Property investors seeking holiday homes that they can also rent out for an income are looking at Italy where price reductions of between 10 and 20% are tempting them back into the market, it is claimed.

The property market in Italy is weathering the global economic downturn better than many other European countries and is close to bottoming out, according to real estate expert Linda Travella. ‘I have been marketing homes in Italy for 22 years so have sold through recessions before. What is different this time is that it is global,’ she explained.

‘However, Italy is a country that was not high on bank borrowings so did not suffer the brunt of the world economic downturn and has therefore remained remarkably buoyant,’ added Linda, director of Italian property specialists Casa Travella.

Popular locations like Florence and nearby hillside villages have seen enquiries from investors from the UK, US, Scandanavia, Belgium and the Netherlands, according to international property company Knight Frank.

Sales volumes were down in late 2008 and early 2009, but have started to recover, according to Rupert Fawcett from Knight Frank’s Italian desk.

Other agents report interest in villages like Settignano which is often dubbed the Beverely Hills of Florence and  not only are they attracted by the drop in prices but also a tax regime that means that foreign residents pay taxes only on their Italian income. Even if buyers of vacation homes in Italy own property in their home countries, their Italian homes are treated as primary residences, as long as they don’t own any other homes in Italy.

Also if you are buying for investment purposes if you don’t sell within five years you can avoid paying capital gains tax.  ‘People with savings are seeing virtually nil returns on their banking investments and as the market in Italy is definitely showing signs of bottoming out this summer, buyers could make the purchase of a lifetime with capital growth and income’ explained Linda.