BUCHAREST, Romania (AP) — Buzesti Street used to be one of the shabbiest parts of Bucharest with crumbling, Communist-era structures and one of the city’s roughest markets.
Now, gleaming multistory buildings have turned the area into one of the capital’s new business centers — testimony to a property boom sweeping Romania and Bulgaria, the newest members of the European Union.
“It used to be hell here,” said Toader Grigoras, a 55-year-old priest who has lived in the neighborhood for more than a decade. “It’s good now that all the mountains of garbage have gone, but there’s a lot of noise.”
It’s the sound of unprecedented demand for real estate: In Romania and Bulgaria, some property prices have more than doubled in the last three years. And analysts say there’s no end in sight to a boom fueled by domestic demand, increased tourism and foreign investors.
It’s a far cry from the 1990s when mortgage lending was not permitted and banks languished under state control in both countries.
Last year, 80,000 people in Romania — population 22 million — signed up for mortgage deals. In Bulgaria — population 7.7 million — there were 31,000 applicants. Interest rates in both countries range from 7 percent to 9 percent.
Marian Tudor, a Bucharest real estate dealer, says Romanians are staging an exodus from the tiny, crammed apartments prevalent under dictator Nicolae Ceausescu, who was overthrown and executed in 1989.
“Everyone wants to move out of the drab Ceausescu buildings,” Tudor said. “And many of the buildings that were built before communism are not earthquake-proof, so (they) are not a good buy.”
Prices for apartments in Bulgaria increased by an average of 15 percent to 20 percent in 2006. In Romania, values rose an average of 8 percent to 10 percent. But in some parts of Bucharest and Sofia, the increases are much higher, with rates of return on investments among the highest in Europe.
Mike Lloyd, chief executive for a $1.55 billion real estate development in the Baneasa district north of Bucharest, said bluntly that Romanians simply “won’t put up with crap anymore.”
“What would have been put up with years ago won’t do any more: You could build rubbish and tell them it was great and they would believe you,” said Lloyd.
All agree that joining the EU has been the main catalyst for growth, lending more credibility to both countries and attracting investors who are seeing their returns grow stagnant in more developed countries.
Romania’s vast swathes of agricultural land also are the focus of much interest — and some believe there could be staggering price increases of up to 40 percent this year if foreign developers continue to swoop.
Prices for land with development potential could shoot up by 20 percent to 25 percent this year, said Radu Zilisteanu, spokesman for the Romanian Association of Real Estate Agents.
However, Lloyd, the Bucharest-based developer, cautioned that not all investors stand to make big gains in Romania.
“There are 17 shopping center projects at the moment (in Bucharest) and that is gross overdevelopment,” said Lloyd. “We will end up where lots of them fail.”
In Bulgaria, some also fear the construction boom is going too fast.
About 1.5 million tourists visited Black Sea resorts such as Sunny Beach and Golden Sands last year, but many luxury hotels are standing half-empty. Nevertheless, investors continue to build new ones.
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Associated Press writers Veselin Toshkov and Nevyana Hadjiyska in Sofia, Bulgaria, and Anca Teodorescu in Bucharest contributed to this report.