As stated by gruturo the real problems are taxes, inadequate laws, infrastructure (for example cable connection is scarce even in the bigger cities) and finally economic issues.
I was born in Italy and I love my country, but I had to move to a different country to be able to work and being payed for my work.
Corruption, together with bureaucracy, is amongst the most severe problems that Italy has. The fact that now it's almost impossible to tell the difference and there a mixture of bad behaviour at any level of any position of power.
It is a BIG, HUGE issue, but not the main one ruling out housing business in Italy.
The main issue right now is the myopic political view driving the economy.
And btw, "bureaucracy" is not a bad thing per se! See: http://en.wikipedia.org/wiki/Bureaucracy
[edit: added link]
And too many idiots thinking that stamps and signatures and certificates have magical powers and prevents the real ill-intentioned people from doing anything (we could say bureaucracy is the DRM for real life). Also people making use of their position as to gain personal power.
You have a point in saying that bureaucracy is not a bad thing per se, in both the original acception of the word and in some places, like in Germany it "mostly" works.