To Restore or not to Restore Property in Le Marche

The choice as to whether to restore or to buy a building that has already been restored is very often based on insufficient or biased information. In this article we will provide the information, some limited to the market in Le Marche, that is vital to making an informed and rational decision. We also hope to provide a platform for an open discussion on this topic.

The elements that will be discussed are –

The cost of restoring compared with current values of restored houses.

The importance of the architect.

Controlling the building process from afar.

A summary of the pros and cons of restoring.

1. The Cost of Restoring Compared with Current Values of Restored Houses.

The average cost of a house in the countryside that needs complete restoration (substantial structural work, new services and all finishing work to a good standard) is a) €550/sqm (including purchase costs) when a minimum price tag of around €100.000.

The average cost of a complete restoration is b) €1200/sqm including tax and architect’s fees. For an example breakdown of costs see http://www.vinciproperties.com/market_information.htm#b1

Buying and restoring therefore costs a) + b) = €1750/sqm

The average cost of buying a ready restored house (with a better than average standard of finish) from a developer is €2200-2500/sqm. Whereas the average cost of buying a ready restored house from a private owner is €2000-2500/sqm (where the standard of finishing materials varies greatly).

Thus, clearly buying a ready restored house is more expensive than undertaking a restoration. The difference between the cost of restoration and the cost of a finished house, in other words the vendor’s profit, is €450-750/sqm in the case of a developer and €250-750/sqm in the case of a private vendor.

In the present economic climate, all the above mentioned costs are negotiable in more or less equal measure. Building companies and private vendors alike are giving discounts of around 15%.

2. The Importance of the Architect.

It is not difficult to understand how crucial to the successful outcome of a restoration the architect is when you consider what he or she is responsible for:

Design and planning

Recruiting the building company

Surveying

Project management

These four roles encompass just about all aspects of the restoration process and there is no doubt that finding a trustworthy and competent architect is essential to a smooth and, above all, cost efficient restoration process. The architect should be seen as auditor and first line of control as well as designer of the dream home.

The question is, given the importance of the architect, is the risk of not finding the right one too great a risk to take? The answer would be yes if it were not for the fact that there are some safeguards already in place which any owner can take advantage of.

Firstly, there exists an official regional price list (il Prezziario Regionale http://www.operepubbliche.marche.it/defaultprezz.asp?quale=generale)  which is updated every year or so depending on global material and local labour costs. It therefore follows that a detailed set of plans and the consequent works specification will give an accurate end cost for the entire restoration. This in turn then provides a bench mark for costing plans, for judging quotations from building companies and for surveying.

Secondly, there are laws which stipulate technical build standards, covering all aspects of the structure and the services, that have to be met. If these standards are not met then the local Comune will not issue a “habitability certificate” (il Certificate di Abiltabilità) and the house cannot be legally lived in.

Thirdly, the architect is legally responsible for all technical decisions that are made and remains so for 10 years after the work has been terminated.

These safeguards do not entirely make up for the lack of an honest and competent architect but they do go a long way to helping control the main elements of the process and to determining responsibility were problems to arise.

For each horror story of a restoration gone wrong, there are many of successful restorations and happy owners. The trick is to tap into the network of owners that have already been through the process before and ask for recommendations of tried and tested professionals. This, combined with the safeguards mentioned in this short chapter and the owner’s prying eye, will make the restoration just about as easy as it is anywhere else.

3. Controlling the Building Process from Afar

Quite apart from communicating regularly with the architect (see above), there are other ways of keeping an eye on progress, making sure that costs are controlled and that important decisions are not being made in the owner’s absence.

Firstly, there are a number of project management companies, such as Treehouseitaly , that will not only manage the restoration process on your behalf, but that will also convey in precise terms the essence of what the owner is aiming at - this can be very difficult to do without fluent Italian. A project management company will be at pains to make sure that the owner is kept abreast of developments and that tiresome problems are dealt with so that during a visit the owner can use his time efficiently.

Secondly, there is an increasing number of building companies that employ digital technology to keep clients informed of progress. Take for example Panichi Srl, a building company from Ascoli. On their web site there is a page, reportage, dedicated to each building site with options to see progress by clicking on any specified day or week. To take things a little further, Panichi Srl will also do a live webcam report whilst walking around the site. This means that individual problems can be handled without interrupting work in progress.

Clearly, the owner’s presence on site is essential when the restoration is in it’s final phase and questions of style and taste of finish arise. But with a good team of professionals much of the restoration process can move forward without owner intervention, especially in the early stages where only good technical knowledge will allow any sort of worthwhile contribution - how many owners, for example, know enough about underpinning to be able to judge work well done or not?

Finally ofcourse, owner control is underpinned in the contract agreed with the building company. A well written contract will give the owner financial leverage (no payment until work is satisfactorily complete) and will include a clause on procedure in case of unforeseen issues.

Fractional Ownership has been around a long time, especially in the USA where it is a multi-billion dollar industry, but most people in Europe are just becoming familiar with this approach to buying and owning property. It is a very simple and cost effective way of owning a second home without all the hassle and cost of running and maintaining it.

This method of ownership allows the consumer to buy a part share in an asset (the property) that would otherwise be outside their budget.

Buying a fantastic 4 bedroom, renovated, fully furnished farmhouse with a large swimming pool, tennis court, vineyard and magnificent views, in Italy, is out of most people’s reach but buying just a few weeks in that property suddenly makes it much more accessible!

You are able to buy the number of weeks you will actually use annually, not have a house that is likely to sit empty for most of the year. Your budget goes so much further when buying through Fractional Ownership, and you only pay your portion of the running costs while having someone else oversee the maintenance and management of the property. The headaches of buying and owning a second home outright are removed. You get all the enjoyment of owning your own second home without all the hassle.

Some often used phrases to describe fractional ownership are ‘multiple parties owning an asset’ or ‘shared ownership of an asset in perpetuity’. This differs from ‘time share’ in that the asset is actually owned by you, rather than having just a right to use time in a development for a limited period. You have the right to sell or gift your share in a fractional ownership development and it could appreciate over time. A share can be purchased in the name of an individual, jointly, through a company or a trust structure.

There are a number of ways of structuring a fractional ownership development; one method is to have a UK based company own the property. There are 52 shares corresponding to the number of weeks available. Clients can buy as many shares as they wish and time will then be allocated in the property to correspond to the shares purchased.  In simple terms ‘the company owns the property, the shareholders own the company’. By structuring this way you are able to avoid the normal legal and tax issues associated with purchasing a property outright in Italy. Appassionata have handled all of these complexities and costs when originally purchasing the property through the UK Company.

To ensure that all owners get equal access and use of the properties throughout the years of ownership there is a Rotating Residency Calendar (RRC). This calendar will move your weeks each year so that you will enjoy all the seasons. The calendar is published in advance and weeks can be swapped between owners. Owners who purchase 3 or more weeks of ownership will be able to link two of those weeks together on the same rotating basis. This is the fairest way of assigning weeks and the starting point will be allocated on a first come first served basis. Two weeks of the year will be held in ownership by the developing company for maintenance purposes and where possible to assist owners to swop weeks.

The properties will be fully furnished to a very high standard, as you would your own home, they will not look like holiday rentals. The aim is to attract an affluent, aspirational customer who wants to share in something they cannot buy outright. To be able to say ‘I own a country house in Italy with a swimming pool, tennis court and its own vineyard’ is true, whether you own one or more weeks.

Finding an amazing location is also part of the development process. Le Marche is situated on the east coast forming the calf of Italy. Set against a mountain backdrop with a picturesque landscape of vineyards and olive groves dotted with small farms and medieval hill top villages. There is a wonderful coastline with lovely sandy beaches only 15 minutes drive away. This is authentic Italy, untouched by mass tourism and extremely welcoming to foreigners.

The first project will  be launched in the spring of 2009.

To further explore the opportunity of fractional ownership please conatct David Parish at david@vinciproperties.com

The current situation.

To most foreign purchasers, the credit crunch and all the consequences it has had on the economy has meant that the best policy is to wait and see what happens to the market and personal circumstances before buying. The result has been a drastic reduction in the number of foreigners currently viewing or buying. In particular, the British, who in the last few years have made up the lion’s share of the buyers, have almost completely vanished. There are some prospective buyers from the eurozone still looking, although numbers are down by about 50%. Interestingly, many agencies are noting a small increase in the number of non local Italians looking for a bargain.

To most vendors, the crisis has not had such an effect that they are forced to sell at rock bottom prices, firstly because they, like most Italians, are not heavily leveraged and secondly because selling the ruin is simply an option rather than a necessary step on the property ladder. There has infact been very little evidence of a drop in advertised prices.

Generally speaking then, despite demand collapsing, house prices have not followed. The question is - where are the good opportunities?

The most obvious bargain is to be had when buying from British owners of restored houses. Desperation to sell combined with a particluarly weak pound have brought prices down by about 20-30% and may go further. Be warned however - many second home owners carried out minimal restoration work on the basis that they would “make do” for a couple of weeks each Summer. It is essential that buyers fully understand the condition of the house they intend to buy as costs to repair shoddy restoration work can quite easily overshadow the gain made on a seemingly good price.

Less obvious is the bargain to be had when buying from those Italians that need cash for one reason or another. So as not to lose face, many local vendors will not publish a price decrease but, having noticed a dearth of foreigners in recent months, will negotiate quite substantial reductions. Local agencies say that 15% drop can be obtained. In this case, the trick is to find an agency that knows where the opportunity exists.

Investment in the Region

They say that a recession is a good time to invest and this cerainly seems to be the case in Le Marche.

An international group based in Milan is finalising its plans for a €150 milion euro investment in 3 championship standard golf resorts. The resorts will be spread throughout the region and will combine what the group has termed as “Heritage and Tourism”.

The idea is that the resorts will revive the areas they will be in by concentrating as much on social issues, restoring existing buildings and encouraging local farming, as providing high standard golf courses for tourists.

The first resort,called La Rocca di Montevarmine, will be near Carassai in the province of Ascoli Piceno and building will start before the Summer.

There is  no doubt that this investment will have a huge effect on holiday home property prices. If the resorts go as planned, Le Marche will shotly be the number one region for golf in Italy.