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, 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;

Ready2Invest (01273 627900;

Assetz (0845 400 7000;

Royal Institution of Chartered Surveyors (0870 333 1600;

Caxton FX (0845 658 2223;

There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm today
Arts and Entertainment
Bianca Miller and Katie Bulmer-Cooke are scrutinised by Lord Sugar's aide Nick Hewer on The Apprentice final
tvBut Bianca Miller has taken on board his comments over pricing
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
Elton John and David Furnish exchange marriage vows
peopleSinger posts pictures of nuptials throughout the day
in picturesWounded and mangy husky puppy rescued from dump
newsAstonishing moment a kangaroo takes down a drone
Latest stories from i100
Have you tried new the Independent Digital Edition apps?

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'