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Focus on Bulgaria and Romania

Monday September 18, 2006

Saundra Satterlee

The demise of the Iron Curtain ushered in an era of economic decline for Bulgaria and Romania. Heavy dependency on Soviet markets created a fiscal vacuum in the region that would take years to fill. Wind forward to 2006 ? and with both countries on the threshold of European Union membership ? it?s all change. ?Foreign investment fuelled by the prospect of EU accession,? says PricewaterhouseCoopers economist Seema Shah, ?has been a key driver to economic growth.?

EU accession aside, there are many similarities that bind together these two ex-communist bloc countries. Bulgaria and Romania are both on the Black Sea and both have dramatic mountains, primeval forests, world heritage sites and an abundance of vineyards. But there are differences too, which is no more apparent anywhere than in their international residential property markets.

Bulgaria and the Balkans property revolution

?Unlike Romania, Bulgaria is undergoing a tourism boom, notably amongst western Europeans looking for second homes,? says research analyst James Kingdom at Colliers CRE. And the buyer procedure is less complicated.

?Bulgaria is much further on than Romania in terms of the maturity of its estate agency system and the legal side of property purchase,? says Liam Bailey, Knight Frank?s head of residential research. ?It is easier and more straightforward to buy land in Bulgaria than in Romania.? Just how Bulgaria came to be in this position is complex, but an overriding point is that Bulgaria is now one of Europe?s fastest growing emerging market property destinations.

Apart from astounding natural beauty and a rich historic landscape, Bulgaria?s increasing popularity as a global property market is put into simple terms by Mr. Bailey: ?It?s affordable and offers value for money. That it?s not St.Tropez is a matter of horses for courses. For overseas property, it?s cheap.?

Bulgaria has three major areas of attraction for international buyers. Henry Wilkes, East European Residential Manager at Savills, describes them as: the Black Sea; city centres; ski resorts. There is a minor market in country cottages.

A further draw for the international buyer is that infrastructure improvements are taking place on a massive scale. Executive director Rupert Ferard from Eden Developments draws attention to privatisation initiatives at Varna and Bourgas airports. ?General infrastructure is improving all the time, moving rapidly from second world to first world status, which is particularly visible in coastal areas and cities.?

The coast

Sunny Beach, once a premier summer resort for the elite of the Kremlin, is nowadays awash with construction sites. While drab Soviet style buildings are razed, new low and medium rise structures follow in their wake. Echoes of the early days of the Costa del Sol come to mind . . .

Away from the hustle and bustle of Sunny Beach and a four km drive north is the Garden of Eden development at St. Vlas. Constructed from local stone and oak, it is more in keeping with period architecture of the area than much of the on-going building in Sunny Beach. Its gently sloping hillside setting ? with beach frontage, small marina, pools, tennis courts and a boutique style hotel ? is set for completion early next summer. Of over 500 studios to three bedroom apartments, 98 remain. ?We tend to sweep up lifestyle buyers whose priorities are location, quality and amenities, as opposed to cut and dried investment buyers,? says Mr. Ferard. Prices range from E45,600 to E216,000.

Another Eden coastal development ? situated in an oak laden forest flanked by the sea and close to Varna city ? is Eden Sands, planned as a resort village of 1,000 apartments and villas with all the necessities, from swimming pools and tennis courts to shops and restaurants.

Numerous other resorts are springing up along the coast. North of the sprawling port city of Varna, two golf courses are under construction with a third on the planning board, two of which are Gary Player and one Ian Woosnam. ?The area north of Balchik and south of Kavarna is probably so new that it does not have a name, but we?re billing it as the ?new Algarve?,? according to Bulgarian Dreams sales director David Smith, whose company is marketing the cliffside Windows to Paradise development, where prices start from E37,000.

Mr. Wilkes has hinted about Savills? involvement in a further upscale golf development, still on the planning board, that he describes as: ?hitherto unseen on the Black Sea.? Bulgaria?s Unesco-listed Nessebar, with limited residential development, is a historic town on a Black Sea peninsula brimming with Byzantine architecture.

The city

Whilst Varna is a vibrant port, it is Bulgaria?s capital Sofia that is gaining greater interest from international buyers. Already awash with huge commercial and retail projects funded through foreign investment, more and more individual buyers from abroad are realising its potential. ?Capital cities usually offer sound residential property investment,? says Mr. Wilkes.

One project, attractive to local and international buyers, is Sofia?s Museum House, a handsome, central building that draws heavily on local period architecture. Located off a leafy cobblestone street, for sale through Bulgarian Dreams, one bedroom apartments start at E70,000, while two bedroom units are E105,000 and above.

The ski resort

Bansko is not Chamonix, but it is swiftly transforming into a much sought after ski resort. To boot, several new developments are being billed as five-star. Savills? Mountain Residences, for instance, has all the requisite upscale bells and whistles including 24-hour concierge service, spa and indoor pool. It features studios and one, two and three bedroom apartments from E58,000 to E237,000 with special finance packages available. Completion is scheduled for spring 2008. Another upmarket project is the Orchard from Bulgarian Dreams, where prices start at E45,000 for a studio and rise to E225,000 for a four bedroom penthouse. Amenities include a16,000 sq m spa and an ice rink. Completion expected next summer.

Romania: A ?Transylvanian? transition

Think Romania and Count Dracula, Bram Stoker?s fictionalisation of real life Vlad the Impaler, comes to mind. His fairytale castle is in the Unesco-listed historic Transylvanian town of Sighisoara. Or on a more sinister note, think Ceaucescu and remember his 50-year reign scarred with megalomania and abject cruelty to his own people, which ended in 1989 with a noose around his neck.

Nowadays and on a lighter note, when we think about Romania we are reminded of international diva Angela Gheorghiu, tennis star Ilie Nastase or perhaps the country?s economic upturn related to impending accession to the EU.

A property market waiting in the wings

Although macro-economic growth in Romania is well en route to meet EU accession criteria, as with Bulgaria, the residential property market for foreign buyers is in its infancy. Alexandra Kamarowsky, business development manager at Arc Property, which specialises in off-plan Eastern European city developments, remarks: ?Unlike neighbouring Bulgaria, this is the very beginning of foreign buyers coming to Romania.?

Mr. Bailey cautions that: ?Romania is very much an unknown emerging market and is not yet on the international ?homes abroad? map.? He adds, however, that Romania might potentially offer higher returns than more ?established? emerging markets.

Although the Romanian capital of Bucharest is experiencing a commercial construction boom driven mainly by large European companies cashing in on pre-EU status (similar to Sofia, notes Collier CRE?s research analyst James Kingdom), individual foreign buyers are thin on the ground. The country remains largely untouched as a holiday destination, but there is a lot of development for locals in Bucharest alongside the occasional expatriate purchase of a buy-to-let.

Arc Property?s Quadrant is a complex of 11 low and high rise apartment buildings in the leafy central Grozavesti neighbourhood. Of over 300 studio to three bedroom penthouse units ranging from E79,000 to E346,000, only 30 remain. ?Over the past year the trickle of foreign buyers has included a handful of Britons and Irish honing in on the buy-to-let market,? says Ms Kamarowsky.

When it comes to ski property, Savills? Mr. Wilkes confirms that international ski resorts have not yet really taken off in Romania. If there is a Bansko type of development, he believes this will change. One to watch though, according to Ms Kamarowsky, is the mountain town of Brasov, about half an hour?s drive from one of Romania?s main ski resorts, Poiana Brasov.

Romania is a country of contrasts ? from beggars in the streets of Bucharest and horse-drawn carts as a major means of countryside transport, to a rising GDP and a burgeoning middle class. Many analysts predict a future property boom, echoing that taking place in Bulgaria. But for now, the acquisition of property by foreign nationals is not for the faint-hearted.

Regional practicalities and pitfalls

Emerging markets are volatile and not for the risk-averse. Bulgaria and Romania are no exception. There have been widespread reports about corruption in both countries. Tighter legislation is part of accession criteria. As long as you have English speaking, local legal representation and buy through an established estate agent registered with the appropriate trade bodies, you will minimise risk. Above all, make sure that you undertake the same checks that you would in the UK, US or elsewhere, but perhaps because of the complexity of emerging markets, it is even more essential to take into account planning restrictions, rights of boundaries, access to your property, rights of way and so forth. ?Because real estate is immovable and accordingly subject to the laws, taxation and political developments in its country of purchase, good tax advice goes hand in hand with good legal representation,? warns lawyer Chris Kalin, partner at Zurich based Henley & Partners, international tax and property specialists.

How you pay for your property is equally important. Moneycorp senior broker Stuart Rogers says: ?That the Bulgarian ?lev? is now tied to the euro and the Romanian ?leu? ? now called ?ron? ? closely follows the euro, means less currency risk when transferring funds from abroad. In the past, for example, Bulgarian ?lev? payments would frequently get bounced back.? Looming EU accession has streamlined the buying process.

Fly to buy

Flights on Europe?s main carriers from major European cities to Bucharest and Sofia are well established. New routes are in the ascendency, such as British Airways direct Varna/Heathrow service launched last spring. Wizz Air, Central and Eastern Europe?s largest low-fare airline, already flies from Bulgaria to various European destinations including the UK, but has recently announced a massive expansion of flights to Romania, including direct flights to Bucharest and other Romanian regions from Barcelona, Budapest, Dortmund, London and Rome, to commence early 2007.


Arc Property

British Airways

Bulgarian Dreams

Eden Developments

Henley and Partners

Knight Frank



Wizz Air

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