The boom business of the Bulgarian economy in recent years, real estate has seen its strong upward path seem more uncertain in the last few months, despite unflagging interest from many foreign buyers. Meanwhile, real estate agents are becoming increasingly disgruntled with the slow pace of producing a new property register, while others wonder how land prices will fare as European Union membership approaches. In fact, the future of land ownership is becoming a much more heated issue in general, as the government looks to shore up its troubled agricultural sector.
While foreign interest in low price Bulgarian properties - particularly on the coast and in the tourist mountain resort regions - continues, domestic demand has been showing increased volatility in recent months. Real estate analysts put this down to a combination of factors, not the least of which is the rising interest rate on bank loans following the Bulgarian National Bank's basic rate hike to 3.83%. In addition, it is widely thought that Bulgarians who have accumulated more property than they can use have begun injecting the market with more properties for rent, bringing down prices in the rental market, with a consequent knock-on effect in property purchases.
Yet there are also some underlying structural difficulties that are now being highlighted, particularly by the real estate agents themselves.
Principal among these is the creation of a new property register. Back in 2001, a project to put one of these together was begun, helped on its way by a $30m World Bank grant, $2m from the Dutch government and $6m from the state's coffers.
The project is due for completion by March 2007, yet this last week saw warnings from both real estate brokers and the World Bank itself that it was not going at the requisite speed. A recent letter from the World Bank claimed that slow progress with the property register's implementation could jeopardise the transition to EU property registration standards. It also insisted that Bulgaria unify the existing cadastre and property registration agencies into one authority.
This demand has the backing of most of Bulgaria's real estate agents, who argue that this would dramatically reduce administrative costs while also speeding up the process with a one-stop service.
The World Bank concluded its letter by demanding that the merger and other improvements be implemented by a September 2004 deadline.
Meanwhile, there is also growing interest in the price of growing - or tillable - land. According to market watchers, this prime resource is currently selling in Bulgaria at between one-fifth and one-tenth of the price of cultivatable land within the EU. This has created speculation that prices may be set to rise by significant amounts as the country moves towards EU membership - in much the same way as real estate has jumped.
However, there exists one major stumbling block. Much of the real estate boom in recent years has been fuelled not by Bulgarian investors, but by foreign, often multinational investment funds, looking for the kind of rapid and massive profits that were extracted from the real estate booms in other pre-accession EU states such as the Czech Republic and Hungary.
Yet in Bulgaria, there are still legal restrictions on foreign ownership of land. Naturally enough, there are ways in which such barriers can be overcome - usually by the establishment by the foreign entity of a Bulgarian company, which then buys the land. Nonetheless though, this is a difficulty, but one the government recently announced it was working to overcome.
Deputy Prime Minister Lydia Shouleva said June 7 that the government was drafting legislation to lift a ban on selling land to foreigners, which should ease things in the future.
Meanwhile though, there are other questions outside market economics that some Bulgarians are asking about just what kind of an impact the sale of land to non-Bulgarian entities may have on the country as a whole. Up to now, with Bulgaria's rural areas the country's most impoverished, farmers and landowners have been more than eager to sell up and move on. Combine this with some disappointment at the extent of EU aid for the agricultural sector now being promised, and there is some concern as to the future shape of Bulgaria's farmlands.
Agriculture Minister Mehmed Dikme announced June 7 that farmers would receive between 1bn and 1.2bn euros in EU subsidies per year after their country joins the bloc in 2007.
While Dikme claimed that, "Agriculture has never received such a large amount of aid as the aid it will get from the EU," opposition MP Borislav Kitov countered that "Bulgaria has been heavily disadvantaged with the closure of the agriculture chapter."
The basic dispute is over how to calculate the size of the Bulgarian agricultural sector and thus determine its eligibility for subsidies. Bulgaria would like to use the years 1987-1991 as the base line for calculating outputs, while the EU argues 2000-2003 is more realistic. The differences the two dates produce are major - as Bulgarian agriculture has been in dramatic decline since the end of the Cold War.
Yet the prospect of those EU subsidies is also one attraction for property and land speculators eyeing the Bulgarian countryside. According to business web site Novinte.bg, investors from Greece, Turkey and Western European countries have shown the greatest interest in buying Bulgarian land, particularly that located along the highways.
Experts told Novinite on June 1 that a patch of tilling land near the Thracian highway had been recently traded for around Lv3000 per ha, while vine-growing and wine-production were the areas seeing the most interest - and the requirement for the largest patches of land.
This may bode well for investment in agriculture and land prices, as well as for Bulgarian Cabernet Sauvignon, but questions also remain over how such a transformation of the Bulgarian countryside may play out in the years to come.