Assetz® News - Experts doubt eastern property potential

Experts doubt eastern property potential

4th January 2007 |

Bulgaria and Romania made the historic step of joining the European Union on January 1st and while being part of the continent's free trade zone will inevitably benefit their economies, property specialists have suggested that investors should be careful when looking east for quick returns on investment.

The former communist states have been talked up as property hotspots for just over two years now and although some investors have seen dramatic price increases, there is little evidence to suggest that such rises will continue into the long term future.

Spain and France grew into holiday home havens in the mid-1990s and early 2000s as a result of a long-term growth in their tourist economies and cultural integration and appreciation that comes as part and parcel with taking regular holidays to these countries.

Although the tourist market in Bulgaria has performed strongly of late – chiefly because it offers skiing in the west and beaches in the east – Paul Collins, overseas property editor for BuyAssociation, says that the country has got some way to go before it rivals Brits' favourite European holiday hotspots.

"With the rapid expansion of the tourist resorts in these countries, it is taking a while for infrastructure to catch up in some places," he explained.

"Low-cost airlines are coming in regularly now, but the road and rail networks are not to the same level as yet. Essential services seem to be adequate, though you may have trouble getting a broadband internet connection into an older property."

Another problem that many investors have seen with their coastal properties is the weather. The Black Sea coast is beautiful during the summer, with temperatures rivalling the Mediterranean, but this only stays for a window of around five months.

Andy Welland, spokesperson for Propertyshowrooms.com, said that the coast is not such an attraction during the winter.

"In January the temperature can drop to as low as minus twenty on the coast," he explained. "You wouldn't want to have a beach holiday somewhere with those temperatures."

As a consequence, this limits a property's rental potential and thus reduces its value. Mr Welland advises that if one is bent on buying in Bulgaria, then they should look to the capital.

"I think the best investment that was had in Bulgaria was in Sofia, the capital, because from a rental point of view you've got a lot of big blue chip companies that are bringing their own staff over, and they need good quality accommodation," he said.

"You've also got a very big university area in Sofia, which attracts a lot of students who again are looking for good accommodation. So you'd have a really good all-year-round rental market."