The Italian Property market and Exchange rates

 

The spring this year in Le Marche has been cold, damp and wet punctuated with a few brief days here and there of warm sunshine. In fact last week we had quite thick fog and heavy mists covering the whole region for several days before the warm spring sun reappeared at the end of the week. The bad weather though is not the reason that foreign buyers are still not returning in the same numbers in previous years, the state of the economy in both the UK and the rest of the world still is a major influencing factor.

A drastic reduction in the number of foreigners currently viewing and in particular, the British, who in the last few years have made up the majority of property buyers, are conspicuous by their absence. Visits from clients in the euro zone are down by 30% but visits by UK potential buyers are down by almost 60%.

The drop in visits is not at all surprising given the fact that apart from most of the world being in recession the Euro has also strengthened against Sterling by almost 30% in the past year. But I am not alone in believing that the strength of the Euro is overstated and along with several currency analysts I would not be surprised if we see the Euro start to weaken against Sterling in the next few months. The Euro has already moved from very near parity with Sterling at the beginning of 2009 to an exchange rate of 1.11 euros to one pound sterling as I write in April 2009, and of course this is still along way from the heady days when one pound sterling would by 1.60 euros and this rate will most probably never be seen again. But a gradual move back to around 1 pound Sterling to 1.3 euro would certainly be very helpful to UK based purchasers of property in Le Marche and Italy as a whole.

Unfortunately as I have often mentioned before, Italian vendors are not normally under any pressure to sell their properties, which have often been in the same family for many generations. So prices often do not reflect what is happening in the real world outside of Italy and Le Marche and vendors will not reduce their asking prices to encourage a sale, and this coupled with a much lower number of client visits is producing a very property moribund market in many of the villages and towns. Prices of old properties in need of major restoration and rebuilding work have in many cases become detached from economic reality and in most cases will never find a buyer. Trying to convey this fact to many vendors is stiil a very time consuming and frustrating experience.

One thing the Italian property market does have in common with the UK market is an oversupply of new build apartments, especially in coastal districts and in Le Marche, Pedaso, Marina di Altidona and many more small coastal resorts are suffering from an oversupply in these apartments. Developers are finding it hard to sell speculative new builds to both the local Italian population and also other Italian buyers from the major cities looking for summer holiday homes and who normally purchase the majority of these types of property.

But I do believe that we are most probably at the bottom of the market for demand by foreign purchasers of Italian property and as the Euro weakens and the economies finally starts to recover across Europe we will gradually see an increase in both enquiries and visits from both buyers from the UK and across Europe.



Sell and Rent Back