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The colourful houses of Positano, a village on Italy's southwestern Amalfi coast, are usually an attraction for foreign tourists, but not in July of 2020, when this picture was taken.

FILIPPO MONTEFORTE/AFP via Getty Images

Sell Toronto, buy Tuscany. Or Sicily or Lombardy or Puglia or anywhere else in Italy.

Over the past 20 years, house prices have soared in much of the Western world, especially in Canada, but have barely budged in Italy, according to official data. They climbed a bit last year, even as COVID-19 ripped through the country, but are flat over five years and down over 10.

Many foreigners dream of owning a property in Italy. Given the high – even outrageous – prices in cities such as Toronto, where houses in desirable areas routinely go for hundreds of thousands of dollars over asking price, selling high in Canada and buying low in Italy must be tempting for many Italophiles.

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Just don’t expect to make money on your Italian investment. The dire economic and demographic forces working against the country suggest that property turnaround anytime soon seems unlikely even though Italian banks now offer mortgages at rates of 1 per cent, or less.

Italy has been in near-permanent recession since the 2008-09 financial crisis and its GDP shrank by 9 per cent 2020, after it became the first country in the world to go into full lockdown.

At the same time, the Italian fertility rate is one of the lowest in the world, at 1.3 children per woman. In 2019, the total number of registered deaths, at 647,000, was 54 per cent greater than the number of births. In the grimly fatal 2020 pandemic year, the gap widened. The result was an overall population decline of almost 400,000, equivalent to a city of the size of Florence, partly due to emigration as young people searched for job opportunities abroad. Only the biggest cities – Rome (pop. 4.3 million), Milan, Naples, Turin and Palermo – are holding their own, barely.

OECD data suggest Canada has been the world’s hottest property market, and Italy the coldest. In Canada, house prices in real (inflation-adjusted) terms rose 168.4 per cent in the 20 years through last year. In Italy, the figure was a mere 7.3 per cent. The next closest rival at the bottom of the rankings was Germany, with a 30.8 per cent rise.

ISTAT, the Italian statistics agency, reported that house prices rose 1.9 per cent in 2020 – a remarkably strong figure given the country’s serial underperformance – but are down 15 per cent since 2010.

The housing market in Europe’s other big economies fared much better, according to Eurostat, the European Union’s statistical agency. In Germany, prices were up 9.5 per cent in 2020; in France 5.9 per cent; and in Spain 2.8 per cent. Figures for the U.K. for 2020 were not available, but all indications are that a post-Brexit buying frenzy is underway, with house prices reaching records in April as tax breaks on purchases and rock-bottom interest rates worked their magic. Houses outside of London were rising at the fastest pace as remote working took off.

Generally speaking, prices for city and rural properties in Italy are astonishingly low by big-city Canadian standards. They may get even lower, at least in the tourism-dependent cities, as a glut of vacant Airbnb properties are pushed onto the rental and sales market. Foreign tourist visits fell by 60 per cent in 2020, says the World Travel & Tourism Council, pushing many Airbnb owners into financial distress.

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The 2021 Demographia International Housing Affordability report shows a number of metropolitan cities are worsening, with Canada now holding two of the top five rankings. We compare what your money buys in Canada, and how far it goes overseas.

Rome property agent Alessandra Puglisi, whose family runs a Re/Max Prodigy agency in the city’s historic centre, says the high-end properties are holding their value, even rising, but the middle market is under pressure. “Anyone who has to sell is facing lower prices,” she told me.

Luxury properties in Rome seem like a bargain by international standards – all the more so since condo fees and property taxes are relatively low.

Ms. Puglisi showed me a preliminary listing for a new three-level villa, covering 500 square metres (almost 5,400 square feet) next to the Villa Doria Pamphilj, Rome’s biggest park, just beyond the city centre. It comes with a pool, Turkish bath, vast terraced garden, three fireplaces, solar panels, in-floor heating and standby electricity generator.

The expected price is about 2.7 million euros, or $4-million. An equivalent property in London, Paris or Berlin would probably be 50 per cent higher

Non-millionaire bargain hunters have vast choice if they are looking for rural Italian properties, because of depopulation. Towns and villages pretty much everywhere, but especially in the Mezzogiorno, the southern half of Italy (roughly starting from Rome), can be a quarter to a half empty. In 2016, the Italian environmental group Legambiente said that about 2,500 villages throughout Italy were in danger of extinction.

Many are dilapidated little gems from the medieval, Renaissance or Baroque eras whose mayors are begging for buyers. “The costs of some beautiful of villas are very low compared to the U.S.,” said Brook Edinger, an American friend of mine who has lived in Rome for three years.

The main square of the medieval hill town of Montepulciano in Tuscany.

MIGUEL MEDINA/AFP via Getty Images

Some towns and regions are pulling out all the stops. Dozens of towns have joined the “Case a 1 euro” – houses for 1 euro – initiative, where empty or abandoned properties are given away for the price of a cappuccino as long as the new owner agrees to renovate the place, generating local employment, within a few years. A few town councils offer renovation grants worth many thousands of euros.

An extreme variation of this concept has seen the region of Molise, a high-unemployment area in south-central Italy that stretches from the Apennine mountains to the Adriatic Sea, pay newcomers 700 euros a month for up to three years if they move to one of its 106 depopulated villages. The catch? You would only qualify if you start a business of some sort – no easy task when the streets are empty of customers.

Another initiative would see Italy’s pandemic recovery plan, bolstered by more than 200 billion euros in grants and loans from the European Union, wire up rural areas to high-spreed broadband networks. With the pandemic still firmly in place, the idea is to turn as many towns a possible into remote-working hot spots.

The concept might appeal to young, tech-savvy entrepreneurs who can’t afford properties in the big cities, though the reality is that the small, remote, lifeless towns are unlikely to benefit. Those on rail lines that are fairly close to cities, and come equipped with a couple of buzzy bars and restaurants, will be the prime beneficiaries. Ghost town status awaits much of the rest of rural Italy, and giveaway prices will become the norm.

Buying real estate for the first time means dealing with an array of new terms and acronyms. Here are some explanations for some of the most common a buyer might come across. The Globe and Mail

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