FIRST IT was Spain. Then other parts of the Mediterranean, followed by the Czech Republic and the rest of the “Eastern Eight” that joined the European Union in May. Now property investors are stalking the new hunting grounds of Croatia and Bulgaria, where €60,000 (£41,000) buys you an apartment on the beach. Bulgaria, with its ski resorts and Black Sea coast, is hoping to join the EU in 2007, along with Romania. Croatia, which is fast becoming a popular destination for yachting types, is also an official candidate to join the club.
Investors hope to benefit from the foreign funds pouring into the region and to find tenants among the young professionals looking for quality homes to rent. Neil Lewis, director of the investment guide Property Secrets, says that the history of property development in Spain and Portugal suggests plenty more years of capital growth to come. Broadly speaking, there are two types of investor buying in Eastern Europe — those snapping up flats for workers in city centres, and those looking for a holiday home which they could let to tourists. In both cases, looking beyond the obvious destinations is key to achieving the best returns.
“Investors are moving away from cities such as Budapest, Prague and Tallinn and looking at places such as Brno, the second biggest city in the Czech Republic,” says Neil Lewis. He says that it is not only cheaper to buy, but the returns in a city such as Brno would be 8 per cent compared with 6 per cent in Prague.
There are lower prices and higher yields to be had in Bulgaria and Croatia, where the market is more speculative and risks greater. A one-bedroom flat at The Monastery, a new development in the ski resort of Bansko, two hours from Sofia, costs €60,000. On the Black Sea coast, a two-bedroom apartment at the Cape St Stephan development in Sozopol costs €80,570. Both are being sold by Avatar International, which operates throughout Eastern Europe.
There are so many new-builds springing up that investors have to be careful about where they put their money. “People who bought projects that are not well situated might have trouble filling them,” says Amar Sodhi, of Avatar. “Investors in Bulgaria are competing with package-tour operators selling cheap holidays.”
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Croatia’s jagged coastline may not benefit from sandy beaches, but here the Government is restricting the amount of development in order to protect the environment. Investors also benefit, as lower supply helps to keep the prices steady. Paul Keppler, of Croatiansun, an agent, says: “Croatia should avoid the boom-and-bust cycles that investors have witnessed in markets such as Spain in the past 15 to 20 years.”
The cost of property in Croatia is already rising. Though Croatiasun is selling a one-bedroom flat in Medulin on the Istria peninsula for €58,032, a three to four-bed stone villa with a quarter of an acre and a swimming pool there costs €450,000 — not exactly bargain basement. But then again this Tuscan-style villa is aimed at Tuscan-style people rather than those looking to make a quick buck. Amar Sodhi says: “While many of those buying in Bulgaria are attracted by the price, those looking at Croatia tend to be more affluent and middle-class.”