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. Last Updated: 07/27/2016

Scandals Drive Italians to Property Investment

ROME -- At nearly 30, Sergio Tomasetto is finally ready to move out of his parents' home, but with a one bedroom flat in downtown Rome costing anything upwards of 300,000 euros ($374,400), that looks to be a distant prospect.

"I'd love to buy a house but it's just not realistic," said the 28-year-old Italian. "Prices are so crazily high that it is impossible to buy without some help from your family."

Italian youngsters are famed for staying lashed to their mother's apron strings years after many of their European neighbors have flown the nest, and with the Italian housing market booming, that looks likely to continue.

Stung by corporate scandals like that at food group Parmalat and uninspired by low-earning government bonds, investors are piling their cash into bricks and mortar, and prices have rocketed out of reach for many first-time buyers.

From apartments in the northern commercial center Milan to aging palazzi in Rome, house prices in Italy's main cities rose 10.7 percent last year compared with inflation of 2.7 percent.

House prices have risen by more than half since 1998, according to private economic research group Nomisma.

"Even for a small property, outside the prime city center locations, you will struggle to pay less then 200,000 euros. That's a major hurdle for many small investors," Nomisma's Luca Dondi said.

But with rental costs also sharply on the increase, many are taking the leap.

"It's clear that the uncertainties in the financial world over recent years have only boosted the credibility of more reliable sectors like property," Dondi said.

Italians traditionally squirreled away trillions of lira in high-interest government bonds, but rates plummeted with the advent of the euro and investors shifted their cash to equities and corporate debt only to be hit by a spate of scandals.

The Italian consumer group Intesa estimates almost 37 billion euros of savings have vanished in recent financial disasters, including the Parmalat insolvency, the bankruptcy of smaller food group Cirio and a meltdown of Argentine bonds.

"Investors are more wary of certain types of investment, not just with equities but bonds, too, which always seemed a safer option but have proven to be riskier than many had assumed," Dondi said. "Property looks the best bet, even if that means investing a far higher sum than many would put elsewhere," he added.

While falling interest rates have taken the shine off government bonds, mortgages have become far more affordable.

In the first half of 2003 alone, existing mortgages were 22.7 percent higher than a year earlier, Nomisma said.

Beatrice Anbra, of Rome-based estate agent Immobilradar, said the housing market had attracted new estate agents and that many sellers had used the switch from the lira to the euro to jack up asking prices.

All factors combined, Anbra said Italy's housing market had reached a boiling point. "Rome is not New York," she said. "Buyers' interest is there, but asking prices are so high we seem to have reached a stalling point in the market."