A look at how the investment real estate property markets in Bulgaria and Romania are changing thanks to EU accession-
The two newest members of the EU are the eastern European, former communist nations of Romania and Bulgaria; they joined the European Union on the 1st of January this year and prior to their entry there was huge speculation, especially among the British and Irish, about whether an investment made into the real estate property markets of either country was a good investment.
Now that both countries have joined the EU, and many have already made a commitment to invest in property in Bulgaria and Romania, it’s time to review their decisions and look at the future projections for new investors examining the prospects of the property markets in both countries.
Leading up to EU entry many investors sought to target property in Romania and Bulgaria because they had already witnessed the positive returns that other investors had derived in the property markets of previous entrants such as Hungary and Poland for example. As a result, Bulgaria in particular developed an active property market almost overnight. In fact it was completely due to EU accession that Romania and Bulgaria developed a property market at all, because if it was left to local demand to fuel the real estate sector neither country would have taken off.
This strong international demand for property stock in Bulgaria and Romania spiked the media’s interest and once the media became interested and began promoting the perceived financial benefits of investing in either nation, property investor interest surged even more. Meeting this demand for investment property stock was keen property developer activity, and because few restrictions were in place at that time (we’re talking 3 – 4 years ago), few regulations and restrictions were in place to prevent over development.
As a result certain areas such as Sunny Beach in Bulgaria are now over developed and many say spoiled, and property prices in these locations are now stagnant. Luckily the rest of Bulgaria and Romania has been protected from this over development with the benefit of hindsight, and so looking to the medium to longer term there is certainly room for property price expansion still.
Now that both Bulgaria and Romania are in the EU each will benefit from a period of investment which will help to improve some of the creaking infrastructure in both countries. The money will go towards such projects as road development and airport expansion meaning it will be easier to access and explore both countries which will boost tourism appeal. Additionally money is likely to be spent on renovating historic sites of interest as well as promoting the delights of both countries.
All this investment will hopefully boost the travel and tourism economy in Bulgaria and Romania and mean that investors have a growing market to let their real estate investments out to suggesting that not only is long term capital appreciation likely in both countries, but short to medium term rental yield is also possible making a return on investment quickly achievable.
Rhiannon Williamson writes about buying property abroad and international investment property worldwide. Follow the links to read more about property in Bulgaria and property in Romania
Article Source: http://EzineArticles.com/?expert=Rhiannon_Williamson
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Looking for the best return on property purchases? Turn to recent EU entrants or outsiders
Before the EU’s fifth enlargement NATO Secretary General Jaap de Hoop Scheffer compared “Old Europe” to a pensioner who needed transfusions of fresh ideas from the 10 incoming central and eastern European members.
Few people gauged his meaning until the second wave of the fifth enlargement, when it transpired that the 12 additional entrants provided welcome news to property investors.
The rules of real estate investment are clear. Buyers seek not only a return on their investment but also additional profits from either reselling their property or from rentals. Currently, a real estate investor would reap bigger profits through a property purchase in eastern Europe rather than western Europe. Among the reasons: low property prices, marginal taxation rates and modest living costs as well as relatively high rental dividends and fast rising property values.
Most European real estate agencies promise a high investment return – defined as the percentage change in the investment’s value over a specific period. There are two ways to ensure a return on real estate investment. You can either purchase property and then rent it out or wait until prices rise and sell.
Superficially, investment return on properties in the aforementioned capital cities does not vary significantly between the three groups. What makes Group One so different, however, is the fact that investment in Old Europe either equals or accounts for at lest half the amount levied in taxes on property transactions. But the most important factor is the dramatic difference between purchase prices in Central and Eastern Europe compared to those in Western Europe. In most cases, it would be much easier for an average EU citizen or a smaller company to invest in Budapest, Warsaw or Sofia, than in Monaco and pay 24,900 euros per square metre. It means that, for example, a German company with an average annual turnover would be unable to undertake a large project in its own country. In Bulgaria, however, the same company would probably receive a Class A investor certificate and, if all went according to plan, a sizeable return on the investment.
The investment map looks similar to the other type. The key element in speculative deals is finding out where prices are rising fastest. Clearly, this is the third group of European countries as well as Bulgaria and Romania.
There is one key problem in all this. Identifying the suitable investment area for speculative deals from statistical data is almost impossible. The prevalence of the “grey” economy and corruption in countries from Group Three as well as the absence of official data are obstacles to buyers. According to unofficial forecasts, the five most profitable European investment spots this year are: Montenegro – the record holder for the fastest growing property prices in the world (50 percent annual increase), Serbia (29 percent), Bulgaria (22 percent).
To recap: western European countries have been stable and expensive real estate markets for a long period. Therefore, to a certain extent, they have exhausted their opportunity. The three Baltic States and Central Europe have already become expensive investment destinations and prices are not expected to increase soon. Romania and Bulgaria provide chances for good speculative deals but without dramatically large profits. Other countries outside the EU – such as Montenegro or Moldova – may yet turn out to be the new “gold mine” of real estate but only if dealings are transparent and legal.
It is up to investors to choose between safe investments with smaller profits or serious risks and equally serious dividends.
Image: Think and Get Rich Seminar Dublin 6-8th February 2008
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