Property in Venice Italy

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 façades 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 façades 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.