Italian real estate has long been the coveted prize of many international buyers in search for the perfect vacation home. While purchasing property in a foreign country can be a complicated process, the good news is that acquiring your very own piece of the Bel Paese is significantly more affordable than it used to be. There are two primary reasons for this.
1. US Dollar to Euro Exchange Rate
Over the last decade, the US Dollar has seen various ups and downs, and has averaged a value of approximately 0.89 Euros. While its relative value is not as high as it was during the second half of 2022, the exchange rate remains at historical highs. The average price of 1 dollar was 0.92 euros as of this week (May 17, 2022). This is +2% greater than the average exchange rate over the past 5 years and +12% greater than the average exchange rate recorded since the Euro became Italy’s official currency. In short, American buyers are getting more house for their money than they used to.
Fig. 1: USD to EUR Exchange Rate
2. High Mortgage Rates = Less Competition
Like in most of the western world, high mortgage rates (~7% in the US and ~4% in Italy) have significantly slowed down the real estate market. Italian and European mortgage rates have increased by 2% since early 2022. While an Italian mortgage might look affordable relative to its US counterpart, the Italian market had adapted to significantly lower rates over the past decade. The higher cost of financing has reduced the pool of Italian and European buyers currently in the market for a second home in Italy. That means there is currently less competition for the home of your dreams. While cash buyers are clear favorites in this environment, buyers with good credit are still able to obtain financing at attractive rates.
Fig. 2: Average 30Y Mortgage Rate in US and Italy
To quote the old adage, there is no better time than the present when it comes to purchasing real estate in Italy at competitive prices. If you are curious to learn more about the process of purchasing a house in Italy, please explore our library of content or reach out to us at [email protected].
