Investing in New Construction vs Existing Construction in Italy: Which is Better?

Investing in New Construction vs Existing Construction in Italy: Which is Better?New Developments News
  • 29.05.2025
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Investing in New Construction vs Existing Construction in Italy: Which is Better?

Italy, with its breathtaking landscapes, rich history, and vibrant culture, stands as one of the most attractive countries for real estate investment in Europe. Whether envisioning a picturesque villa on the rolling hills of Tuscany, a chic apartment nestled in the heart of Milan, or an ancient palazzo in the cobbled streets of Rome, Italy dazzles with possibilities. For investors eager to enter the Italian market, a critical question arises: Is it better to invest in new construction or existing construction?

This comprehensive guide delves deeply into this question, comparing the distinct benefits, challenges, financial implications, and unique characteristics of both new and existing properties in Italy. It aims to equip you with the insights necessary to make an informed decision that aligns with your investment objectives and lifestyle aspirations.

Table of Contents

Overview of the Italian Real Estate Market

Italy’s real estate market is an enticing concoction of tradition and modernity. From historical cities such as Florence and Venice to bustling metropolitan areas like Milan and Rome, Italy offers a broad range of properties fit for both residential and investment purposes. The country’s real estate landscape is characterized by:

  • Diverse property types: Apartments, villas, farmhouses, townhouses, palazzi, modern developments, and more.
  • Regional differences: Each region has its unique charm, price point, and regulatory landscape, influencing investment strategies significantly.
  • Tourism influence: High tourist influx, especially in regions like Tuscany, Amalfi Coast, and Lake Como, creates significant demand for vacation rentals and second homes.
  • Historical context: Many existing properties, especially in city centers and countryside, are steeped in history, dating back centuries.
  • Modern advancements: Urban centers and some suburban areas are witnessing a surge in new, eco-friendly, and technologically advanced constructions.

Since the global financial crisis of 2008, the Italian property market has undergone fluctuations. However, there have been signs of steady recovery and renewed foreign interest, partly spurred by enticing incentives for renovation and the internationally famed “€1 houses” initiative in select rural towns.

As interest rates and economic conditions evolve post-pandemic, strategic investors carefully weigh the pros and cons of new construction versus existing construction to maximize value and minimize risk.

Defining New Construction and Existing Construction

Before comparing both options, it’s essential to clarify what constitutes new construction and existing construction in the context of Italian real estate.

What Is Considered New Construction?

In Italy, new construction typically refers to properties that meet the following criteria:

  • Built within the last 2–3 years or currently under development.
  • Comply with the latest building codes and energy efficiency standards (“Classe Energetica”).
  • Often offer modern amenities such as parking, elevators, smart home systems, and sustainable design features.
  • Never previously occupied or transferred except for a developer or builder’s purposes.

New construction can range from single-family homes and condominiums in urban developments to luxury waterfront villas. The planning and building process is overseen by developers and subject to extensive regulatory approval from Italian local authorities (“Comune” and “Ufficio Tecnico”).

What Is Existing Construction?

Existing construction encompasses all properties not classified as new, including:

  • Period homes, usually featuring classic Italian architecture, often several decades to centuries old.
  • Modern properties built more than 2–3 years ago, which may have undergone partial or full restoration.
  • Heritage buildings, palazzi, and rural farmhouses (“casali”) with unique historical character.
  • Properties occupied previously by owners or tenants.

Existing properties in Italy are renowned for their distinctive charm and, often, their need for renovation or maintenance to meet contemporary standards of comfort, safety, and efficiency.

Market dynamics in Italy are constantly evolving, and the choice between new and existing construction must be understood within the context of broader trends:

Demand for New Construction

  • Growing in cities like Milan, Turin, and Bologna, where modernization, job opportunities, and infrastructure boost residential demand.
  • Younger buyers and international investors often prioritize new builds for convenience, safety, and energy savings.
  • Government incentives, such as the “Superbonus 110%” for energy-efficient upgrades and new green buildings, have fueled interest.

Resurgence of Interest in Existing Properties

  • Rural and historic homes remain hugely popular, especially among foreign buyers seeking lifestyle, rental, or restoration opportunities.
  • Urban period buildings—in Florence, Venice, and Rome—offer high cultural value and rental yields, especially when restored tastefully.
  • Lower price points and availability of character properties attract buyers looking for bargains or unique homes.

The COVID-19 pandemic further affected demand, with a surge in “smart working” prompting renewed interest in larger homes, countryside retreats, and properties with gardens or terraces—both in new and existing stock.

Advantages of Investing in New Construction

New construction in Italy presents a host of significant advantages for investors, homeowners, and landlords alike. Let's take an in-depth look at why you might prefer this route:

1. Modern Amenities and Design

Newly constructed properties are designed with today’s lifestyle in mind:

  • Open-plan living spaces
  • Underfloor heating, air conditioning, and smart home technology
  • High-speed internet and energy-efficient lighting
  • Eco-friendly features such as solar panels, thermal insulation, green roofs, and rainwater harvesting
  • Private parking, elevators, and accessible infrastructure for people with disabilities

For those seeking comfort, efficiency, and a low-maintenance lifestyle, these modern features are an undeniable draw.

2. Energy Efficiency and Sustainability

Italy’s building regulations have undergone significant tightening, particularly in line with EU climate targets:

  • All new builds must meet minimum energy efficiency ratings or “Classe Energetica.”
  • Reduced carbon footprints through sustainable construction materials and processes.
  • Substantial savings on utility bills over time.

With the EU’s ongoing push for green construction, new builds frequently qualify for incentives, tax breaks, or reduced mortgage rates.

3. Lower Maintenance and Repair Costs

Unlike period homes, new properties ordinarily require little to no immediate repair or restoration:

  • Brand-new infrastructure, wiring, plumbing, and roofs mean fewer unexpected expenses.
  • Warranties on construction and building systems, typically provided by the developer for up to 10 years (“polizza decennale”).

This reduces the risk of “money pit” surprises and allows for predictable cash flow projections in the early years.

4. Customization Options

Purchasing during the development phase usually enables buyers to:

  • Choose layouts, finishes, fixtures, and fittings.
  • Personalize color schemes, flooring, and cabinetry.
  • Add optional extras such as landscaping or security systems.

For investors, this can provide a competitive edge in the rental market by tailoring properties to specific tenant needs.

5. Compliance and Peace of Mind

Legal compliance is less of a concern, given that new buildings:

  • Adhere to seismic safety (“antisismico”)—an important factor in earthquake-prone regions like central Italy.
  • Are free from planning violations and illegal structures common in older buildings.
  • Come with full documentation, including “certificato di agibilità” (certificate of habitability).

This eliminates many legal hurdles, delays, and compliance costs that can plague transactions involving older properties.

6. Stronger Appeal to International Buyers and Tenants

Many international investors, especially from Northern Europe, the US, and Asia, seek “hassle-free” properties with all modern conveniences. Newly built homes are thus easier to market and command higher rents in urban areas or tourist hotspots.

Challenges of Investing in New Construction

While the benefits are clear, new construction also carries some inherent challenges that investors must weigh carefully:

1. Higher Initial Costs

New developments typically command a price premium—sometimes 10–30% above comparable existing properties:

  • Developers recoup costs for land, construction, compliance, and marketing.
  • Value premiums for modern amenities and location.

This higher outlay can elongate the timeline to achieve desired returns, especially in markets with modest capital appreciation.

2. Delayed Completion and Delivery Risks

Buying “off-plan” (before or during construction) exposes investors to certain risks:

  • Delays in permitting or building caused by bureaucracy or supply chain disruptions.
  • Potential insolvency of the developer.
  • Final results that may diverge from plans or marketing materials.

Italian law requires developers to provide financial guarantees, but protracted delays and disputes can still arise.

3. Less Historical Appeal

While new builds deliver comfort and energy efficiency, they may lack the character and soul of classic Italian homes. Some buyers and holiday renters specifically seek properties with period charm, original features, or UNESCO heritage status.

4. Limited Inventory in Certain Locations

In historic city centers or protected rural areas, new construction is tightly regulated or outright restricted:

  • Italy’s UNESCO towns and many rural regions enforce strict planning rules to preserve historical integrity.
  • New build opportunities are often confined to city outskirts or new suburbs, which may lack the prestige or rental demand of core areas.

5. Initial VAT and Taxation Impact

Purchasing new builds generally incurs Value Added Tax (VAT or “IVA”) at higher rates (typically 10%, sometimes 4% for primary homes), whereas existing properties may be subject to much lower registration taxes.

This can significantly impact the total acquisition cost and should be factored into investment appraisals.

Advantages of Investing in Existing Construction

Existing properties, whether ancient farmhouses or recently built but pre-owned apartments, continue to charm investors. Here’s why they remain so attractive:

1. Unique Character and History

Nothing embodies Italy’s cultural allure like a centuries-old palazzo, a rustic “casale,” or a frescoed townhouse. These properties offer:

  • Authentic architectural details: terracotta floors, exposed beams, original fireplaces, frescoes, stone facades.
  • Stories and provenance, often with ties to famous artists, architects, or historical events.
  • Potential for design and restoration projects that blend tradition with modern luxuries.

Such homes are especially appealing for buyers seeking a unique residence or a high-end vacation rental.

2. Prime Locations

Many of Italy’s finest neighborhoods and villages are defined by existing properties. New construction is rare or banned in:

  • UNESCO-listed town centers like Venice, Florence, and Siena.
  • Picturesque countryside with “conservazione paesaggistica” (landscape conservation) status.
  • Seaside or lakeside zones with strict coastal development laws.

This means that, for premium addresses and authentic settings, existing homes are often the only option.

3. Lower Upfront Costs (Sometimes)

Existing homes can be less expensive per square meter, especially if requiring modernization, thus:

  • Offering attractive entry points for value-added investors ready to renovate.
  • Allowing for strategic purchase-below-market opportunities, especially in less competitive rural regions.

Registration taxes are often lower (2–9% of cadastral value), further benefiting cost-conscious buyers.

4. Immediate Availability

A key advantage is the ability to:

  • Take possession quickly, with transaction times typically ranging from 2–4 months.
  • Rent out, occupy, or list the property on Airbnb shortly after closing (subject to legal requirements).

5. Potential for Appreciation through Renovation

Many Italian homes present significant “value-add” potential:

  • Modernizing heating, plumbing, and kitchens can elevate a property’s market value and rental income.
  • Restoration grants and incentives may be available for upgrading heritage properties (“bonus ristrutturazione,” “ecobonus,” “sismabonus”).
  • Buying in “up-and-coming” areas poised for revitalization can yield excellent long-term gains.

6. Established Neighborhoods and Communities

Older homes are often situated within well-established districts featuring:

  • Mature gardens, tree-lined streets, and period piazzas.
  • Long-standing amenities, schools, shops, and cultural activities.
  • Integrated transportation and infrastructure links.

Challenges of Investing in Existing Construction

Despite their romance and potential, existing properties come with a set of challenges, risks, and obligations:

1. Greater Maintenance and Restoration Needs

Even if habitable, older properties are likely to require:

  • Upgrades to heating, wiring, insulation, and plumbing to meet modern standards.
  • Repair of roofs, facades, and structural elements.
  • Addressing issues such as damp, mold, or insect infestation, especially in rural or coastal areas.
  • Ongoing, often unpredictable, maintenance costs.

2. Legal Complications and Compliance Risks

Italy’s bureaucratic system is notorious for complexity, and older homes may present obstacles such as:

  • Unregistered extensions, illegal alterations, or unclear property boundaries.
  • Missing or outdated “certificato di agibilità” (certificate of habitability), crucial for both resale and rental.
  • Heritage listing restrictions that tightly control renovation options, especially in town centers or on protected buildings.

3. Energy Efficiency Standards

Most existing homes, especially those built before the 1970s, are energy-inefficient:

  • Poor insulation, single glazing, and outdated boilers result in higher running costs.
  • Some homes may require extensive retrofitting before obtaining financing or qualifying for modern insurance policies.

4. Financing Constraints

Securing mortgages for dilapidated or non-habitable properties can be challenging:

  • Italian banks may require proof of compliance with land registry and building consents.
  • Unfinished renovations may render properties ineligible for standard home loans.

Buyers should be prepared to front substantial renovation costs before obtaining long-term finance.

5. Time and Project Management

Managing renovation projects, especially from abroad, can be daunting:

  • Finding reputable architects, builders, and artisans in rural areas is not always easy.
  • Projects may be delayed by planning, permits, or supply chain issues.
  • Unexpected “hidden” problems can inflate costs and extend timelines.

Financial Considerations: Cost, Taxes, and Returns

Given that Italian real estate investments involve significant capital, understanding the financial nuances is critical. Here we break down key cost components, taxation, and expected returns for both new and existing construction investments.

1. Purchase Price and Value per Square Meter

  • New Construction: Typically commands higher prices, especially in large cities, due to premium features, location, and compliance costs.
  • Existing Construction: May offer a discount relative to new builds, but this varies significantly depending on condition, location, and historical status.

2. Taxes and Transaction Costs

  • New Construction: Subject to VAT (“IVA”):
    • 4% if purchasing as a primary residence and certain criteria are met.
    • 10% as a second home, and up to 22% for luxury properties (“categoria catastale A/1, A/8, A/9”).
  • Existing Construction: Registration tax is usually lower (2% for primary residence, 9% as a second home, calculated on cadastral value, often less than market value).

Additional costs for both include notary fees (approx. 1–2.5%), legal fees, real estate agency commissions (2–4% of sale price), and cadastral taxes.

3. Renovation and Maintenance Expenses

  • New Construction: Minimal initial repairs, with longer-term costs limited by construction warranties and modern materials.
  • Existing Construction: Renovation costs can range from €400–€2,000/m² or higher for luxury or heritage restorations. Owners should budget for unforeseen repairs and ongoing maintenance.

It’s not uncommon to see buyers exceed their original renovation estimates by 20–50% due to structural surprises or changes in design scope.

4. Rental Yields and Capital Appreciation

  • New Construction: Usually attracts premium tenants, which can mean lower vacancy rates and higher yields in sought-after neighborhoods.
  • Existing Construction: While charming properties command top rental rates after renovation, vacancy risk and rental caps may apply in historical zones, especially with short-term lets.

Capital appreciation depends on market cycles, local demand, and macroeconomic factors. Historically significant or well-renovated properties in tourist cities are more resilient during market downturns.

5. Taxes on Income and Ownership

  • Rental income is subject to Italian income taxes, either at progressive rates or under a “cedolare secca” flat rate (21% or 10% in some cases).
  • Property ownership taxes (“IMU,” “TASI,” and “TARI”) apply, with rates varying by municipality and use case (primary residence vs. second home).

6. Tax Incentives and Relief

  • Various tax breaks exist for renovation (“bonus casa”), energy upgrades (“ecobonus”), and seismic improvements (“sismabonus”). These incentives can cover 50–110% of eligible expenses, often offsetting the cost of restoring existing properties.

Italy is famous for its complex bureaucracy, but also for robust protections for buyers. Understanding the legal requirements for both new and existing construction is essential to avoid costly pitfalls.

Buying New Construction: Legal Steps and Protections

  • Developers must provide a surety bond (“fideiussione bancaria”) on all deposits paid before handover.
  • Contracts must include details of completion dates, property features, technical specifications, and penalties for delay.
  • Warranties (“assicurazione decennale postuma”) cover structural and installation defects for ten years post-completion.
  • Buyers should verify the developer’s track record, building permits, and compliance certificates.

Legal professionals (“notaio” and/or international property lawyers) are crucial to verify due diligence, especially for foreign buyers unfamiliar with Italian procedures.

Buying Existing Construction: Key Due Diligence Actions

  • Verify title, land registry (“catasto”), and urban planning status with local government offices.
  • Seek records of any renovations, permits for additions or upgrades, and the most recent certificate of habitability.
  • Understand any heritage restrictions or condominium bylaws that may affect renovation scope or usage (e.g., short-term rentals vs. long-term leases).
  • In rural areas, confirm access rights, utilities connections, and potential inheritance or co-ownership issues.

It is strongly recommended to hire a bilingual, qualified property lawyer. Many horror stories in Italian real estate stem from skipped or poorly handled due diligence, especially in heritage properties.

Location Analysis: Where to Invest in Italy

“Location, location, location” is the mantra of global real estate, and Italy is no exception. However, the dynamic between new and existing construction varies across the peninsula:

Northern Italy

  • Milan: Major center for new construction, with flagship developments in Porta Nuova, CityLife, and Bicocca. Older Art Nouveau and Liberty apartments also abound in central districts.
  • Lake Como, Garda, Maggiore: Primarily existing villas, but some new luxury developments in less restricted shore areas.
  • Turin, Verona, Bologna: Opportunities in city center period buildings, with new developments on peripheries.

Central Italy

  • Tuscany: Coveted for country estates and farmhouses. Strict building codes mean few new constructions outside city areas, but restored period homes are sought after.
  • Florence, Siena: Core centers are almost entirely existing stock, with high restoration demand.

Southern Italy and Islands

  • Puglia: Trullo houses, masserias, and Baroque townhouses dominate. New builds rare unless on the coast or in planned urbanizations.
  • Sicily, Calabria: Mix of heritage and new developments, with the “€1 house” schemes drawing global headlines.
  • Naples, Amalfi, Capri: Mostly existing, with new building highly restricted. Prices for period homes reflect strong international demand.

Key Considerations by Location

  • Regions with strong tourist demand (Florence, Venice, Amalfi, Lake Como) tend to offer the best returns on existing, restored properties.
  • Growing cities with expanding populations (Milan, Bologna, Turin) offer strong rental and resale prospects in new construction.
  • Rural and southern areas can offer bargain prices on existing homes, but returns depend on successful renovation and access to tourist/rental markets.

Case Studies and Real-World Examples

Case Study 1: Urban New Construction in Milan

Project: A foreign investor buys a two-bedroom apartment off-plan in Milan’s Porta Nuova district.

  • Price: €700,000 incl. VAT
  • Delivery Time: 24 months from purchase
  • Rental Yield: 4.5% gross on long-term lease to corporate expatriates
  • Advantages: Modern amenities, eco-certification, and strong demand from business tenants.
  • Risks: Initial delay of 6 months during construction, requiring renegotiation on handover date.

Outcome: Stable rental income and capital gain after 5 years due to area redevelopment.

Case Study 2: Restored Farmhouse in Tuscany

Project: A retired couple purchases a 19th-century farmhouse (“casale”) outside Siena, requiring restoration.

  • Price: €350,000 for the property, €250,000 for restoration
  • Support: Eligible for “ecobonus” renovation incentives
  • Rental Yield: Seasonal rental at €2,500/week during peak months
  • Challenges: Delays in obtaining planning consent for expansion, cost overruns of €30,000 due to hidden structural work.

Outcome: Exceptional rental yields in summer and autumn, high occupancy rates, and substantial property value increase after completion.

Case Study 3: Heritage Apartment in Rome

Project: Professional couple invests in a 140m² apartment in a historic Roman “palazzo.”

  • Purchase Price: €520,000
  • Restoration: €100,000 modernization
  • Rental Return: €2,000/month, long-term lease to diplomats
  • Advantages: Centrality, unique frescoed interiors
  • Drawbacks: Restrictions on major structural changes, mandatory restoration of façade shared with other owners.

Outcome: Steady returns and high capital appreciation over 7 years, but occasional disputes with condominium over restoration priorities.

Future Outlook: What Lies Ahead?

Italy’s real estate market is shaped by evolving economic, social, and regulatory factors, making the choice between new and existing construction subject to future trends:

  • Continued demand for green, energy-efficient living will fuel new construction, especially in metropolitan centers.
  • Ongoing interest in lifestyle and “workation” properties is likely to benefit both new and renovated homes in rural and coastal regions.
  • Government incentives for restoration will remain crucial for making existing properties viable and desirable.
  • Potential tax reforms and changes to short-term rental legislation could shift returns for investors in tourist hubs.
  • Population dynamics (aging population and urbanization) may favor properties in cities or well-served towns, both old and new.

As Italy aligns with EU standards for sustainability, energy efficiency will increasingly impact both the attractiveness and legal compliancy of all property types.

Conclusion: Making the Right Choice

Ultimately, the decision to invest in new or existing construction in Italy is a personal and financial choice shaped by:

  • Your investment goals: capital appreciation, rental income, lifestyle, or legacy.
  • Your preferred location: city, coast, countryside.
  • Your risk tolerance: comfort with project management, renovations, or legal complexity.
  • Your appetite for authenticity versus convenience and modernity.

New construction offers ease, efficiency, and strong returns in growing urban areas, while existing properties provide unique charm, potential for value-added appreciation, and opportunities in prestigious or restricted locales.

Practical Steps for Prospective Investors:

  1. Conduct rigorous due diligence: Always partner with experienced local legal and property professionals.
  2. Budget for the unexpected: Factor in taxes, fees, and contingencies, especially with renovation projects.
  3. Assess rental/return potential: Evaluate local demand, competition, and regulatory constraints.
  4. Visit properties and neighborhoods in person before committing, if possible.
  5. Leverage available tax incentives for restoration or green upgrades.

Whether you dream of a modern penthouse in Milan or a centuries-old villa in Umbria, Italy’s real estate market can reward careful, well-informed investors. Weigh your options thoughtfully, and you’ll enjoy a slice of La Dolce Vita while building a solid financial future.

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