Property For Sale in Italy

Property For Sale in Italy

There are several places in Europe that particularly appeal to me when it comes to houses for sale. One of those places is Southern Italy. It’s warm right down in the south. It’s pleasant and the pace of life is relaxed. You can grow your own oranges and lemons, and grow your own grapes, and try your hand at wine making just like a friend of mine who bought a house in Italy three or four years ago. In short, if you are looking for cheap homes for sale, looking at Italian real estate has to be a good place to start.

Italian real estate can be expensive in the North, but here, where the sea is never far away wherever you choose to live, you get the best of both worlds because you are also never far from mountains.  From your new house in southern Italy you can get a boat across the Adriatic to Greece or Albania, and all those interesting countries along the Eastern coast of the Adriatic, including Montenegro which, except for the appalling food, is a magical place to visit.

Last but by no means least, there are some bargains about. Italy real estate does not have to be expensive. You can buy ruins for renovation from £20,000. And I guess you could bargain those prices down even more. Some have a useful chunk of fertile land to go with the ruin.

I’ve just put up a bulletin containing quite a few little gems of cheap homes for sale in Italy on the Unique Property site members’ pages. If you think the life may be just what you’re looking for, you know what to do: Join Up; Log On; Find the Future.

Here’s a house in Italy I was looking at recently. I quite like these trulli, as they are called. The cone-shaped roof is supposed to help keep the trulli cool during the hot summers. Nice!

Trulli for sale in Southern Italy
john

House Prices in 2012

House Prices in 2012

I have done a few calculations to cross reference my contention that house prices are likely to fall next year in the UK. When I was at college many years ago I invented what came to be known as the House Price Affordability Index. This showed how far people were prepared to go with their spending on accommodation.

I have always been fascinated by juggling figures to see what they can do for me. If I take my original thesis on housing prices and turn the basic elements into a slightly different spreadsheet I can get a figure which I can then subject to what I call mood analysis, and that will give me an indication of what is likely to happen to house prices in the future.

One rather large caveat. It does not help any of us decide what to do when the euro collapses, or the dollar collapses, or China goes bang. Those events are outside my control or comprehension. Let’s have a look at this slowly and methodically.

I always took as my basic contention that people were prepared to spend half their money on their home. My mother is largely responsible for that assumption. She pointed out that times change, and that when you are poor your food and accommodation accounts for 90% or even 95% of your spending. As you get richer you get more disposable income, and your accommodation costs fall as a percentage of your spend. I found by analysis of house price trends that there are barriers beyond which people just wont go, no matter what the situation is.

In Scotland there is a big resistance to spending more than 40% of the annual income on property house prices. That figure is about 45% in East Anglia, about 55% in London, and 65% in the South East. Those figures are not set in stone, but you can say with confidence that if house prices rise so that the above figures are breached then they dont stand much chance of going higher in the near future unless wages explode.

There is a mood element to all this. If people feel confident, and the future looks bright, they’ll go out on a limb and spend next year’s money. If things look gloomy they will do the opposite, and hoard what they’ve got, and bid things down rather than up.

I have to generalise at this point, but using the indicated figures above you can be a bit more specific if you want to get the average house prices for your area.

Here is what I do to get an idea on what house prices are likely to do in the near future. First I find out how much people are being paid. The average income at the moment is a fraction below £26,000. If I assume that broadly speaking people across the UK dont want to spend more than 50% of their income on housing then they have half that sum available to spend on a mortgage.

Now let’s look at the other side of the equation. What’s the average house cost? Apparently it is a little over £228,000. What does that cost at the moment? Interest rates on mortgages are about 5%. The average repayment scale for a mortgage is 25 years. That means in rough figures your average mortgage on your average house should be costing about £14,820.

Okay, I know most people simply dont live in an average house, or pay an average mortgage, but you can break these figures down to localise them. I am simply looking to find out whether house prices are in general over-priced or under-priced. Let’s look at our calculations.

I’ll drop a screen-dump in lower down so you can see how I’ve set this out. If my assumptions are correct your average mortgage holder should be looking to pay no more than half his salary on the house, that means your average house should cost no more than £12,950 a year. Unfortunately it costs £14,820, or 57.22% of income.

If I were a property consultant I would now claim that house prices are 5.22% over-valued, and they are likely to fall in the coming year. However, people dont function according to mathematical rules. This is where we have to apply the mood index.

What’s the general mood of people in the UK? Are they optimistic about the future? Is the general pay packet getting bigger? Or are things a bit grim, and folks are feeling nervous? If they were optimistic about the future I would say house prices are at a fair level, and they could even go up a bit next year. If people are tending towards the pessimistic I would say there is no chance house prices will go up, and they may very well come down as much as 10%. There may well be pockets where houses are way over priced, and others where they may be under priced, but the general picture is of an over-priced market, and with a general gloomy mood across the country, those prices will fall.

Here’s the spreadsheet:

john

House Prices

House Prices

Those who have ignored the many pundits predicting a property price collapse, or the alternative, big rises from recent lows in house prices, have seen that John Clare has gotten it right again. Last year I predicted no change in house valuations (maybe up a bit, maybe down a bit). I was not phased by the lurch upwards in house prices in the middle of the year, as I pointed out at the time, prices were likely to come back down again and end the year pretty well where they started. They did just that. This year I said would be the same, property prices maybe up a bit, maybe down a bit. Well, it looks as though the year will end roughly where it started, or maybe down 2-3%.

UK House Prices

It’s a bit early to start thinking about where next year will take us, but you people keep asking me, so here is my attempt to look ahead.

Real estate prices will continue to be ruled by three things, and three things only:

1   Bank lending
2   Wage increase levels
3   Political interference in sovereign and bank debt

Nothing else counts. So, what do we have?

1   Bank lending is not about to increase. Banks are in very bad shape across Europe. Result, house prices will fall in various countries.

In Greece (and Cyprus) there will be no market at all.

In Portugal and Spain the housing prices will be severely curtailed with falls of about 10%. I expect further falls in the Algarve where house prices got way above where they should have been, and they are still way too high. The only thing that is preventing worse falls here is the fact that so many people refuse to sell, and that will lock up the market for many years to come.

Ireland will see further falls in house prices, or a complete lock-up.

Italy will see falls.

France is an enigma. I dont expect rises, and common sense predicts further falls, but at the moment the whole country appears to be in sleep-walking mode, completely ignoring the financial mess that is stacked up all around them. That has to change, but how long before it does change is another matter.

Turkey I cannot say. I dont know enough about property prices in the region.

USA: Not sure whether to say walking wounded or dead man walking. Talk of recovery in the housing market is a bit premature.

UK: Ask me again in december when I will make my usual annual comment. At the moment I see no change. All things being equal house prices are fairly stated. The trouble is, all things aren’t equal.

2   Wages are not even keeping up with inflation, so there will be no house price increases across the UK or the euro-zone. In fact, the reverse will be the case. If wages are decreasing in real terms then house prices will have to follow suit.

3   This is the fly in the ointment. The political strategy of kicking a can further down the road will lead to further and further fiscal imbalances and is building a steadily worsening scenario which will have to blow sometime. When it does I have no idea what the outcome will be. I have never viewed a currency and political melt-down close up across several countries. It should at least be interesting. Reality will burst in at some stage. At the moment the politicians have barricaded themselves in. All bets are off with this one.

Dont you just love all this?

What all this means is that, putting it in a nutshell, house prices will stagnate or fall next year.

The rental market still looks good, but dont put too much faith in the current upward move in rents. Rising rents are also dependent upon rising income. I dont see much room for further increases. I suspect rents next year will stagnate.

Wealth warning: For the record, I have been doing these annual analyses of the housing market in one form or another for the past 42 years. I have yet to be proved wrong. However, the warning on the package takes the usual form: past success is no proof of future success.

john