traditional buying route – i.e., handing
over a large sum of money for a big farmhouse where they might spend
just five or six weeks a year. So they’re beginning to investigate
novelties such as fractional ownership and private residence clubs.
Others, determined to own a whole property in the traditional way, are
seeking out agents who are innovating extended payment plans and other
creative financial terms.
I use words like ‘novelties’ and
‘innovating’ because alternative buying routes like these are really
very new in the Italian property market. They may be fairly well-known
in certain other countries, but Italy – with its affordable homes and
generally well-heeled foreign clientele – has never previously needed
anything like this. Times change, and needs must. It’s likely that
alternative buying routes of various kinds will grow increasingly
popular in Italy over the coming months and perhaps years – especially
in the central Italian regions most popular with foreign buyers.
For all this sense of change, it’s
important to remember that Italy is still a pretty good place to buy
property, even now. The pound-euro exchange rate might be off-putting,
but Italian property values themselves are holding out remarkably well.
Prices have moderated, and in some cases declined slightly, but the
situation is nothing like as bad as it is in the UK. In fact,
statistics recently published in The Economist revealed that Italy was one of the few Western European countries to have seen increased
property values in 2008. It seems there are still plenty of good
reasons to aim for that house in the Italian sun, and they’re not all
emotional reasons.
Let’s start by looking at part-ownership schemes such as fractional
ownership and private residence clubs. It’s important to note that these are not
the same thing as ‘timeshares’ – that dread word so unfortunately tainted by1980s
rip-offs on the Spanish costas. Timeshare earned an incredibly bad
press as a result of a few unscrupulous dealers, but there’s nothing
fundamentally corrupt in the concept itself. You buy portions of time
at a property and make regular visits – which ultimately works out
cheaper than merely renting a holiday home. It can be a good system, as long as it’s well-run. While there were some
experiments made with timeshare schemes in Italy in the past, they are
extremely rare in the country now.
Fractional ownership schemes,
however, are beginning to take root. The difference with FO is that you
do actually buy a portion of a property, which is yours in perpetuity
and which you can re-sell or leave in a will just like a whole
property. You’re not just buying time at
a property, you’re buying a share in the property itself. The concept
is so new in Italy that quite a few highly-reputable estate agents
admit they currently know very little about such schemes, while others
deem the idea a waste of time or a flash in the pan. Still others, such
as John Dillon of RealPoint Property, believe such schemes are set to
make a big impression on the future of buying in Italy. “This is going
to take off,” John predicts. As long as they’re well-run and well-put
together, FO schemes could certainly present a good option for some
buyers.
So what are the nuts and bolts, and the pros and cons, of fractional
ownership? How does it work, and could it be right for you? Valerie
Bottazi of Tuscany Real Estate explains that fractional ownership is
when the title or deed of a property is legally divided into shares
which are sold separately. “Shareholders are entitled to usage rights,
normally in the form of weeks at the property,” she says. “And when the
property appreciates in value, the same appreciation shows up in the
shares.” Shareholders are free to sell their shares at any time,
bequeath them in a will or place them in a trust.
“Normally,” Valerie explains, “a
management company provides services such as renting the house,
maintaining it and preparing it, and it is common that the management
fees include utility costs, taxes and insurance costs.” This is one of
the big plusses of fractional ownership – all management of the
property is done for you, and all tax and legal matters taken care of.
The other big plus, of course, is that you can buy into a truly amazing
historical property which you would never be able to afford in its
entirety. You get to stay there in the knowledge that it’s partly
yours. When
you get to stay there is one of the few possible downsides to
fractional ownership. While the residence calendars of most FO schemes
are designed to be extremely flexible and fair, there are still some
necessary limits on when you can stay, which might occasionally prove
inconvenient.
Ironically,
since its key selling point is to make property in Italy more
affordable, another potential downside of fractional ownership might be
the price. Be sure to investigate what kinds of entire
property you might be able to buy for the same amount required to
secure yourself a place in an FO scheme. You might not be able to get a
home anywhere near as lavish, but still you might be able to buy
something outright if that is what you would truly prefer. At least one
estate agent I spoke to remains suspicious about whether FO is good
value. Linda Travella of the long-running agency Casa Travella believes
that FO schemes are uncommon in Italy for good reason. “If you check
out the prices they are high,” she says. “Why should anyone want to do
this when they can buy a whole property somewhere similar for more or
less the same price? It seems this sort of thing is aimed totally at
the foreign-buyer market, so is it a good investment?”
Obviously there are FO schemes and
FO schemes. Each one will be organized differently, and while some may
not offer the best value, others surely will. As I say, be sure to
check out what whole properties you might be able to buy for the asking
price of a stake in any fractional ownership scheme. And weigh up the
advantages of full maintenance and security against what improved value
you feel you could get with an independent home of your own.
If you want to check out an example of a fractional ownership scheme,
you might look to the restored 14th-century hamlet of Borgo di Vagli in
Tuscany, where one and two-bedroom residences are currently being sold
from €63,000. Or peruse the website of Le Marche agency Appassionata,
who are about to launch some promising-looking FO schemes this spring.
Agent Michael Hobbs is very enthusiastic about the concept, explaining
that “The Appassionata method is to have a UK-based company own the
property, with 52 shares available in that company – corresponding to
the number of weeks available. Clients can buy as many shares as they
wish and time will then be allocated in the property to correspond to
the number of shares purchased. In simple terms ‘the company owns the
property, the shareholders own the company’.”
Michael rightly
believes that in general only very high quality properties will succeed
with fractional ownership. He says, “The aim is to attract an affluent,
aspirational customer who wants to share in something they cannot buy
outright. To be able to say ‘I own a country house in Italy with a
swimming pool, tennis court and its own vineyard’ is true, whether you
own one or more weeks.”
Very similar to fractional
ownership schemes and equally novel in Italy are ‘private residence
clubs’. These typically focus on a very grand and historical property
which would itself be way beyond the financial reach of most buyers in
Italy – either in good economic times or bad. Such properties are often
organized to feel more like a luxurious hotel than a private home, with
several part-owners staying at the same time. Residence club members
pay for the right to stay for a certain number of nights per year,
usually remaining free to choose their own dates. They also enjoy a
share of ownership, a future stake in the property.
The advantages of private
residence clubs are, of course, that you can regularly stay in a
spectacular property and also own a bit of it. Popular with well-heeled
clients, private residence clubs offer a sense of exclusivity – it’s
not a hotel; not everyone can stay here. They also facilitate great
social connection-making, as fellow members are like-minded people you
have the chance to re-meet at the residence year on year. A
well-established example of such a private residence club is the
elegant Palazzo Tornabuoni in Florence. At €200,000- €500,000 for a
stake in the property, it’s not cheap, but the facilities are sumptuous
and the perks include preferential access to museums, vineyards, other
palaces, beachside villas and so on – all thanks to the owners’
connections with influential Florentine families. Club members have a
‘future right to assume ownership of the palazzo.’
But part-owning a property isn’t for everyone, of course. We
privacy-loving British famously prefer having a place all to ourselves
if possible. ‘An Englishman’s home is his castle’ and all that. So, are
there alternative ways of securing yourself a whole property in Italy,
with the benefit of more manageable payment terms?
Kevin L. Gibney of the Le
Marche-based agency Marche Homes Direct has been coming up with some
clever answers to this question. “I have basically changed my entire
approach to my business,” he says. “I have become more of a financial
consultant than a property consultant. I am constantly seeking
creative financial terms, extended payment plans, fixed-price
contracts, owners giving buyers low interest loans to conclude
purchases, etcetera. I have even built in exchange rate hedges –
things as simple as clauses allowing buyers with two weeks' notice to
go to closing, should the currency precipitously drop. I even go
a step further after the sale, and have guaranteed fixed price
contracts for restoration work. I have successfully employed such
tactics with many foreign buyers and Italian sellers. Basically, by
extending the window on purchase terms and payments, I take the
immediate financial pressure off the worried buyer's shoulders,
deferring some portion of the purchase into the future when things will
hopefully be more stable.”
Kevin’s creative and pro-active
attitude toward selling homes in Italy is laudable, and a great way to
safeguard the future of his company. One can only hope that his ideas
will become more commonplace among agents selling homes in Italy. Why
not suggest such things yourself when you approach an agent? Quiz them
on whether they can negotiate similarly creative purchasing terms for
you. Be pro-active and offer ideas. Estate agents in Italy want to stay
in business, and you might be able to turn the current situation to
your advantage. Suggest payment plans and discuss cost-spreading
options. It might just make good business sense to all involved.
In life, survival depends on
adaptability, and especially so in troubled economic times. Thus it’s
crucial now to keep an open mind. Be prepared to look for new ways of
doing things, be ready to explore new possibilities. And whatever else
you do, don’t abandon your dream of buying a home in Italy. Remember,
there’s more than one way to skin a cat!
Edinburgh-dwellers
Janet and George Harvie are buying an old ruined country house to
restore in Le Marche. So far, their purchase has been relatively
straightforward, but their restoration work is being arranged along
unusual lines – with fixed prices, flexible payment schedules and
project-suspension options allowing them much greater peace of mind in
a time of economic uncertainty.
“Originally our plan was to buy
and restore a home in Italy perhaps five or ten years from now,” Janet
explains. “But with the way our economy and the prices in Italy were
going, we decided that we wanted to get our foot in the door earlier.
Because of work commitments and the age of our children, we aren’t in a
position to make full use of a property in Italy right now. So we’re
not in any great rush to get the house converted and completed.”
The couple’s estate agent, Kevin
L. Gibney of Marche Homes Direct, devised a way for the Harvies to buy
now and restore slowly. “Kevin came up with an arrangement,” Janet
says, “where we pay our builders a fixed price, in stages, as they
complete different stages of the work. And when the property gets to
the al grezzo
stage [about halfway through the whole process, when the full structure
is sound], we have the opportunity to suspend the project – so if
necessary we can choose to put the whole thing on hold for another five
years or whatever. We would pay the builders up to the al grezzo stage and then suspend the rest.
“The house has two storeys and
potentially four bedrooms. There’s also an annexe. We don’t need a huge
house, and, if we get planning permission, we might develop an
apartment first of all – maybe getting a summer or two out of that and
then starting work on the main house.”
Flexibility and adaptability have
enabled the Harvies to secure their place in the sun. Kevin Gibney, who
made it possible for them, says “The real creativity was getting a
geometra and a builder to figure out how to do an 18-month project over
a 3+ year horizon, giving Janet and George a lot of time to come up
with the funds and a lot of peace-of-mind knowing they will have a
fixed price. They weren’t going to go forward with the purchase, until
I engineered this idea and served it up. To navigate approvals and
expiry dates and the physics of this start-stop approach is quite a
feat, so is finding a great builder whose cash-flow position is such
that he can wait as long as he will have to.” One hopes that such
readiness to be creative and to offer clients tailor-made solutions
will become far more commonplace in Italy over the months and years
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