Eastern promise

No longer the poor relations of Europe, countries from the east are increasingly a target for British property investors. Ginetta Vedrickas investigates the boom
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The Independent Online

Realising when a market is about to boom is the key to successful investment abroad - as anyone who bought in Spain 10 years ago will tell you. Today, the destination on every savvy property investor's lips is eastern Europe.

Realising when a market is about to boom is the key to successful investment abroad - as anyone who bought in Spain 10 years ago will tell you. Today, the destination on every savvy property investor's lips is eastern Europe.

Earlier this month, the Czech Republic, Slovakia, Poland, Estonia, Latvia, Lithuania, Hungary and Slovenia joined the EU. With Bulgaria and Romania set to join in 2007, many investors are betting on the east as a property hot spot in the making.

Knight Frank is certainly backing a boom in the area. Its global real estate forecast for 2004 is clear that residential property markets are advancing in the post-Soviet era, due to the increased prosperity of buyers. And, it goes on, these buyers don't have a great deal of better quality accommodation to choose from: the still-tortuous bureaucracy in this part of the world has hampered the supply of property, so the market isn't suffering a glut - and the pricing structure is consequently robust. Eastern Europe is risky, it concludes, but it has the potential to offer superior returns.

Avatar International has been selling property in Croatia and Bulgaria for some time, but has recently added Montenegro and Hungary to its list of destinations. The director Amar Sodhi says that British interest in all of these countries is huge: "Initially, we started selling in Turkey, and when we moved into Croatia and Bulgaria we realised that the same people were also enquiring after these countries. These are people who missed out on the Spanish boom and they don't want to miss this one."

Later this month, Avatar International will be offering investors the chance to buy off-plan in Budapest. "The ones who are not particularly interested in investment are in a tiny minority," Sodhi says, adding that growth potential outweighs any risks: "In countries such as Bulgaria or Montenegro, whether you are buying a ruin to renovate, a plot or a new-build, then at the moment you just can't lose as prices are so low."

Not everyone is so certain. Adrian Medd of the Federation of Overseas Property Developers, Agents and Consultants (Fopdac) warns: "Only buy there if you don't mind losing your money. It's a bit like gambling on the horses." Although these countries are either new or potential EU members, Medd says, buyers cannot expect the same level of protection, standards and infrastructures they take for granted in the UK.

Sodhi, however, maintains that, as long as buyers do not over-extend themselves financially, the risks are minimal: "If you are only spending £20,000 on a villa instead of the £200,000 it would cost you in somewhere like Spain, then where is the real risk?"

British buyers seem to agree. A report published this month by The Bollin Partnership shows that significant numbers of Britons are now investing in property in Bulgaria. The report links the demand to an expansion in tourism, and says that low-cost airlines have also increased interest. British tourist numbers are predicted to have doubled in two years to 250,000 visitors in 2004 thanks to the influx of main European tour operators now operating in Bulgaria.

Robert Jenkin of Bulgarian Dreams, who commissioned the report, explains the history behind the demand: "It's only in the last two years that people in Bulgaria have been able to take out a mortgage and buy a home. This has, of course, unlocked a property boom. And with EU membership for Bulgaria less than three years away, eyes are on Bulgaria in anticipation of an economic transformation."

Marcia Hunter is about to visit Bulgaria for the first time, and she plans to buy an investment property: "This is my first investment, but everyone tells me it's a good idea and I should get in now." Hunter recently downsized in the UK in order to release capital to fund a property abroad: "I couldn't afford a UK buy-to-let and this way I'm hoping to be able to use the place myself for holidays."

Last August, Martin Padfield bought a luxury apartment in Hungary for £60,000. "I went to Budapest and found it absolutely mouthwatering. Nobody goes there and doesn't like it. I found a newly built apartment in a riverside development. It has river views, plus luxuries such as a swimming pool, Jacuzzi and 24-hour security."

On his return, Padfield started up his own agency, Hungary Property: "When I came back and told my friends, they couldn't believe it. I realised that demand in this country would be high. I went back, formed a partnership with a major player, and now sell their properties over here in the UK."

The Invest in Property Exhibition (0870 143 2203) is at Earl's Court, London SW6 from 4-6 June

Knight Frank: 020-7629 8171, www.knightfrank.com

Avatar International: 0870 728 2827, www.avatar-international.com

FOPDAC: 0870 350 1223, www.fopdac.com

Bulgarian Dreams: 020-7614 1240, www.bulgariandreams.com

Hungary Property: 01293 541667