Gold rush in the Balkans By Elias Hazou THE PRINTED media is being swamped by advertisements promising prime land at irresistible prices in places such as Romania and Bulgaria. Cypriots’ love affair with foreign real estate has been going on for some time, and begs the question whether they are getting fed up with the local market and looking elsewhere.
Recent research by Savills, a world leader in property services, has shown that in 2006 the average price of a home in Cyprus is £252, 175 sterling, compared to £252,342 in Spain and £277,500 in Portugal. The UK was the most expensive, at £371,250. The return on investment in real estate property in Cyprus was 14.6 per cent, and the degree of ‘purchasing difficulty’ rated at 21 per cent. The corresponding figures for Spain were 13.2 and 25.8, and for the UK 11.1 and 18.3. In other words, prices may be very high on this island, but the return is pretty satisfactory and it is relatively easy to become the owner of real estate. Savills’ study concerned tendencies of UK nationals in Europe and the Balkans, concluding that countries such as Turkey, Croatia and Bulgaria were becoming increasingly more popular with buyers, slowly turning away from the Iberian peninsula and the Mediterranean. In total, Britons own some 400,000 villas in Europe worth a staggering £52 billion sterling. Fifty-six per cent of these homes are in Spain and France, with just 4-5 per cent investing in Cyprus. Always the opportunists, Cypriots themselves have been turning to Central Europe – untouched territory, as it were, in the real estate boom. Christiana Strati, a property consultant with real estate agents Happy Lands Ltd, active in Bulgaria, traces back the Cypriot “frenzy” to around three years ago. At the time, both Bulgaria and Romania were slated to join the EU, with prospective investors anticipating that the price of real estate would soar on accession. “It’s a very simple formula: buy low, sell high,” Strati told the Mail. “This explosion that has occurred is precisely because Cyprus prices are too high. Over there [in Bulgaria] with £30,000 you’re considered a medium investor, and that kind of capital can get you a seaside plot. It’s a no-brainer… all about purchasing power,” she said. Bulgaria in particular has become hugely attractive, what with some areas of the country experiencing an up to 30 per cent rise in tourist arrivals since EU accession. Strati again: “Another incentive is the minimal bureaucracy involved in acquiring land. There is one hindrance, which is that foreigners [non-Bulgarians] are currently not allowed to own real estate, despite the country being part of the EU. But we expect the law to be abolished, perhaps some time next year.” In the meantime, though, there’s a perfectly legal loophole. Although private individuals cannot buy immovable property, corporations can. So all you need to do is register a company – it costs around 550 euros – and you’re in business. The real estate is then “written” to the company in question, and this has the added benefit of avoiding property taxes. Once the law is repealed, said Strati, owners would transfer their titles from the company to themselves as private entities. Real estate agents such as Strati’s facilitate such transactions by providing the full gamut of services: hospitality in Bulgaria, weekend tours of the desired location and assistance with paperwork. And Strati claimed that setting up a company was often “a matter of days”. With foreigners already arriving in Romania and Bulgaria in their droves, what is the next big thing in the market? “The word on the grapevine is Serbia. It might be a little bold to commit your money now, since it’s not certain whether the country will enter the EU, but on the other hand, the sooner you invest the higher the return later, as real estate is very cheap. Once again, it’s risk versus reward.” But are Central Europe and the Balkans really the promised land? It does sound too good to be true. Yes and no. One prospective buyer, who wished to remain anonymous, told the Mail he had “explored” both Bulgaria and Romania, but was ultimately scared off by stories of deals gone bad. “We’ve heard of at least one guy who lost £100,000 because it turned out that the property had already been sold to someone else. Unless you have the connections, people who know the ropes in these countries, you’re taking a big gamble. “Then there’s the whole thing about setting up a company. OK, what next? You need to hire someone to do the bookkeeping… preferably somebody you can trust,” he said. These apprehensions were confirmed to a degree by economic analyst Dr. Stelios Platis, who said people should probably not rush in head first. “Always do your homework,” he cautioned. Platis, who has conducted research on Cypriots’ real estate investments abroad, said low prices are only part of the story. “Yes it’s cheap to buy in Romania or Bulgaria, but one has to consider other important factors when you decide to venture in foreign lands. You have to look at the amenities: hospitals, proximity to airports, the crime rate, how reliable the land registry is… “There have been cases where the same property has been sold twice. You can imagine what legal disputes this leads to. This sort of thing would never happen here in Cyprus… and let’s leave it at that,” he added. Another aspect was what Cypriots are doing with their property. Platis says that already the “first generation” of investors were selling off their property, in many cases to other Cypriots. Asked whether this pointed to a bubble, with real estate values being artificially inflated, Platis acknowledged the possibility but said it was too early to pass a verdict. “At any rate, Cypriots are buying purely for speculative reasons. In my opinion, it’s doubtful that they plan to settle or spend a great deal of time in Bulgaria or Romania in their villas and whatnot. Obviously, a few might do this, for instance if they own seaside property, but for the most part, no.” Citing statistics, he said that Cyprus money represented the fifth largest buyer of real estate in Romania, with investments of 150 million euros during the first half of the present year alone. And according to figures released by Romania’s Central Bank, in 2005 Cypriot investments amounted to 850 million euros, although Platis estimates it could be as high as one billion. Yet he did not think that Cypriots are obsessed with land, as some have suggested in trying to explain the phenomenon. “It’s all profit-driven. If it was cheap cattle, we’d be buying cattle. What can be said is that Cypriots have a good eye for opportunity, and of course word spreads quickly. “This land craze is the new stock exchange, if you will. It used to be that the topic of discussion in barber shops was which share was hot. Nowadays, we chat about this or that piece of land we’ve spotted in Romania.” Copyright © Cyprus Mail 2007 http://www.cyprus-mail.com/news/main.php?id=35849&cat_id=9 [Non-text portions of this message have been removed]
