‘nude sales' bolster italian market

The worst recession since 1975 is eroding the wealth of elderly Italians and forcing them to do something they had never before considered: sell family homes to strangers at a discount on the condition that they can stay on until they pass away...

The cash transactions are called "nude sales" in Italy because in most cases the owners are stripped of ownership while retaining use of the property until they die. While they account for only 5 percent of Italian sales, they represent one of the few boom areas as the slump deepens.

There were 40,000 sales in 2008 compared with 18,000 in 2000, according to Scenari Immobiliari, a Rome-based property research Institute.

"With an aging and increasingly impoverished population there is a compelling economic reason," says Mario Breglia, head of Scenari. "Socially also, Italians want to die, literally, in their homes, not in retirement communities."

The sales also occur in France, where they are known as "en viager." The purchaser pays a monthly charge while the owner lives in the house. When the owner dies, the property passes to the person making the payments.

‘House Rich'

Since 85 percent of Italians over 65 own their homes, according to government statistics, the market for naked property sales is destined to keep growing.

By 2040, one in 10 Italians will be an octogenarian, turning the nation into one of Europe's oldest. What's more, Italians earn an average gross annual salary of 23,405 euros, 25 percent less than the French, meaning they also get lower pensions.

"Italians are house rich but cash poor, so you do the math," says Mario Corsini, president of the non-profit association Housing and the Elderly, which advises pensioners on housing. "This is one way for them to beef up their income and stay in their homes."

Rosa, 85, ran an Internet ad to sell her 50 square-meter Roman apartment with a yard for 207,000 euros. She declined to give her last name because she says she doesn't want her family and friends to know she needs to sell.

"I won't be around forever but while I am here I want to have a good life," Rosa, a retired school teacher, says by telephone. "Then again, I may be around longer than you think."

‘Too Weird'

It's that potential longevity that carries the risks.

The values -- updated in 2008 to take into account longer life expectancy -- are calculated using a formula whereby the older the person, the closer the property is priced to market rates. That means that buyers can profit from earlier deaths or lose out if tenants cling on to life.

In Italy, men will live on average until 79 while women until they are 85, says Istat, the national statistics office.

Luigi Paterno, 38, couldn't believe his luck when Grasso told him about the apartment she was marketing. Then he got cold feet because of the arrangement with the aging owner.

"Too many ifs and buts," says Paterno, a manager at car- rental service company Avis Europe Plc. "I suddenly had a vision of me locked out of my own house and it's just too weird thinking about moving in to a house where someone has died."

French Tale

History provides a cautionary tale.

In 1965, French lawyer Andre-Francois Raffray was 47 when he bought 90-year-old Jeanne Calment's apartment, expecting to move in with his family within a few years. Instead, she went on to become the oldest woman in history, dying at 122 in 1997. By then, Raffray had already been dead for two years.

"You're betting on someone's life and that can blow up in your face" says Iain MacPhail, a financial adviser in Edinburgh for potential U.K. buyers of Italian property.

Still, for many young Italians trying to get their foot in the property market, "nude sales" are all they can afford.

Real estate bubble risk?

While the global economic slump has driven down the price of homes from Hong Kong to Manhattan, Italian Prime Minister Silvio Berlusconi said Feb. 24 that Italy has no reason to fear a real- estate bubble. House prices in the country's 13 major cities rose 4.2 percent in the first half of 2008 from a year earlier, according to Nomisma, a research institute. Between 1997 and 2007, house prices doubled.

"For estate agents it hasn't been easy because we are sitting on a lot of property that we are having trouble selling because they are overpriced," says Grasso. "We are focusing a lot more on nude properties because the price is right."

Source: www.Bloomberg.com

Picture:  iiepassport