Romania, Bulgaria, EU Accession and Real Estate Property Investment

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.

Property investors favour traditional hotspots

The traditional overseas property havens of France and Spain are still the most popular among investment-hungry Brits looking for holiday homes abroad, according to new research.

Unsurprisingly, given the British historic love affair with the Mediterranean Costas, Spain came top of the A Place In The Sun magazine poll and was closely followed by France.

Other established markets of Cyprus, Portugal, Italy and the USA also dominated the top ten, which was punctured by just three emerging hotspots: Bulgaria, Turkey and the Cape Verde islands in the mid-Atlantic.

Previous studies have shown that the regions where UK residents tend to invest in property tend to be broadly similar to our favourite holiday destinations and this survey appears to back up this correlation.

But that is not to say investors are indifferent to achieving high returns on their investments.

France has consistently ranked highly in British investors' estimations not only because of its romantic boulevards, idyllic villages and rolling countryside peppered with vineyards and flailing cornfields, but because it typically offers a strong rate of capital growth.

Trisha Mason, founder and managing director of VEF French Property, predicts capital appreciation of between eight and ten per cent, considerably higher than the 1980s and 1990s' norm of five per cent.

This estimate is broadly in line with the Knight Frank Global house price index, which calculated house prices in France rose 8.9 per cent in the third three months of last year.

However, jet-to-let is also a recognised way of making income from properties abroad. Ms Mason said that they French buy-to-let market "remains exceedingly buoyant" at present

She added: "Anyone buying to let needs to be looking at small apartments in the centre of cities. Nice remains a strong favourite for investors."

Although many may still dream of the picturesque countryside villa in rural France, some of the biggest bargains to be had are in urban areas as there is a high domestic demand for rental properties.

Accommodation in Beausoleil in the Provence-Cote d'Azur region, overlooking the expensive yachts, castle, sea and occasional Formula One racing circuit in Monaco can be snapped up for a mere €100,000 (£66,325). Considering that Nationwide states the average home in the UK now tops £170,000, this represents a safe, low-cost investment.

Properties in the town have high rental capacity due to the masses of tourists that flock to Monaco for luxury holidays throughout the year.