Adrian, a British pharmaceuticals executive, never expected to buy an Italian ruin. But, when he visited Lucca in northern Tuscany 10 years ago, he and his wife fell in love with the region. After spending the next five years looking at properties, they finally found one of the few undeveloped homes left in the area: a crumbling fortified manor house dating back to the 12th century.
“We were looking for something with a bit of character and we ended up finding something with a lot of character,” says Adrian, who for the sake of privacy prefers not to give his surname. He is one of a growing number of international businesspeople who, according to estate agents, have seized the chance to work from home during the Covid-19 pandemic and spend more time in the high-end properties they have bought in Italy.
In the past, international executives who bought a villa or beach property here often only used it for holidays. Over the past year, though, the shift to homeworking has opened Italy’s high-end property market to those who previously spent most of their time in New York or London.
“We have seen a lot of clients who . . . had been considering buying a property in Italy for years, [then] suddenly decide they want to make a change in their lives,” says Bill Thomson, chair of estate agent Knight Frank in Italy. “The pandemic has made many people have a ‘this is not a dress rehearsal’ moment. They now think, I have survived this, my business has survived this, and now I know it is possible for me to spend more time in Italy.”
Adrian started by rebuilding a barn on the property, which the couple could stay in while the main building was being renovated. The renovation work is expected to be finished within six months and fitting-out will take another year.
“We are history buffs and were desperate to preserve as much of the original fortress as possible,” he says. “We have found the quality of the building work to be fantastic here. In the US, you can walk around and see buildings you don’t think will last longer than 10 years. The builders we are using take a real sense of pride, something that transcends a nine-to-five discussion of work.”
Jelena Cvjetkovic, director of estate agent Savills’ international residential network, says inquiries about higher-end properties across Europe have risen sharply during the pandemic. “Italy remains one of the most sought-after countries and has some very well-loved areas, such as Lake Como, Tuscany, Liguria and Sardinia,” she says. “During the pandemic people couldn’t do much, but what they could change was their living environment. Wealthy people were forced to spend much more time at home than before. Some might have decided it didn’t meet all their needs. All business leaders have learnt they can spend considerably more time at home.”
Cvjetkovic says wealthy foreign buyers who work around the world are attracted to the Lake Como area because of its proximity to Milan and well-connected international airports. There are international schools in the area, while another draw is quick access to nearby Switzerland.
“The type of buyer who is looking at Italy tends to be more internationally diverse than in other European locations. In [Portugal’s] Algarve, for example, we mostly have inquiries from the UK and Ireland. In Italy, you have British interest but also very well-heeled clients from northern Europe, France, the US and elsewhere.”
Tax breaks introduced by successive Italian governments, intended to attract both non-resident Italians and foreigners to domicile their tax residence in the country, have also lured foreign buyers. The measure that has received the most attention is a flat-rate scheme whereby people who have a home in Italy, rented or purchased, can pay a fixed annual fee of €100,000 to shelter their foreign income from other Italian taxes — potentially saving the ultra-wealthy millions in taxes on assets and income.
“A large number of buyers have been attracted by the tax changes,” says Thomson. “They may be looking at a map of the world and learn about what is on offer in Italy. I don’t think people move to Italy only for tax reasons, but it has become an added bonus.”
Cvjetkovic agrees: “For those people who are sitting on the fence, it can tip the balance towards Italy from a place like France. If you are only thinking about tax, of course, there are other locations that will be better than Italy but, for people who want an Italian lifestyle and to live in a historical property, it helps.”
Super-wealthy buyers have not been overly concerned about generating a significant return on their Italian property investments. The fortunes of the Italian economy, which has been stagnant for two decades, does not tend to influence buying decisions in this rarefied part of the market, which is more sensitive to the super-rich’s traditional financial concerns, such as global stock markets and commodity prices. “The majority of people buying these properties come from abroad, or are Italians who are so wealthy that what happens to the domestic economy doesn’t really affect them,” says Gianluca Mattarocci, a real estate finance specialist at Luiss business school in Rome.
Yet many in Italy are hopeful that the installation in February of Mario Draghi, former European Central Bank president, as Italy’s new prime minister may help the country find a way out of its economic rut. This, in turn, could stimulate the domestic property market and lead to more wealthy Italians returning home from overseas. The so-called ‘Draghi effect’ has already contributed to a sharp fall in Italian government borrowing costs, which feed through to national lenders. This may help anyone buying a property in Italy using a loan from a local bank.
Another consequence of Draghi’s premiership has been that Italy’s formerly anti-euro political parties have ditched any lingering hostility towards Brussels and the single currency in order to sign up to his national unity government. Few political watchers in Rome believed these parties were serious about quitting the single currency, but years of their rhetoric has damaged international investor confidence.
Thomson says that while ultra-high-net-worth clients are not focused on making a large profit on Italian properties, they are concerned about not making poor investments. “Nobody will do this if they don’t think there is a sensible chance they can recoup the capital they invest in a five-year timeframe,” he says. “No one is going to throw away €10m, no matter who they are.”
Possibly of even greater significance will be Draghi’s programme of structural reforms to improve the efficiency of the Italian legal system and public administration, both of which can tie an unwary or unlucky foreign property buyer in knots. The reforms will probably not take effect for at least a decade, but they mark the first serious attempt in many years to address some of the biggest hindrances to foreign investment in Italy.
Adrian, the pharma executive, says he used estate agents who specialise in international buyers to advise on local laws. The agents also had good contacts with craftspeople who had worked on similar restoration projects. “It is not the simplest thing buying a property like this and it will cost you a lot of money if it goes wrong,” he says. “So it is worth paying more to get the right people as you will end up spending the same amount.
“We were told: ‘try to resist putting a strict timeline on this, and commit fully to the journey and the process. If you don’t, you will get frustrated.’ That was really good advice.”
Cvjetkovic says she expected the pandemic to weigh heavily on the luxury property market but, in fact, many clients have ramped up house hunting even though they have been unable to visit locations. “During the lockdowns and travel bans, we have seen a rise in virtual viewings where a client will get a representative to travel to a property with an architect and then view it remotely. We have had sales of €2m-3m on the back of a virtual viewing. The demand is very much there.”
But, most importantly, says Thomson, the months of working from home during the pandemic have allowed people who previously thought it would be impossible to live most of the year in Italy to imagine a new life. “The majority of these people are self-made businesspeople, very clever and astute, who have worked very hard and now want to play hard in the sense that their lifestyle is important to them,” he says.
“This is a long game and they have finally decided during the pandemic that the moment has arrived for them to pursue a dream.”
This article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment.