bulgaria/romania joining eu on 1/1/2007

It remains to be seen if property prices in Romania continue to grow as strongly as they have over the past few years once the country joins the EU. In deed what effect does joining the EU have in the context of romanian demographics???

Not all of the growth is driven by speculation on EU membership. In fact, in my opinion, very little of it is although foreign investment is growing hugely.

It should be remembered that under the old communist system there was a massive drive to centralisation. This, among other things, resulted in many residents of rural communities being drawn, if not dragged, to the major urban centres.

As a result, in Romania, the majority of the urban population lives in tower blocks.

Make no mistake folks, there is vigorously growing middle-class evolving in Romania. As in any country if you are making money then you soon start to think about improving your quality of life. For this reason it has become ever increasingly popular to buy a site and construct your dream home.

As the masses move out of the blocks and into the suburbs so they drive up the demand for buildable land (and hence the prices) within commuting distance of the urban areas where they have their businesses.

This has VERY little to do with the pending EU membership and EVERYTHING to do with human aspirations.

We, my wife and I, are a example in question. We currently own our apartment and are negotiating on a site out of town upon which to build our home complete with pool, dog and 3.2 kids.

Our choice to do so has absolutely NOTHING to do with the EU and EVERYTHING to do with with a desire for space and a yen for our own veggie patch!

That's where the growth in the romanian property market is coming from. Simple folk like us and all our mates who are at exactly the same thing!

As a retired professional in the investment field, I can only wonder at the naivety of the thousands who continue to buy overpriced rubbish in Bulgaria. In particular, the so-called "rental guarantees" attached to almost all of these products are nothing short of scams. There is simply NO rental market in Bulgaria's Black Sea coast at present, apart from one catering to the hundreds of gullible buyers flocking to hand over their money for grossly overpriced properties.
The rental guarantees are achieved by adding a couple of years rent to the price. Nobody seems to question the fact that there is no market on the coast except for a limited return for the VERY SHORT summer season (2nd half June/July/August). Certainly no apartment on the Black Sea can generate more than €1,000 gross pa on summer lettings, so "guarantees" of 4 and 5K are a nonsense.
If you are really intent on buying an apartment along here, take just one bit of advice -- wait for about two or three years until the penny drops with all the idiots who have been scammed to date, and avail of the falling prices as they all rush for the door together. If you must buy now, try offering to rescind the rental guarantee and take a discount of the equivalent amount -- most developers in Bulgaria will jump at this offer.
Bulgaria is simply the pits as an investment location, best avoided like the plague unless you really want to lose money. If you insist on going where property is cheap, good locations in Sofia might do well in time, but be prepared to wait. Much better advice would be to go to Cracow, Warsaw, Budapest, or Prague and try to buy properties in good residential locations where there is a real possibility of returns.
Don't believe me? Why then are some companies actually offering the unbelievable of allowing you to keep any rent achieved over and above the rental guarantee? What on earth is that about?

I'd also like to tag on that Bulgaria is completely run by local Mafia/organised crime, and is the main reason why Ireland and other countries are blocking entry to Ireland once they join the EU

Do you know what? I believe its time tog go to first principles; the day you buy is the day you sell. Therefore, 'who will buy my new property?'. And LOCATION, LOCATION, LOCATION.
I've bought in Brasov and like any other place in the world you just have to know what side of the street to buy on.
We risk paralysis by analysis on one hand, and on the other deciding on the basis of 'talking to the man who spoke to the horse'.

paddyd said:

I'd also like to tag on that Bulgaria is completely run by local Mafia/organised crime, and is the main reason why Ireland and other countries are blocking entry to Ireland once they join the EU

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I agree with this and comment before. Re naive investors buying in Bulgaria. Its amazing that EU membership could be seem as a factor to base an investment decision on. There is so much more to it. Comments in terms of the rental guarntees in Bulgaria is a good shout too. You would have to have some sort of guarntee because it would be v hard to actually rent your property when its finished, if it gets finished that is!!

Always remember though that nobody forces a buyer to sign a contract, so the old maxim of "buyer beware" always holds good. It still amazes me though how many people buy the "guaranteed rental" properties in Bulgaria and elsewhere with their brains parked outside the door.
I wandered into an exhibition recently where an agency was pitching ski property in Bulgaria,and promising a rental of almost 5K a year on an apartment in Bansko. When one prospective buyer questioned whether this rental was achievable all year round, she was told that there is a strong summer market for walkers and hikers in the mountains.
Really? So Bulgarian ski resorts will buck the trend in all of Europe and attract equal numbers of summer tourists to the ski resorts? Someone should tell the Swiss and Austrians how this is done, since they have tried to do the same for the past fifty years without success. The reality is that all ski resorts either close up in summertime or have a very limited amount of business; a summer rental market in ski resorts (except for a trickle hoovered up by local residents) does not exist, anywhere.
The other old chestnut that the salespeople were trotting out that day was that Bansko has applied for the winter olympics, and once or twice I heard over-enthusiastic sales staff telling clients that it was actually getting the winter olympics! Anyone can apply, maybe Leitrim could boost property prices by apllying for the olympics, but Bansko simply won't get a look in until the facilities get an awful lot better. Even if the unthinkable happened and the olympics came to Bansko, what would that do for property prices? What did it do for Innsbruck? Don't know? then why would you buy on that basis?
I am alternately amused and saddened at how gullible Irish buyers line up to be fleeced by every snake oil salesman when it comes to foreign property. Even people who have already bought this overpriced rubish are in denial, they get very defensive if you point out that they have bought with their hearts rather than their heads. At least it keeps agencies in business, but it is a pity that at a time when Irish buyers have real purchasing power abroad that they do not use it to maximise wealth in the future for themselves. Instead they tumble of the cliff with the rest of the lemmings and ignore the good investments that are out there, if you just look a little harder.

From what I read it appears that low cost carriers including Ryanair, German Wings etc., plan to fly to the coast in Bulgaria next Summer. This might help sustain the market there. Apparently these low cost carriers were waiting for offical confirmation of EU entry which they now have got.

Also read that Bulgaria is now going to have one of the lowest corporation tax regimes in european union. Reducing the tax from 15% to 10%.
Bound to help inward investment.

Would also like to add that there are as many good opinions on Bulgaria as bad ones and it is only time will tell whose right and whose wrong to invest there.

As with any area, the maxim of location, location, location is valid - this is equally relevant in Bulgaria.
Black Sea Coast is over-run with development, some of it quite poor standard, limited seasonal rental window and the foolsgold of rental "guarantees".
Ski-resorts are heading the same direction.
Sofia is seeing alot of development around the base of Mount Vitosha - who is going to rent these places - a large number are currently vacant with no sign of the elusive "embassy" tenant and rent yields are poor.

Having said all of that, there is upside to be found - you won't get it at a property fair though.

Colliers quarterly report makes for interesting reading

Daddy said:

Also read that Bulgaria is now going to have one of the lowest corporation tax regimes in european union. Reducing the tax from 15% to 10%.
Bound to help inward investment.

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one the one hand it sounds like a good thing for sure.

The only question to ask on the negative side, would be why they are reducing it in the first place.
On balance, low corp tax is always more of a plus than a minus tho, esp in the long term.

Dr. Gerard, I'd be very interested to know what you bought in Brasov & why! I've got a mate of mine from Bucharest on the case to find me some land in the region and the sort of prices he is coming up with down there are heart-stopping when compared with prices up here in the northwest.

For instance he came up with a 400 hectare plot (all together so Comasat) in Covasna at 2,200 Euro a hectare! Just nuts!!

I'd like to get some land on the ring-road. Also would consider something close to the resorts, Busteni et al.

Any ideas?

Brasov is a good solid bet in Romania -- its popular with the middle classes from Bucharest, but as the previous poster said, you need to know what side of the street to buy on. Lots of local agents around there who will offload rubbish on foreigners at inflated prices.
Land around Bucharest is absolutely out of control right now, prices higher than Paris for similar stuff. Best avoided, at least until some sanity returns to the market.
Smaller cities like Constanta and Cluj are better for opportunities. Building land around Constanta/Mamia that is ready to go for apartments/villas will give a fast return for small developers, but you need to be very "hands on" or the builders will screw you. Good serviced sites are a smart medium to long term bet here, especially close to the shore.

With regards to Ryanair or Air Berlin flying to the coast in Bulgaria, the bottom line is still as follows:
1. The peak season is about ten weeks long, outside these times the place is dead, mostly because of the weather.

2. You can't get a rental for apartments right now on the coast, except for some business being got from buyers who are flooding the place. When all the current projects have been completed, you haven't a hope of getting a return, ever. Your property will be worth a lot less than you paid for it when it has been completed. This is also true of the ski projects in Bansko and elsewhere, for the same reasons. If you have already bought there you can delude yourself that it will come right in time -- it won't, it can't possibly.

3. Property being put up by 20% a year by the sellers is not the same as the market rising at 20% a year. If you can get a margin on something you have already bought in those areas, move it on and grab your profit. If you can even get out with your own money, go! Don't wait for the big rush for the door when the penny drops with all the other suckers.

Remember that absolutely none of the serious investors are having a punt in these markets; they have all "done the math" and stayed away. This market will end in tears, and not too far from now.

I'm going to have to disagree with you that the 'bigger players' steering clear of the romanian market right now.

In my own adopted city a very large Northern Irish developer has recently bought a huge tract of land to build a Blancharsdtown 'style' development on.

I also know through my Bucharest contacts that a number of large, even publicly quoted Irish companies, are moving in in serious acquisition mode.

I respect your knowledge of the Black Sea Coast resorts and agree with you as to their potential but with respect your knowledge of the interior might be a little out of date!

By the way, other sources such as Colliers, KPMG, Pricewaterhouse Coopers and even the lowly Channel 4 all beg to differ with your view of impending tears.

Ancutza said:

I'm going to have to disagree with you that the 'bigger players' steering clear of the romanian market right now.

In my own adopted city a very large Northern Irish developer has recently bought a huge tract of land to build a Blancharsdtown 'style' development on.

I also know through my Bucharest contacts that a number of large, even publicly quoted Irish companies, are moving in in serious acquisition mode.

I respect your knowledge of the Black Sea Coast resorts and agree with you as to their potential but with respect your knowledge of the interior might be a little out of date!

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Apologies for confusion -- when I said that the bigger players are staying away, I meant from Bulgaria. Lots of smart money is moving into Romania; I have been buying heavily there for clients for the past three years.

I still stand over my comments that the market for land around Bucharest is at a level that allows for very little profit taking in the medium term.

I have been working along the Black sea coast for some time, where the pickings are still very sweet. Mamia for instance, long just seen as a holiday resort, is now the target of a lot of wealthy businesspeople from Constanta who want suburban living by the sea. Land north of Constanta in Mamia and Navodari has more than doubled in the past three years, but there is still plenty of room for profit. I have seen very good serviced sites there recently for 75 to 80K, and 60K will put a house on them which will then be worth 160 to 180K. So there is still margin even without holding, although my advice would be to buy such lands and sit on them until they achieve a rarity value.

I have seen a certain trend in recent times with Romanians on middle to upper income levels; they definitely want to get out of the high rise blocks and on to a suburban lot, and by the sea or the lake is the preferred option for many of them.

To Auto 320

You say you are a retired professional in the investment field.

You say you have been buying for clients for the past 3 years in Romania.

Appears between the lines to me that your not fully retired.

You can not give impartial advice on Bulgaria as you are / have been purchasing property in Romania and I know if i was doing the same as you have been then I would be talking up romania to the detriment of Bulgaria.

You appear to have a slanted opinion.

I'm not saying your wrong or right but people need to take what your saying at face value.

I am retired, although only recently, and I still have some residual business that will take time to wrap up.

I am not or have never been in the business of promoting or selling property -- I advised and bought for a number of clients in Europe and I am still available to them when they call me for advice naturally. Im not or never was involved in selling to the mass market either in Ireland or abroad.

I offer my insights to people who don't know their way around the minefield that is the overseas property scene. I know that I am sometimes scathing of the real junk markets, and this tends to upset the scammers who make serious killings from small players who get taken to the cleaners every day by these chancers.

Property can be a route to wealth for many people, and it is a real shame that at a time when ordinary Irish people have the capacity to build a good future for themselves, the majority of them will make poor decisions, based on "advice" from salespeople and property "journalists".

The reality is that ordinary buyers can make good returns over time if they use their heads and sieve the good advice out from the dross. You have to make investment decisions based on hard data and observation, not on wishful thinking.

As I read the posts on this site I find myself very much torn between 2 outlooks.

On the one hand I am frustrated and disheartened by the negativity. I'm surprised and shocked by the influence which the 'spin' related to overseas investment has over the thinking of the average irishman particulary in relation to countries such as Cape Verde and Bulgaria. Not so long ago an Irish friend of mine bought in Bulgaria in spite of watching what has been going on in Romania, a country in which he did (in deed continues to do) business in.

If ever there was an example of the influence of hype then this was it. He'd never been to Bulgaria and probably has little interest in going out there but a member of his family, who works for a large Irish company with holdings there, persuaded him to 'take the leap'. In my opinion it all flew in the face of the facts with which he was previously presented.

The other perspective which I find myself party to is that the longer Romania is side-lined in Ireland then the better the opportunities for myself and my family, together with some of our friends, to consolidate our position before the inevitable onslaught starts.

Have to say though that, on balance, I'd prefer fight it out with other Irish investors than see such a fabulous country side-lined and ignored but then time will tell I guess.

The reality of course is that there have always been more mugs than winners, ever since the sharks started selling parcels of swampland in Florida. The Bulgaria/Romania divide is a case in point -- all the mugs are sucked inot a scam-led market in Bulgaria and all the time there are rich pickings just up the road.

I can see recent moves however to cater for the mugs in Romania too. A few small players have successfully modelled themselves on the Bulgarian caper and have developed a few apartmetns that they have sold to UK buyers at prices well above their true value. Now if they could only entice a few mad Paddies with big chequebooks....

I'd assume that such schemes as you mention are mostly Bucharest-based. In my opinion the worst of all markets to get involved in in Romania. None of my experiences in Bucharest have been good and I speak the language! Too many folks there actively involved in ripping-off foriegners. Everything from taxis to meals to the purchase of property.

It's an absolute minefield! If you want to buy in Ro then stick to the larger towns, excluding Bucharest, and find yourselves a good local lawyer to take care of you.