ECONOMY

Land market breaks records in Bulgaria

SOFIA (SeeNews) – Bulgaria’s land market is expected to grow in both price and the number of deals as the country heads toward European Union membership and demand exceeds supply, a government official said this week. «We expect the land market to be as active in 2006 as it was in 2005, when record deals were registered, both in terms of number and value; 56,000 hectares of arable land were purchased at the average of 16.9 levs per hectare (8.66 euros), which is a record, compared to previous years, and close to 30 percent higher, compared to 2004, which was due to higher demand than supply,» Bulgaria’s Deputy Agriculture Minister Svetla Bachvarova told reporters. Bulgaria expects to join the European Union in January 2007. Prices for farmland will go up at a moderate pace in 2006, but the highest increase is expected where prices currently are low, she added. «The interest of buyers will most likely be directed to areas where the price of land is now 100-110 levs (51-56 euros) in Vidin, Vratsa, Targovishte and Ruse [in northwestern Bulgaria],» said Bachvarova. Fragmentation and low prices are the key obstacles to even more intensive sales, she added. The prices reached in southwestern Bulgaria for 2005 can hardly grow further, as they are quite high for arable land, said Bachvarova. The average price of arable land in the region was 27.6 levs (14.1 euros) per hectare. «As a whole, prices of land in Bulgaria are low compared to prices of land in the region, which attracts investors, but this will be corrected in 2006,» Bachvarova said. In neighboring EU member Greece, for instance, land prices vary between 1,200 euros per hectare of non-irrigated land, to twice or three times higher for irrigated land. Prices of land are highest where farming is developed, such as in Bulgaria’s bread basket of Dobrudzha, and lowest in regions where farming activity is low, like northwestern Bulgaria, Bachvarova said. She added that farmland prices in Bulgaria were going toward levels that were not effective for farming because if one has to invest too much in the land that capital could not be used for other purposes. «Those who buy land count on the fact that they will have a stable income in 2007 due to EU farming subsidies,» said Bachvarova. Land bought as construction plots cost an average of 2,850 levs (1,460 euros) per hectare and 3,500 hectares were sold. The high average price is due mainly to the excessively high prices of land in areas like Smolyan in southern Bulgaria where prices have reached over 7,000 levs (3,590 euros) per hectare. One of Bulgaria’s most famous ski resorts, Pamporovo, is located near Smolyan. Overall, 1.7 million hectares were rented in 2005 and rents varied between 0.5 and 3 levs (0.25 and 1.54 euros) per hectare, said Bachvarova. The ban on the purchase of land by foreigners has no material effect on the price of land, as a legal opportunity exists for joint ventures with foreign partners to buy land, she added. About 250,000 hectares of land have been purchased in the last three to four years. Overall, three Bulgarian special purpose vehicles are currently intensively investing in arable land, as they expect land prices to continue growing for at least a decade. Corporate income from land transactions is tax-exempt in Bulgaria. The total arable land in the ex-communist state of nearly 8 million is estimated at over 3 million hectares.