05/01/07 - Prices set to rise in Bulgaria and Romania

After Bulgaria and Romania joined the EU on 1 January 2007, their property markets are predicted to become increasingly popular with prospective second home owners this year...

In the run up to Bulgaria and Romania joining the EU on January 1st 2007, there has been much speculation about increasing property prices in these regions. MRI Overseas Property research has revealed that one in seven (13%) Brits thinking of buying a property abroad would already consider either Bulgaria or Romania. With tourism increasing in these countries, Bulgaria and Romania are tipped to become even more popular with second home buyers in 2007.

The number of foreign tourists visiting Bulgaria in 2006 increased by 8.3% on the previous year, with a total of 1.5 million foreign visitors to its Black Sea resorts last summer, according to the Bulgarian Tourism Institute. The number of foreign tourists arriving into Romania has also risen significantly in recent years, from 800,000 visitors in 2000 to 1.4 million in 2004, according to the London Chamber of Commerce.

John Triton, Sales Director Bulgaria, Romania and Turkey, MRI Overseas Property, commented: “Bulgaria and Roman’s official inclusion in the European Union is a key opportunity for property investment in these emerging markets. Based on the past history of other Eastern bloc countries joining the EU, where property prices have risen significantly these markets look set to become strong areas for capital growth.

“With major tour operators now increasingly starting to focus on Bulgaria and Romania, the tourism boost will in turn feed the rental market so second home owners have the opportunity to generate a rental income. The new EU status will benefit the existing and future investors and we expect growth to continue to increase for several years to come.”

But don't be blinded by the gold rush...

However, although these markets offer great value properties in a wide range of regions, from ski resort complexes to mountain retreats and beach-side villas, MRI Overseas Property is also advising investors to be mindful not to be blinded by the gold rush. Prospective buyers should ensure they do their full research into the local area’s economy, facilities and infrastructure and research the property’s potential rental income before investing in properties in these new European markets, as well as being prepared to view the purchase as a long-term investment.

Rebecca Molinoff, Managing Director of eastern European property specialists Arc Property, told Assetz news last month: "We're looking at rental yields ranging from anywhere from around four or five per cent in the Baltic States, up to as high as ten per cent in Romania - although no one expects that to continue for long."

The key for investors is to consider domestic demand from nationals as well as international demand from tourists and investors to get a full picture of whether property prices and rental yields will rise or fall over the medium term.

A bigger EU

Although Romania and Bulgaria didn't attain the EU's stringent entry criteria to join the 2004 expansion, they have made considerable economic and political progress towards these goals over the last couple of years and are now deemed up to scratch. This latest expansion brings the EU's membership up to 27 states. Romania and Bulgaria will collectively increase the EU's population by 30 million but will only boost the EU's economic output by 1 percent, according to Reuters.

Many analysts believe that this is the last time the EU will expand before 2010.