The EU effect: New members Romania, Bulgaria enjoying major property boom
Written by Alison Mutler ASSOCIATED PRESS   
BUCHAREST, Romania — 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 Grigora s, 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.”
The sounds of construction reflect the 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.
Prices for apartments in Bulgaria increased by an average of 15 to 20 percent in 2006. In Romania, values rose at an average of 8 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.
Last year, 80,000 people in Romania and 31,000 people in Bulgaria also signed up for mortgages. Interest rates in both countries range
from 7 to 9 percent.
Marian Tudor, a Bucharest real estate dealer, said there’s been an exodus among Romanians away from the crammed apartments that
were prevalent under Nicolae Ceausescu, the former dictator 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.”
Mike Lloyd, chief executive for a $1.55 billion real estate development in the Baneasa district north of Bucharest, said Romanians simply will not stand for inferior homes 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.
Some believe prices for Romania’s vast swaths of agricultural land could also see staggering price increases of up to 40 percent this year if foreign investors continue to swoop in. Prices for land with development potential could also shoot up by 20 to 25 percent this year, said Radu Zilisteanu, spokesman for the Romanian Association of Real Estate Agents.
All agree that Romania and Bulgaria’s joining the EU on Jan. 1 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.
Some caution, however, that the construction boom may be outpacing demand in both countries.
“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, 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.
There are concerns, as well, about the destruction of centuries-old structures in both countries’ frenzy to modernize.
On Saturday, Pope Benedict XVI expressed worry about the construction of an office building near the 130-year-old St. Joseph Catholic cathedral in Bucharest, which Romanian Catholic Church officials and nongovernment organizations have said will weaken the church’s structure.
There have been several small protests and petitions against the development by Catholics and others who see the cathedral as an important historic landmark of Bucharest.
Associated Press writers Veselin Toshkov and Nevyana Hadjiyska in Sofia, Bulgaria, and Anca Teodorescu in Bucharest contributed to this report.
 
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