Black Sea beauty: Buying in Eastern Europe

The modernisation of Eastern Europe has given rise to an exciting property market, says Graham Norwood

Eastern Europe has been the most successful global region for property investors over the past year. A quarterly league table, produced by UK estate agent Knight Frank looking at the worldwide market, shows Latvia, Bulgaria, Lithuania and Estonia in the top 10.

"The price rises are part of a longer term process affecting countries in the old Eastern bloc," says Liam Bailey, Knight Frank's head of residential research. "Economies are modernising and the countries are growing richer. In most of them, the mortgage industry is maturing so its easier to buy. That all combines to create rapidly rising prices as the countries edge closer to the price levels and property quality seen in similar cities and holiday home locations in Western Europe."

But while the results are welcome for investors and sellers, most property professionals believe the real potential is only just beginning to surface.

For example, Ready2Invest is building 300 apartments on a 30-acre site near the glamorous Sveti Stefan location in Montenegro. Prices range from £160,000 to £1m and the scheme, to be ready next year, will have restaurants, swimming pools, a spa and marina.

Ready2Invest is also building an up-market development nearby at Lucice, a beach location where Russian developers are investing £600m in another new resort. "Montenegro is perhaps the hottest part of Eastern Europe now," says Jonty Crossick, Ready2Invest director."Until independence, the degree of uncertainty involved in investing in Montenegro was factored in to the price and now it's a far better-known quantity. So prices are higher. Clients kick themselves that they didn't buy a year ago." Crossick predicts prices will continue to rise at a similar rate for a few more years.

Another Eastern European hotspot is Poland. Assetz, a property investment consultancy that tracks a basket of small buy-to-let property markets, has seen the country rise from third to first place as a result of lenders halving the deposits required to just 15 per cent.

"This has raised the potential returns and will continue to do so as long as prices carry on rising consistently," says Stuart Law, Assetz' managing director.

Likewise, the Royal Institution of Chartered Surveyors (Rics), which conducts an annual survey of European housing markets, puts Poland in first place with 33 per cent capital appreciation in 2006. Warsaw and Krakow are doing even better.

This came on top of Rics's 2005 report that showed Poland recording an average 28 per cent rise.

"Poland now has one of the fastest economic growth rates in Europe and such a buoyant economy is being reflected in housing market activity," says Professor Michael Ball of Reading University, author of the Rics report.

He adds: "Rising foreign investment interest has added a further boost to demand. Housing finance has also improved with the continued development of the mortgage market, leading to more attractive interest rates and better loan terms."

Alan Forsyth, who runs www.property-investment-deals.com, says because the region has already become popular it is key for investors to look away from the most obvious locations.

"You should find secondary locations, perhaps outside the resorts where there may be a high supply of properties with high prices sold directly by developers," he says.

Forsyth argues that most investors' concerns about Eastern Europe, which at one time was best known for disputed land ownership and banking practices that would have been laughed at elsewhere, are now things of the past.

"It used to be difficult to exchange currencies when paying a deposit or buying a property outright. But not any more. Most of the Eastern European nations now use the Euro and that's a stable currency," says James Hickman, property consultant at exchange company Caxton FX.

There are still some problems however. For example, Hungary's poor performance in the Knight Frank global index - it languishes in 28th spot with average prices down 1 per cent in the year to November - is due partly to large numbers of old, poor quality homes on sale at the same time as higher quality properties. As a result, both sectors cut prices to compete with each other.

In the broader Hungarian economy, austerity measures of higher taxes and expenditure cuts introduced last year are expected to cause a sharp rise in inflation in 2007 and curtail private consumption. "This will constrain housing demand, so the current economic crisis raises concerns over the level of housing market activity in 2007 and, perhaps, beyond" warns Michael Ball.

Likewise there is evidence of an over-supply of properties in the Sunny Beach area of northern Bulgaria, causing rental income and sale prices to drop. Therefore more investors are turning to Bansko, a ski resort near Sofia. However, these are short-term problems with classic free market dimensions - too much supply depressing prices. Gone are the more fundamental problems that used to blight this region, centred around closed economies not allowing foreign investors, or a lack of transparency in the buying process.

Eastern Europe's property portfolio has come of age. And not before time.

Knight Frank (020-7629, 8171; www.knightfrank.com)

Ready2Invest (01273 627900; www.ready2invest.co.uk)

Assetz (0845 400 7000; www.assetz.co.uk)

Royal Institution of Chartered Surveyors (0870 333 1600; www.rics.org)

Caxton FX (0845 658 2223; www.caxtonfx.com)

Life and Style
life
News
Brad Pitt and Angelina Jolie reportedly married in secret on Saturday
peopleSpokesperson for couple confirms they tied the knot on Saturday after almost a decade together
Life and Style
Chen Mao recovers in BK Hospital, Seoul
health
News
Joan Rivers has reportedly been hospitalised after she stopped breathing during surgery
people81-year-old 'stopped breathing' during vocal chord surgery
PROMOTED VIDEO
Arts and Entertainment
tv
News
i100
Arts and Entertainment
Diana from the Great British Bake Off 2014
tvProducers confirm contestant left because of illness
Arts and Entertainment
Lisa Kudrow, Courtney Cox and Jennifer Anniston reunite for a mini Friends sketch on Jimmy Kimmel Live
tv
Life and Style
fashion

Latest stories from i100
Have you tried new the Independent Digital Edition apps?

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone