Property in Venice: A Little Place by the Canal

London Telegraph. UK

January 5, 2008

The only thing moving quickly in Venice are the house prices. And, says Zoe Dare Hall, now that the notoriously secretive housing market is sorting itself out, this could be the time to buy

From Don't Look Now to The Talented Mr Ripley via various James Bond adventures, Venice has provided an iconic backdrop for film-makers. In fact, this breathtaking Italian city, with 60,000 inhabitants and 117 islands, can feel like one big film set, where real life has to fit in with the surroundings. There are no cars, roads or ugly supermarkets in the centre. Everyone, from firemen to fruit sellers, operates by boat. And gondoliers really do glide along singing O Sole Mio. Though maybe with just a touch of irony.

· Like the water traffic (you are fined #100 if caught speeding), time passes slowly in Venice - and that includes property transactions, says Sebastiano Doria, from Views on Venice, Savills' associate in the city: "Venice is a sort of Sleeping Beauty. Spend one week here and you become very relaxed. You lose contact with the reality of the rest of the western world."

The property market is "inefficient, with many estate agents but mainly one-man bands who don't speak English", he adds. "Short-let apartments, with websites to advertise them and management services, are hardly a new concept elsewhere, but no one was doing it in Venice before us." One client, the CEO of a British bank, is trying to complete on a property eight months on because the vendor is demanding he pay 50 per cent in cash.

One thing has moved fast in the past five years: house prices. Property hunters will be hard-pressed to find a one-bedroom flat in a decent location for less than #275,000. But rental yields are high, too. One-beds in good locations rent for about #800-plus a week, two-beds from #1,700, with most short-let properties rented out for about half the year, which is punctuated by lavish events such as the summer Film Festival and the explosive Biennale in June.

"Property values have tripled here in the 10 years since the introduction of the euro," says Mr Doria. "That brought easier access to credit and more competitive interest rates." Ann-Marie Doyle, from Venice Estates, forecasts annual rises of about 14 per cent to continue in 2008. Mr Doria expects more steady growth of about 5-8 per cent; Italy's conservative banking system means that the country has not seen US- or UK-style over-lending, so the market is likely to see solid, but not sensational, positive growth, he says.

For property-minded foreigners - most of whom are British - knowing where to start is not easy without For Sale signs on fagades or recognisable estate agents' names. And while there are incentives for restoring listed buildings, including a lower buyer's tax (4 per cent of the nominal value, rather than 10 per cent) and effectively tax-free rent, tackling a renovation project when you have waterways instead of roads makes parking a skip or transporting materials an added challenge.

The Grand Canal, the main artery that snakes through the city, is the most desirable place to buy, particularly between St Mark's Square and the Rialto Bridge. There, expect to pay up to #13,700 per square metre, while in the other central areas of Dorsoduro and San Marco, #6,800-#8,200 per square metre is the norm. "A lot of buyers are getting more educated about Venice and asking for Castello, an untouristy area east of St Mark's Square," says Mr Doria. "Prices are lower there at about #3,500 per square metre because it's on the Adriatic side rather than the land side of Venice, so it takes longer to commute out of town."

Islands such as Burano and Torcello also offer better value for money: "Burano is one of the nicest. You could buy a small house there for #400,000. Tellestrina Chioggia is lovely also."

Unlike a city such as Barcelona, whose crumbling old town fagades increasingly conceal trendy, high-spec apartments, Venetian interiors typically range from the faded and often rather eccentric grandeur of old palazzos to apartments that, to most second home-buyers' or investors' eyes, could do with a serious overhaul.

In the central Campo San Barnaba, a charming, small square lined with a canal, church and restaurants, Savills is selling a 200sq m flat for #1.37million and a 70sq m attic flat for #482,000, both with large, light rooms but in need of new kitchens and bathrooms.

With an equally prime location and potential, but requiring similar upgrading, is a 70sq m, one-bed apartment on the piano nobile - the sought-after first floor, with high ceilings and huge windows - in the San Marco district, costing #680,000. It comes with a spacious terrace - a rarity, which overlooks a large but unkempt communal garden. Or for the ultimate renovation challenge, three apartments in a vast old Grand Canal palazzo that was once home to Lord Byron are on sale for #6.89 million for the lot, through Savills.

The Venetian property market has traditionally been accessible only to those in the know, with limited supply, little new development and agents preferring to focus on local buyers, comments Rupert Fawcett, from Knight Frank. "But the market is starting to open up," he adds, "with owners of smaller properties selling up to move out of the city and owners of piani nobili in big palazzos not wanting the upkeep. You need to hunt around. Most foreign buyers already know the city well before buying."

The only contemporary apartments available recently have been in converted warehouses on Giudecca island, but Domus Soccorso is a new development of 28 contemporary apartments in a row of historic canalside buildings being renovated in Dorsoduro, ranging from #225,000 to #1.27 million, on sale through Knight Frank. The site includes a private chapel and a 1,000sq ft shared garden.

"It hasn't been possible to get this level of finish in a historic setting in Venice previously," says Mr Fawcett. "There will be strong rental potential here. But most people will buy because they know Venice well and are captivated by its magic."

Magical, it certainly is, but in an era where rising tide levels are at the forefront of our consciousness, you would also be justified in worrying about whether your new home will one day be sub-aqua. Fears of Venice's buildings sinking into their foundations, say local agents, are unjustified. But rising sea levels are a more real concern, with St Mark's Square, the lowest area of Venice, all too frequently deluged.

The MOSE project, to build a series of dams blocking the lagoon from the Adriatic, is underway, set to be complete in 2011. And Ann-Marie Doyle insists that sinking is far from buyers' minds. "To be honest, no one talks about sinking, in the same way that no one talks about earthquakes when they go to California," she says, citing a London couple who are currently negotiating to buy a #7.5m palazzo on the Grand Canal as indication that confidence is high, "especially at the top end of the market."

As a property investor, as well as an agent, in Venice, Sebastiano Doria says that he frequently thinks about the danger of flooding. "I would never buy a ground-floor apartment in Venice," he says. "But I don't think the city is in a worse position than many other waterside cities in the world who face problems of rising tides. Venice is such an important place, and technology is sufficiently advanced now, that I don't think they will let it sink."

Do's and don'ts

Damp and flooding: Steer clear of ground-floor apartments. "Get a full survey and check the apartment is above the highest water level for the area," says Ann-Marie Doyle of Venetian Estates.

Renovation: Best to avoid major work. Only tackle it if you are patient, tenacious and able to spend a lot of time in Venice overseeing work. "Always use a local architect to project-manage," says Ann-Marie Doyle.

Which area? Stay in areas such as busy San Marco, quiet Cannaregio, popular Dorsoduro or up-and-coming Castello to work out which you prefer before you decide where to buy.

Legal issues: Venice is a law unto itself. So make sure you use a local lawyer who understands the particular foibles of the laws relating to buildings.

Case study

From his waterfront holiday home on the Venetian island of Giudecca, near Elton John's retreat and the sumptuous Cipriani hotel, John Turner can lie in bed and watch gondoliers drifting by each morning for a spot of fine-tuning in the neighbouring boatyard.

He strolls across the island, which takes a matter of minutes, and looks over the canal to St Mark's Square, happily detached from the tourist hordes. "My litmus test is that you can't buy a postcard on Giudecca because there's no market for them here," says John, 57, a management consultant from Tunbridge Wells, Kent.

In summer, he, his wife, Sheila, 52, a marketing director, and their daughters Juliet, 18, and Imogen, 15, take the 20-minute water bus to Venice's beautiful but untapped Adriatic beaches on the Lido, frequented largely by locals.

Having spent holidays in Venice, the Turners bought their two-bedroom duplex apartment, L'Antico Squero, in the Giudecca Mare development on the site of an old gondola boatyard, for #250,000 as soon as they heard it was being built in 2004. They then spent #5,000 shipping over custom-made furniture from Britain to avoid the logistical headache of trying to arrange sporadic deliveries from boat-bound Venetian suppliers.

New developments in Venice are scarce, and prices at Giudecca Mare have already risen considerably. A larger, two-bed duplex with a jetty and mooring in the same development is on sale for #1 million through Venice Estates; or there's a two-bed apartment with lagoon views in the larger Giudecca Nova for #300,000.

"There's no room left to build on Giudecca, so developers are looking towards Murano and Lido islands, where new apartments are planned, starting from around #200,000," says Ann-Marie Doyle, from Venice Estates.

Not that the Turners are in any hurry to cash in on their investment. They rent out L'Antico Squero for #960 a week, with demand for Venetian rental properties boosted by a wide choice of budget flights from the UK, and they use the house during the long school holidays (see Special Offer, below).

"Owning a home in Venice is all about lifestyle," says John. "When you catch a water taxi from the Piazzale Roma, where the airport bus drops you, you feel like a multi-millionaire as you glide past the most amazing skyline. And the four-minute crossing from St Mark's Square to Giudecca is the best little boat trip in the world." Besides its inherent charms, Venice is also a useful hub for other cities, John adds. "There is a fantastic train service to Padua, Bologna and Verona and you can catch a boat to Croatia."

· As an exclusive offer to Telegraph readers, L'Antico Squero is available for holiday rentals at 30 per cent off the usual website prices for all bookings in 2008. The apartment sleeps four and has views to Venice lagoon and islands from both floors; it also has a shared private mooring and is three or four minutes by waterbus to St Mark's Square. Four nights: #495; seven nights: #695 (prices include being met and all linen/cleaning etc). For full details, visit www.lanticosquero.info or call Venetian Apartments, 020 3178 4180. Quote "Telegraph" to obtain the discount.

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