A Taste of the Dolce Visa: Real Estate for the Italian Investor Visa
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Real estate investments have been a staple of EU Golden Visas for over a decade. Investors perceive real estate as a low-risk, tangible asset that is a robust means to an end: Gaining EU residency.
That perception is skewed, however. Real estate investments have always been problematic, especially under Golden Visa programs. The new residency by investment paradigm shift in the EU emphasizes moving away from real estate and into more impactful investment classes for investors and the country.
Italy’s Investor Visa reigns supreme in this new era of EU investment migration, cast off the shackles of inflated property prices and real estate bubbles to offer investors something better.
The Problem With Residential Real Estate Investments
As mentioned earlier, real estate investments have dominated the EU Golden Visa market for the past decade.
For most of the past ten years, there has been no competition between property investments and other asset classes; it has been a total landslide in favor of real estate. Things began to change during the pandemic, however, and the shift is almost complete.
Portugal’s Golden Visa is a prime example here. Before the government scrapped any real estate-related investment categories, the fund option gained significant ground. In about five years, the percentage of Golden Visa applications under the fund option grew from just 0.56% to nearly 30%, emphasizing the changing mindset of investors who are quickly realizing that the investment aspect of the Golden Visa is just as important as residency benefits it confers.
Real estate investments have two internal problems: Management and low ROI. Managing real estate for rent requires that investors find a suitable and reliable property manager who will take a cut of the profit and, by doing so, forfeit a percentage of an already modest ROI rate.
Golden visa properties also come with an external issue: The public’s overall distaste for them. Governments can easily blame rich foreigners for increasing real estate rent and acquisition prices, leading to outrage against programs like the Golden Visas.
Developers may also set high mark-ups on real estate projects geared toward attracting foreign investors under the Golden Visa programs, which leads to lower value for money.
The shift toward more financially viable and profitable investment asset classes has already begun and, in that arena, one program tops the list.
The Italian Solution
In our last piece in IMI, we discussed why Italy’s Investor Visa is the best residency by investment program in the EU.
The program is simple, quick, and suitable for risk-averse investors. Italy, as a destination, is the best in Europe and one of the best worldwide. It all comes together organically.
But there’s more: Italy’s Investor Visa offers the optimal investment option by allowing investment in shares of Italian companies.
The investment route, which requires a competitive €500,000 outlay, gives investors the flexibility to choose an investment option that aligns with their preferences. It also lacks any additional “tag-along” fees that typically accompany property investments.
Spain’s (current) minimum investment threshold for property under its Golden Visa is €500,000. After you add taxes, agent fees, and notary fees, that minimum suddenly jumps to €567,500. This means that investors will pay approximately 13% of the investment value in additional fees.
Greece, now with a higher minimum at €800,000 for properties in the most desirable areas, has the same issue under its Golden Visa: Tag-along fees bring that total up to €856,720.
Considering that buying property in undesirable locations is not a sound investment strategy, the Greek Golden Visa, with its new pricing, is markedly more expensive than Italy’s Investor Visa.
The Italian program has no additional fees for share investments. It is a flat €500,000, giving it better value for money, especially when you factor in ROI.
Real estate ROI tends to be low. Property investments are considered low-risk, low-reward assets, and the average numbers highlight how dismal a real estate investment under the Golden Visa can be in times of high inflation.
Considering the average rental yields in Greece and Spain and factoring in taxes, management fees, sinking funds, and maintenance costs, property returns under Golden Visas are shockingly low. In Spain, the average net yield is a mere 0.92%, and it is worse in Greece, where the average is a modest 0.48%.
Low returns are among the main factors that led more investors under the Portuguese Golden Visa to shift toward the fund option. However, since Spain's alternative options are much pricier and Greece's economic environment is still in recovery mode, shifting to funds is not a viable solution for those programs.
Even if someone wants to rent out their property on a short-term basis through touristic outlets such as Airbnb for a higher average ROI, that would include a heightened initial outlay as they would have to furnish and prepare the apartment, as well as find a manager to run errands such as key collection, guest sign-on, cleaning, repairs, and more (all at a cost, of course). It just isn't worth it.
Italy, on the other hand, provides something superior. By investing in a solid company with a robust project investors can get higher ROI with greater net yields.
When choosing a suitable project, investors can obtain a gross yield of 5% and a net yield of 3.7%. So, at a net income of €18,500 a year, it's nearly four times more than Spain and eight times more than Greece.
It's clear that in terms of profitability, Italy's Investor Visa trumps both its Spanish and Greek counterparts.
The risk is also significantly lower in Italy, as it is the only option that requires that investors make their investments after getting government approval.
The investment is lower, the returns are higher, the process is easier, and the destination is better. Italy has it all, and it is leading in the new age of EU Golden Visas.
Invest In Italy can give you the ultimate Italian Investor Visa experience through interesting investments. To know more, reach out to Invest In Italy via our website or email us directly at enquiries@investinitaly.world