Assetz® News - Hard work ahead for Bulgaria

Hard work ahead for Bulgaria

4th January 2006 |

Property investors looking to invest in Bulgaria will be keeping a close eye on the country's development in the coming months as it prepares for accession to the European Union.

Although the EU has agreed for the country to become a member state from the beginning of 2007, with only 12 months to go before that date there are a number of outstanding issues and targets which Bulgaria must meet if it is to join the European party. Many property investors have already put their money in Bulgarian property, believing that accession to the EU will do for the country what it has done for a number of other countries and improve economic prosperity and attract interest from business and tourists around the world.

However, many more potential investors may be holding back, at least for the first few months of 2006, as they wait to discover whether Bulgaria's government can get its house firmly in order and get a grip on the problems of organised crime and corruption that have dogged the country in the past. Such difficulties have put off some investors and could threaten Bulgaria's accession to the EU. If the country was denied accession at the end of this year, it could have a negative impact on tourism and property prices in Bulgaria.

Therefore, it may be argued that investors already in Bulgaria are taking something of a risk.

However, that risk does not seem so great when put into the wider context. Property in Bulgaria is currently cheaper than in most of western Europe, but at the same time property price inflation is rising at a faster rate than at any time in the country's history. It is becoming an attractive tourist destination, especially for skiers, even while it remains outside the EU and it is even beginning to outflank the likes of Spain in its popularity. Property taxes in some popular Bulgarian resorts are to see increases of as much as 45 per cent over the coming 12 months as the country begins to flex its economic muscles.

So while property prices might be dented by a failed bid to enter the EU, it seems increasingly unlikely that the impact would have a particularly long-lasting effect on the country. Those investors in it for the long-term would benefit from getting into the market now, while prices remain relatively low, rather than waiting for the added security of EU membership.

In a warning to Bulgaria to get its house in order, Katinka Barysch, chief economist at the London-based Centre for European Reform, told Bloomberg: "It's possible Bulgarian and Romanian accession will be put off."

However, for property investors such a move seems likely to have only a short-term impact, as Bulgaria looks likely to continue its growth for many years to come, with or without EU involvement.

So while the country will continue to work hard to gain entrance to the EU, property investors should rest assured that, should entry be postponed until a later date, a long-term strategy will bring great benefits in the Bulgarian property market.