Luxembourg’s gross domestic product per capita, expressed in purchasing power standards, was 280 units — two and a half times the 110 average of the 13-member euro zone in 2006, the EU statistics office said.

In Bulgaria, GDP per capita in purchasing power standards was 37 units. The EU average was 100 units.

The Luxembourg result is partly thanks to large numbers of cross-border workers who contribute to its GDP, but are not taken into consideration as part of the resident population used to calculate GDP per inhabitant of the land-locked Grand Duchy.

Ten eastern European, mostly former communist states joined the EU in 2004 while Romania and Bulgaria entered the bloc this year, expanding it to 27 countries.

All the new members, as well as older counterparts Greece and Portugal, have GDP per capita well below the EU average.

Non-EU member Norway came second in wealth terms in Europe with 186 units while Ireland, once among the poorest European nations, was third-richest with 146 units.

The biggest of the EU states that joined in 2004, Poland, had only half the average EU GDP per capita. Cyprus, Slovenia, the Czech Republic and Malta were closest to the average with scores between 77 and 92 units.

Europe’s biggest economies — Germany, Britain, France, Italy and Spain — were slightly above the EU average in a range of 118 to 103 units.

The purchasing power standard is an artificial reference currency unit that eliminates price level differences between countries. One PPS buys the same volume of goods and services in all countries, allowing volume comparisons of economic indicators across countries.

The introduction of the three times weekly service between London Gatwick and Sofia, which commences on 6 November, reflects the airline’s continued commitment to growth in Central Eastern Europe and follows the recent announcement that the airline will also enter the Romanian market as well as the introduction of routes to Gdansk in Poland.

Romania expected to attract nearly 2 million foreign tourists in 2007, which would be a 30% increase compared to 2006 figures. 5 million tourists visited Bulgaria in 2006, Bulgaria’s Dnevnik daily reported. Romanian tourism minister Ovidiu Silaghi said that the tourism war with Bulgaria was “half-won”.

The tourism business in Romania is targeted at Germany, Austria, Italy, France, the US, Russia, Hungary, the UK and Ireland, countries, the same countries from which Bulgaria attracts tourists, Dnevnik said.

Bulgaria’s tour operators were skeptical about Romania’s ambitious plans. Foreigners were negative about Romania and it would take time to change their attitude, they said. (Sofiaecho.com)

The new company, Pirelli RE Bulgaria, will focus primarily on residential real estate, investing both in new construction and acquisitions.

In addition to asset management and other services, Pirelli RE plans to work on joint projects with other big-name investors.

By linking up with UniCredit Bulbank, Bulgaria’s biggest lender, it hopes to draw customers by offering its services packaged with those of the bank.

The two corporations are already working together in Poland, where Pirelli’s joint venture with Bank Pekao manages assets of over 300 000 square meters after just one year of operation.

Pirelli RE is one of the biggest real estate companies in Italy with assets in excess of EUR 14,5 B.

Last year, it decided to expand its activities internationally, acquiring a German company and starting operations in Poland.

It now has decided to expand to the European Union’s two newest member states, Bulgaria and Romania, launching operations there within days from each other.

Despite the construction boom in recent years, demand for new housing and office space remains high in Bulgaria, while profit margins are still substantially higher than in Western Europe.

Estonia may have experienced unprecedented price inflation (over 556 per cent between 1997 and 2006) but the cost of purchasing there is beginning to outweigh the potential investment benefits.

The same, says the report, can be said for property prices in Latvia and Lithuania which, while enjoying capital appreciation, are unable to keep pace in terms of gross rental yields.

The Global Property Guide has therefore declared Slovakia as the best bet for investors looking to plough their cash into property overseas.

Why? One reason is the country’s strong GDP performance, a factor closely associated with long-term property price rises.

Unfortunately, there are no house price statistics for Slovakia, but the Global Property Guide reckons it’s pretty safe to presume that prices are low.

Furthermore, they estimate that gross rental yields in Bratislava, the capital city, are very high at 10.1 per cent, a sure indicator to investors to strike while the iron is hot.

With the added bonus of low rental income tax and no capital gains tax on long-term property holdings, the advantages and future economic growth make it one of Europe’s most tempting investment propositions.

Other Contenders

The Global Property Guide also backs four other European countries for their investment potential, with Turkey being the next in line.

While prices in Istanbulare not regarded as cheap, the GDP growth, healthy market and prospect of no capital gains tax boost its attractiveness.

Sofia in Bulgaria also boasts some highly impressive gross rental yields at 10.6 per cent, although house price inflation is beginning to ease and transaction costs remain high.

The 8.17 per cent gross rental yields offered in Bucharest, Romania, a newly opened and growing market, should also attract investors.

In addition, an economy that’s on the rise, combined with low rental income tax, no capital gains tax and good GDP growth make it an attractive proposition.

The Global Property Guide tip Hungary as something of an outside bet, given its weak economic growth.

Nevertheless, with gross rental yields around 6.6 per cent to 8.3 per cent in the Capital centre and house prices that are still relatively low, the state of the market may depend on how committed the government remains to strengthening the economy.

According to the National Statistics Office the economy grew an encouraging 8.2% in 2004, 5.3% in 2005, and growth of approximately 7% is forecast for 2006 and 2007. In fact, the Q2 2006 GDP growth rate was up 7.8% compared to Q2 2005, which makes Romania the fourth fastest growing economy in the EU after Estonia, Latvia and Lithuania.

Reason No. 2 – Falling Inflation

2005 also saw inflation fall to a record low of 7.5% from dizzying heights of 22% in 2002, and it is expected to fall to 3.8% by 2006. With inflation under control, this will inevitably lead to more confidence in the property buying market.

Reason No. 3 – Growing GDP

GDP (purchasing power parity) reached US$183.6 billion in 2005 and it’s projected to exceed the US$200 billion mark in 2006, that’s a 17% growth rate per annum since 1999. At this rate, Romania is set to become one of the largest economies in Eastern Europe.

Reason No. 4 – Increasing Employment

Unemployment fell to 6.2% in May 2006 (less than 3% in Bucharest) which is lower than many more developed European economies. This is rate is still falling rapidly.

Reason No. 5 – Increasing Foreign Investment

Foreign direct investment (FDI) has accelerated fast since 2001, reaching over €5,000 million in 2005, and the prestigious Vienna Institute For International Affairs predicts it will exceed €8,000 million in 2006 – some of the most impressive figures in Eastern Europe.

Some of the larger foreign investors in Romania include Renault, Mittal Steel, Siemens, Colgate-Palmolive, Philip Morris, ABN Amro Bank, Bank Austria, Continental Automotive, Daewoo, McDonalds and Coca-Cola.

Key Romanian industries (and significant exports) include clothing and textiles, industrial machinery, electrical and electronic equipment, semiconductor fabrication, metallurgic products, raw materials, motor vehicles, military equipment, software, pharmaceuticals, chemicals, petrochemicals, foodstuffs, agricultural products. The service sector grew by 8.1% on average in 2005 (construction 9.9%).

Romania has a leading role in attracting FDI in Eastern Europe. In 2005, out of the total EUR 10.4 billion in FDI attracted by countries in the region, Romania received half of these inflows. The positive trend continues in 2006, where, in the first four months of the year, FDI increased 130% over the similar period of the previous year, up to EUR 2.3 billion. Comparatively, Poland reported EUR 2.7 billion as direct foreign investment over the same period, Bulgaria EUR 765 million and the Czech Republic, EUR 564 million.

Since the late 1990s, there have been several economic reforms (many instigated as part of the country’s bid to join the EU) including the liquidation of the large energy-intensive industries and major reforms in the agricultural and financial sectors. As of 2005, a significant amount of Romania’s major companies have been privatised, including the majority of banks, the largest oil companies Petrom and Rompetrol, energy distributors and telecommunications companies.

Reason No. 6 – Growing Tourist Industry

Tourism is also becoming increasingly important to the economy and incoming tourism receipts is expected to reach $8 billion in 2006 with a 7.4% annual growth forecasted over the next ten years (Source: World Travel and Tourism Council).

Tourism is important for two reasons. Firstly, is that it is one of the fastest growing industries in the world. As air travel becomes easier and cheaper, tourism has been increasing over the last few years. Secondly,

Reson No. 7 – EU Funding

Romania has been the biggest recipient in terms of EU funding per capita between 2004 and 2006. Romania will receive an additional €30 billion for the years 2007-2013, the highest allocation of all the new EU member states. This money will pumped into the local infrastructure such as road, hospitals, schools etc.

This will inevitably lead to more jobs and therefore more people who can afford to rent and buy their own property, and with the introduction of mortgages for Romanian nationals, which have only been around since 2004, this will all lead to a massive boom in real estate prices.

EU Funding For The Ten New EU Members And Accession Countries 2004-2006 (EUR
Million)

Reason No. 8 – A mortgage market that’s about to go through the roof
Mortgage growth and debt comparisons worldwide

Romania’s mortgage lending compared to GDP is tiny in comparison to the other Western European countries. This will most certainly grow over the next 10-20 years.

Per capita living in Romania is 17 SQM (Source: HVB Bank), which is 32% the EU average.

The growth so far has been fuelled by a growing domestic middle class sector who are earning good money, and they prefer, and can afford to buy new apartments. Foreign business people will also fuel the growth.

Mortgages for foreigners have, until now, kept many property investors out of the Romanian property market, however, since joining the EU, many new products are being launched, specifically for foreigners. Come 2008, finance should be plentiful, as in the rest of the EU. IN addition, with interest rates falling from 13% in 2006 to 6.9% today, this will also fuel the growth of the mortgage market, both domestic and foreign.

Reason No. 9 – Property prices will increase in-line with wages, which are increasing 13 percent a year

At the moment Romanian wages are just 14 percent of EU average.

If Romanian wages and salaries continue to increase by an average 13 percent per year (as they have done during the previous five years), it will double around every six years. In order for wages to rise to the current level of the EU average, it will take 29 years. This is assuming the average euro wage increases by four percent per year and Romanian wages increase by thirteen percent over the same period.

The EU average wage is currently €2,335 per month.

This rapid increase in wages is good news is good news for Romanians. This means the general wealth for the typical Romanian is increasing as well as their anticipated future wealth is also seen very positively, this leads to more confidence in their personal finances which therefore leads to greater confidence in taking out mortgages and loans (see point 8 above). This creates a credit boom which is exactly what the other Eastern European countries have experienced since joining the EU in 2004.

Reason No. 10 – Lowest tax rate in the European Union

Recent fiscal reforms to make Romania more competitive (and discourage the sizable black economy) have also served to boost the property market – and promote Romania as a modern low tax country. In January 2005 the Government introduced a flat rate of 16% for income and corporation tax, the same as Honk Kong’s and the lowest tax rate in the EU.

Flat tax is believed to:

• help reduce red tape and associated difficulties and confusion
• reduce inequity (same rate for all)
• counterbalance tax dodging and cheating
• provide incentives to work, save and invest
• generate increased tax revenue, and thus
• spark off a ‘mini economic boom’

A low-tax environment attracts foreign companies which leads to both Foreign Direct Investment and therefore more jobs for Romanians. This again means many more people are able to afford to take out mortgages for property.

Comparison Of Personal Income Tax Rates in Europe
(Highest personal tax rate used for comparison.)

Conclusion for the next 20 years?

In 2007, it is my prediction that property prices, subject to global economic conditions, will increase by about 20-25 percent with a further 20-25 percent increase for 2008. My long-term forecast for the next 20 years (from 2007), is a 12 percent increase per annum, with up to 25 percent increase during the initial 5 years.

This will be due to low property prices, a massive influx of FDI, EU funding, growth in tourism, growth in jobs, people taking advantage of new low interest rates, an increase in foreign property investors and financial institutions taking advantage of low residential and commercial property prices.

Even based on a conservative 12 percent per year, prices will double every six years and will rise eight times over an 18 year period.

If you are interested in buying property in Romania, you can download Darren’s free 78-page book called ‘How to profit from the NEXT biggest property boom in Eastern Europe’ by going to www.BucharestProperty.com

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.

———

Associated Press writers Veselin Toshkov and Nevyana Hadjiyska in Sofia, Bulgaria, and Anca Teodorescu in Bucharest contributed to this report.

The former Communist states joined the exclusive union on January 1st and experts predict that 2007 will see a significant rise in the number of people looking for property in the countries.

John Triton of MRI Overseas Property said: “Bulgaria and Romania’s official inclusion in the European Union is a key opportunity for property investment in these emerging markets.

“Based on the past history of other Eastern bloc countries joining the EU, where property prices have risen significantly these markets look set to become strong areas for capital growth.”

But, as well as Romania and Bulgaria’s new EU status, other factors are set to up the amount of property investment in the country.

Mr Triton said that an increasing number of tour operators are turning their focus on Bulgaria and Romania, which will “feed the rental market”.

“The new EU status will benefit the existing and future investors and we expect growth to continue to increase for several years to come,” he said.

Source: Realestate.tv

A progress report by the EU executive due for Tuesday will encourage the two Balkan nations to join the EU in January 2007, but it will propose the tough entry conditions on the newcomers.

The mixed message from Brussels reflects widespread public unease about further enlargement of the 25-nation bloc.

The conditional sanctions are meant to reassure critics of enlargement who say the countries are too poor, corrupt and weak to cope with EU membership, officials say.

Anti-government rallies in Hungary, as well as the break-up of a coalition government in Poland, have raised concerns over the admission of east European countries.

The commission may consider excluding Bulgaria and Romania from some EU policies unless they meet reform targets laid out in the report.

Jose Manuel Barroso, European Commission president, and Olli Rehn, EU commissioner for enlargement, will visit Bulgaria and Romania on Tuesday and Wednesday to explain the EU recommendations.

The EU executive cites “a number of areas … where the commission will initiate appropriate measures to ensure the proper functioning of the EU, unless the countries take immediate corrective action”, the draft report said.

Those include corruption and organised crime, especially in the case of Bulgaria, weak courts and state administration and insufficient food safety standards.

Historical wave

Nevertheless, the two countries will receive a boost on entering the EU bloc. Both are expected to sustain their already impressive growth rates, bring in foreign investment and encourage tourism.

Traian Basescu, Romania’s president, said: “Only with this will the biggest historical wave of EU enlargement be completed – a direct consequence of the collapse of communism.”

By raising the possibility of withholding some membership benefits if the two countries are not up to scratch, Brussels is also seeking to smooth ratification in national parliaments that have not yet approved the accession treaty, notably Germany.

Rehn decided that delaying membership until 2008 would humiliate the countries and prompt an anti-EU backlash. It would also reduce Brussels’ leverage with Bucharest and Sofia.

EU diplomats say that after the entry of Bulgaria and Romania, the rate of expansion will slow.

Croatia is next in line.

Source: aljazeera.net