Is Buying Property in Italy a Good Investment?

Buying property in Italy attracts many individuals seeking cultural richness, scenic beauty, and a different lifestyle. The process involves navigating a unique legal and financial landscape. Understanding the market, associated costs, and acquisition procedures is important before making such an investment.

Property Market Landscape in Italy

The Italian property market is diverse, with regional variations in values and demand. In July 2025, the national average asking price for residential properties was €2,113 per square meter, a 2.92% increase from July 2024. However, prices vary significantly; Trentino Alto Adige had the highest at €3,556 per square meter, while Calabria had the lowest at €950.

Property types include city apartments, suburban houses, countryside villas, historic homes, and unique structures like trulli and masserie. Major cities such as Rome, Milan, and Florence offer modern and historic residences. Milan, Bolzano, and Venice have the most expensive housing, averaging €4,500 to €5,000 per square meter in early 2025. Rural areas and smaller towns provide charming villas and rustic farmhouses, often requiring renovation.

Property values are influenced by tourism, infrastructure, and local economic conditions. Highly sought-after tourist destinations like Tuscany, Lake Como, and the Amalfi Coast command higher prices. Areas with less developed infrastructure or declining economies may offer more affordable options. While the house price index rose by 4.51% in Q4 2024 year-over-year, prices generally remain below their 2008 peak, indicating a stable market.

Residential properties for personal use differ from those for rental income or commercial purposes. Gross rental yields in Italy averaged 7.56% in Q1 2025, with Rome at 7.55% and Milan at 5.44%. Net yields are lower after accounting for fees, maintenance, and taxes. Commercial properties like office spaces, retail stores, and warehouses offer different investment dynamics, often presenting opportunities in cities and tourist destinations.

Financial Commitments of Property Acquisition

Acquiring property in Italy involves several financial commitments beyond the purchase price, including various taxes, fees, and ongoing expenses. Transfer taxes are a significant upfront cost, varying based on property type and seller. When buying from a private seller, the registration tax is typically 9% of the cadastral value for a second home or non-resident purchase, or 2% for a primary residence if residency is established within 18 months. The cadastral value is a government-assessed value, generally lower than the market price.

If purchasing from a developer or a company that built or renovated the property less than five years prior, Value Added Tax (VAT) applies instead of registration tax. VAT rates are 4% for a primary residence, 10% for a second home, and 22% for luxury properties. Fixed cadastral and mortgage taxes, typically €50 each, are also payable.

Notary fees, covering legal transfer and deed preparation, generally range from 1% to 2.5% of the declared property value, with a minimum fee often around €1,500 to €3,000, plus 22% VAT. Real estate agent commissions are typically paid by both buyer and seller, with the buyer’s portion ranging from 3% to 5% of the sale price, plus 22% VAT. Legal fees for conveyancing, while not mandatory, are recommended and can range from 1% to 2% of the declared price, plus 22% VAT, or a fixed fee between €2,500 and €9,500 plus VAT.

Other costs include:
A technical report from a geometra (surveyor) to verify planning compliance, costing at least €761.
A translator for deed signing, costing €250-€350 if the buyer is not fluent in Italian.

Ongoing ownership costs include annual property taxes, utility costs, and maintenance. Condominium fees apply to apartments in shared buildings, covering communal maintenance and cleaning. Regular maintenance and repair expenses are also a consideration. If the property is rented out, property management fees will apply.

Financing property in Italy for non-residents typically involves securing a mortgage from an Italian bank. Loan-to-value (LTV) ratios for non-residents generally range from 50% to 60% of the property’s value, while residents may borrow up to 80%. As of 2025, Italian mortgage interest rates for non-residents range approximately between 2.7% and 4%. Associated costs include arrangement fees (around 2% of the loan amount), a government mortgage tax of 2% of the borrowed amount for second homes, and additional notary fees for registering the mortgage deed (€2,500 to €3,000).

Taxation Associated with Italian Property

Property ownership in Italy involves several types of taxes: annual property tax, income tax on rental earnings, and capital gains tax on sale.

Annual Property Tax (IMU)

The primary annual property tax is the Imposta Municipale Unica (IMU). This tax does not apply to a primary residence unless it is a luxury dwelling. IMU is levied on second homes and luxury primary residences, calculated based on the property’s cadastral value. Rates vary by municipality, typically ranging from 0.5% to 1.06% of the revalued cadastral value.

Income Tax on Rental Earnings

For property owners generating rental income, Italy offers different taxation regimes. Rental earnings can be subject to the standard progressive income tax (IRPEF), which applies to an individual’s total income. Alternatively, a flat-rate tax option known as “cedolare secca” is available for certain residential leases. This option allows for a fixed tax rate, typically 21% on the rental income, and often replaces IRPEF, regional, and municipal surtaxes, as well as stamp duty and registration fees for the rental contract. Eligibility for “cedolare secca” depends on the property type and rental agreement.

Capital Gains Tax

When selling property in Italy, capital gains tax may apply depending on the holding period. If a property is sold within five years of its acquisition, any capital gain is subject to taxation. The capital gains tax rate is typically 20% on the net profit, calculated as the sale price minus the original purchase price and allowable expenses. If the property has been owned for more than five years, capital gains tax is generally not applicable.

Other minor taxes and levies might apply, such as specific taxes for waste collection (TARI). The notary handles the calculation and payment of most purchase-related taxes at the final deed signing.

Navigating the Acquisition Process

Purchasing property in Italy involves a structured legal and administrative procedure, guided by specific steps and key professionals.

Making an Offer

The process begins with a written offer, known as a proposta d’acquisto. This initial offer includes a small deposit and outlines the proposed sale price and conditions. Once accepted by the seller, it becomes legally binding, preventing the seller from offering the property to others for a specified period.

Preliminary Contract

Following the accepted offer, a preliminary contract, called a compromesso or contratto preliminare, is signed. This legally binding document outlines the agreed sale price, final deed completion date, property details, and any specific conditions. A substantial deposit, typically 10% to 30% of the purchase price, is paid at this stage. If the buyer withdraws without valid cause, they forfeit this deposit; if the seller withdraws, they must pay the buyer double the deposit.

Due Diligence

Due diligence is conducted between the preliminary contract and the final deed. Legal professionals verify property ownership, confirm no liens or mortgages, and ensure compliance with building and planning regulations. A geometra (surveyor) checks that the property’s plans match official records and that renovations have proper permits. This technical report is presented to the notary.

Role of the Notary

The public notary (notaio) has a central role in the Italian property acquisition process. Italian notaries are highly qualified legal professionals who act as impartial public officials. They verify the legality of the transaction, conduct due diligence, draft the final deed (atto di compravendita or rogito notarile), and ensure all legal requirements are met. The notary also calculates and collects all applicable taxes and fees, remitting them to the authorities.

Final Deed Signing

The final stage involves signing the atto di compravendita in the notary’s presence. Both buyer and seller, along with a translator if needed, must be present. The notary reads the contract aloud, ensuring all parties understand its terms before signing. The remaining balance of the purchase price is paid, and ownership is officially transferred. The notary then registers the property transfer with the local land registry.

Key professionals involved include:
The real estate agent, who assists in finding properties and negotiations.
A lawyer, recommended for independent legal advice and due diligence, especially for foreign buyers.
The geometra, who provides the technical report on the property’s compliance and structural status.

These professionals ensure the acquisition proceeds smoothly and in compliance with Italian law.