| Countries feel the European touch By Christopher Condon In the dingy outskirts of Bucharest along the road to the airport, one large swathe of land controlled by the University of Agriculture and Veterinary Medicine is about to get a substantial makeover. Ground has already been broken on a 4.5m lei (£775,000) mixed use project that will include 3,000 housing units in a US-style suburban community. No project of its kind or scope has been tried in Romania, one of Europe's poorest countries. But property agents have little doubt about its eventual success. The developer, Baneasa Investments, has commitments from several retailers, including Carrefour and Bricostore. Demand for commercial office space is strong. And, says Adina Covaceanu of Colliers International, the project's residential side should do justas well. "It is such a good location," she says, half joking, "people would buyeven if they didn't provide sewage." Romania is a year or two away from European Union membership on a path that might still prove very rocky. Its courts are considered unreliable by many foreign investors and its capital and debt markets are well behind those in Hungary, Poland and even Slovakia, which all joined the EU in 2004. Yet investors are ploughing cash into the country's property markets at a furious pace. The largest lumps, from institutions, have been spent on big western-style malls, office blocks and industrial space. But residential developments are also attracting millions of euros from professional money managers as well as individuals. In Bucharest, a mortgage market exploding from near zero has resulted in scores of modern apartments and housing estates being built on the city's fringes, many of them sold off-plan before construction begins. If the story sounds familiar, it is because Romania is now riding the same wave, under some of the same underlying conditions, that rolled through its immediate neighbours to the west in the last five to seven years. Just as Warsaw, Prague and Budapest benefited, so now is Bucharest, as well as Sofia, in Bulgaria. Nor will investors stop there. Some already have an eye fixed farther east, on Turkey. All of this has everything and nothing to do with EU accession. Most investors, developers and estate agents say that economic conditions, local financing and supply of the product, not EU membership, are the key to the property boom that has pushed through most of central and eastern Europe. "There is little to say that actual membership changed anything but in the build-up they were getting their economies in shape, and what helps the economy helps the property market," says Nick Barnes of Knight Frank in London. It also didn't hurt that, just as the region became interesting, property prices in several western countries were reaching a peak. Many investors and homeowners sensed it was time to take their gains, or leverage them, and go elsewhere. Central Europe's revived capitals – and its emerging resort areas – were a logical destination. In the mid-1990s, individual foreigners, especially Israelis and Irish, began buying and renovating flats in turn-of-the-century downtown buildings in places such as Budapest and Prague. Soon after, more serious players arrived. But the real change in valuations came when the region's maturing banking sector turned its attention to the household-lending market. In Poland, for example, the proportion of families that could hope to qualify for an average-sized mortgage rose from 10 per cent in 2000 to more than 60 per cent by 2003, according to Pawel Sztejter, of REAS, a property consulting firm. The increasing pool of buyers has enabled developers, in turn, to access cheaper financing, triggering a wave of new construction. These are hugely popular, partly because they are a novelty for local buyers used to living in faded, albeit sometimes historic, housing. The region's new rich, it seems, prefer glass and steel with a swimming pool and secure parking over crumbling baroque. Holiday homes, meanwhile, are another category attracting a steady stream of buyers from Europe and the UK. Croatia's Adriatic coastline was largely undiscovered five years ago, but prices have multiplied several times over since. Bulgaria's Black Sea coast will probably never be as popular but it is gaining momentum. "It's not rocket science," says Barnes. "Just look were the sun is." There are still a few distinct risks for residential buyers in new and potential EU member countries, however. In resort areas, quality of construction and overdevelopment remain concerns. In cities, an under-supply of high-quality modern housing has supported sale prices but buy-to-let investors may be disappointed with declining rents since most locals own their homes and the expatriates who invaded in the 1990s have largely moved on. Another problem is currency risk. Those countries that joined the EU last year are all now striving to join the eurozone. And, while some countries are managing the approach well, others, such as Hungary, are not. (The country's mounting budget deficit will probably result in its postponing its 2010 target for euro adoption and has already caused volatility for the forint.) Any slides in local currencies might create buying opportunities for foreigners but they would be painful for those already invested, as values could plummet10 per cent or more overnight and take months to recover. Buyers in countries outside the EU also face risks stemming from a frequent lack of clear title, especially for property that was confiscated under past regimes, although investors can avoid most problems through good legal representation. Overall, it is tempting to say that Romania and Bulgaria will simply follow the same curve seen in countries like Poland and Hungary. But some observers are wondering whether this enthusiasm is misplaced. "In Hungary, it always seemed that the level of perceived risk was higher than the real risk," says Charles Taylor of Cushman & Wakefield in Budapest. "The contrary seems true in Romania." That said, few people worry about an all-out crash. The outlook for economic growth across the region remains strong, especially in Romania and Bulgaria which are slowly reforming and becoming more stable. And the property investment wave continues to roll east. Turkey, a more complicated and promising market for both investors and second homebuyers, is the next big target. "Turkey is a good growth play," says Michael Doig of Colliers, who is marketing a development near the coastal town of Dalaman, which has an international airport and land recently redesignated for golf courses. Two-bedroom flats, with rental return guarantees, cost TL140,000 (£59,500). "Interest in Turkey is huge and EU accession is part of that," confirms Michael Rydderch, of Cushman & Wakefield. "People understand that it is going to take a while but the general feeling is that it will [take off]." Colliers CRE International, tel: +44 (0)20-7935 4499; www.colliers.com |
| © Copyright The Financial Times Limited 2005 "FT" and the "Financial Times" are trademarks of The Financial Times. |
--
______________
EuroAtlantic Club
monitoring Romania's journey towards the EU
http://www.europe.org.ro/euroatlantic_club/
mail to: P.O.Box 13-166, Bucharest 70700
e-mail to: [EMAIL PROTECTED]
*** sustineti [romania_eu_list] prin 1% din impozitul pe 2005 -
detalii la http://www.europe.org.ro/euroatlantic_club/unulasuta.php ***
YAHOO! GROUPS LINKS
- Visit your group "romania_eu_list" on the web.
- To unsubscribe from this group, send an email to:
[EMAIL PROTECTED]
- Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.
