La Dolce Vita? It just got cheaper

Now you don't have to be John Mortimer to buy your own Italian paradise, says Graham Norwood

For years the country has been a favourite British holiday location, but until now Italy's property prices have deterred all but the wealthiest buyers.

Our own Office of National Statistics says only 3,000 Britons own homes in Italy and while this is likely to be a dramatic under-estimate (the figure is of those who pay tax on the rental income or when they sell) it is nonetheless well under 5% of the number of Britons said to own in Spain and barely 8% of those who own a home in France.

But now UK estate agents - who previously specialised in properties for £500,000 or more - are offering more affordable homes.

"It's only now that improved flights and communications have made it viable for many to consider buying in Italy and it's only now that there's been property at lower prices for international buyers," says James Price of Knight Frank, one of the agencies in question. "But in Italy, British buyers don't always know where to start. Established agents selling low-cost homes should trigger demand," he believes.

The homes on sale fall into three groups. The first consists of wrecks - those classic period properties that need restoration.

In Italy, unlike in France, there are few property finder services or Britons who speak the language. As a result it has previously been left to individuals to try to find those perfect restoration projects but very few have even tried.

Therefore firms like Jackson Stops & Staff (020 7828 7387) now offer places like Borgo Pace at Pesaro-Urbino, a country house in the hills between Tuscany and Umbria. It is only £48,000 but may cost another £70,000 to renovate.

Similarly Knight Frank is selling Fattoria Casadorna at Castelfalfi, a 300-hectare estate between Pisa and San Gimignano, about an hour from Florence. The estate has six farmhouses needing restoration, with prices starting from £151,000.

Renovation projects like these are big business in Italy as the government gives tax breaks to owners using local builders.

The second category of cheap Italian homes consist of large period houses split into smaller units. Again this sector is becoming more popular in rural areas because it offers higher profits to developers, and because small houses and flats attract a large pool of potential buyers.

Typical of this type of property is Il Poderone Roccalbegna in south west Tuscany, where eight large houses have been split into 30 homes. One is a house and the others are apartments with communal facilities including a pool and gardens. Prices start from £111,500 from Savills (020 7016 3744) which is also selling five homes converted from a disused olive mill at Frantoio del Bartolomei near the Tuscan town of Lucca, with prices from £119,800.

Cheaper still are homes converted from houses at Umbertide, a market town in Umbria. They have become a gated estate of 51 flats and small houses, each with car parking and communal facilities and on sale through Knight Frank. The modern facilities mean these are no longer traditional Italian homes but with prices starting at £79,500, Umbria has rarely been as affordable.

The third low-cost category consists of brand new properties, usually in urban areas. "City apartments in Rome and Milan are only exceeded in price in the EU by those in Paris and London," says Professor Michael Ball, who studies foreign housing markets for the UK's Royal Institution of Chartered Surveyors. Therefore any new homes that are considered low cost will be tiny and located well away from central areas.

Typical of this is the development on sale from British estate agent Colliers CRE (0207 487 1978), selling studio flats from £90,000 in a mixed shopping-office-housing site near Cologno, a suburb of Milan - not the city's most fashionable quarter, but about 30% of the price of a comparable centrally-located apartment.

"Italy's market is opening up. Some cities have seen 5% to 10% rises in recent years until things quietened down 18 months ago," says James Price.

But don't expect to make money from letting - Italy's private rental sector is one of Europe's smallest and strict controls mean rents from long-term tenants rise by only 75% of the cost of living, so income may not cover mortgage costs.

And if you are not into renovation you may find it hard to buy in some parts of the country. "A large share of housing is in poor condition with a quarter of dwellings estimated to need significant modernisation," says RICS' Michael Ball.

But in return you will be in at the start of what is effectively a new property market. We may have been visiting for a long time - but we are only at the beginning of our love affair with owning Italian property.

How to buy in Italy

* Make a verbal offer to the seller - a written offer is legally binding.

* Once a price is agreed, seller and buyer sign a compromesso before a lawyer - a legally binding contract stating purchase price, date of completion and mortgage details; it may include a deposit of between 5 and 10 per cent.

* Six to eight weeks later the completion (or atto) takes place, requiring the rest of the payment plus bills for property tax of up to 0.7 per cent of the purchase price, and up to a whopping 15 per cent of purchase price for fees to lawyers and agents.