MILAN, March 11 (Reuters) – Italian real estate stocks such as Prelios and Risanamento rallied on Wednesday to test new highs as investors warm to improving business prospects in a market battered by years of recession.

Chronically depressed property prices in Italy have started to attract growing attention at a time when the weak euro and very low interest rates are luring investors to Europe’s shores.

“Italy is one of the countries in Europe that has not benefited from the price rises we’ve seen in Germany and Spain,” said Paolo Bellacosa, head of capital markets at CBRE real estate consultancy in Italy.

“There’s a lot of interest from foreign buyers, mainly U.S. private equity funds.”

Shares in Prelios rose 10 percent by 1530 GMT, while the Risanamento share price was up more than 9 percent, bringing gains since the start of the year to above 90 percent.

Elsewhere in the sector, Beni Stabili and IGD have risen 27 percent and 33 percent respectively so far this year.

Europe’s commercial property market sizzled last year as demand for real estate in Paris, Britain and Germany, plus strong private equity interest in Ireland and Spain, sent deals to their highest level since the financial crisis.

But a protracted economic recession, along with red tape and a byzantine legal system, meant that little of the money flooding European markets came Italy’s way.

Now pledges by Prime Minister Matteo Renzi to modernise the country and kick-start growth are winning over converts as the euro zone’s third-largest economy shows signs of emerging from a triple-dip recession that began in 2008.

Luca Dondi, head of real estate at independent think-tank Nomisma, said that sentiment in the property market had been lifted by recent positive house sales data, a rise in mortgages from big banks and the recent spate of big deals.

In February Qatar’s sovereign wealth fund struck a deal that made it the sole owner of a prime real estate area in Milan worth more than 2 billion euros ($2.12 billion).

“The past seven years have been very difficult for the market and many of the stocks are valued cheaply compared with their assets. They’re now returning to more normal levels,” Dondi said. ($1 = 0.9456 euros)

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