If your father owns many properties, you’ll end up poor in old age.

Why Real Estate Might Not Be the Best Inheritance: A Closer Look

When it comes to real estate, it’s time to rethink our approach to the properties we inherit.
A recent story shared by a client sheds light on the challenges one might face when trying to sell a property, even if it’s an attractive house in the charming countryside.

The Changing Landscape of Real Estate Ownership

Did you know that about two-thirds of Italy’s private wealth is tied to real estate, which is twice as much as the public debt? Despite these numbers, long-term factors are reshaping the traditional role of homes as a means of accumulating and passing down wealth in Italy.

One significant factor is demographics.
The demand for housing was high in previous years, but now, with the aging population and declining birth rates, the landscape is shifting.
Many younger individuals are not financially able to sustain the demand for quality housing, leading to a concentration of properties in the hands of a few.

Additionally, energy inefficiency in homes poses a significant challenge, requiring substantial investment to undergo an energy transition.

The Economic Perspective

Italy faces economic challenges such as flat wage dynamics, a tax system focused on labor, and low competitiveness.
The necessary reforms to boost the economy are often unpopular and politically risky.
The low productivity of real estate assets further adds to the financial complexities, with returns being offset by management costs and taxes.

With a decline in real estate demand due to demographic and economic factors, coupled with low profitability and high investment requirements, young individuals inheriting properties may find themselves with limited options.
Selling part of the family’s estate quickly becomes a burdensome choice, especially for those with low incomes.

While rural areas are the first to feel these effects, cities will follow suit unless Italy undergoes a significant revitalization – a prospect that seems elusive at present.

In conclusion, the suggestion of selling a provincial apartment to acquire a parking space in Milan or Cortina may hold more benefits than expected.
With Italian assets being relatively illiquid on average, it is crucial to assess the options promptly to avoid future challenges and uncertainties.

For further reading on investments, check out Investments: Should I Sell Stock A or B?