A very British coup

Publish date: 05-07-2007
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 In the last 30 years, the British have transferred their failed colonial spirit into the purchase of holiday cottages in foreign countries.
     Suffering from living on a crowded and wet island full of football hooligans, fat children and drunk teenage girls, they have moved abroad to create expat communities in Marbella in Spain, Tuscany and Umbria in Italy, Provence in France and the sunny beaches of Bulgaria.
     A few are now moving to Romania: some are coming for the quiet life, some to make a quick buck in re-sale, while others are realising an entrepreneurial zeal.
     There is evidence that the Brits are going to the seaside in places such as Olimp and Costinesti on the Black Sea coast, but the two destinations that seem to be growing for purchase and buy-to-let are south and west Transylvania and Bucharest.
     But this is not yet a wave. Romanians are still safe from having to listen, wherever they go, to English voices complaining about the quality of local toilets and their endless talk of house prices.
     "No place is turning into a miniature Tuscany," says Ray Breden, former chairman of the branch advisory board of the British Romanian Chamber of Commerce. "There is no evidence at the moment. But there is no doubt that Transylvania is underdeveloped and has massive potential for holiday homes and British enclaves because its scenery is second to none."

Brasov is identified as the place in Romania offering the best potential return on investment," Damien Thiery, Romanian Properties Ltd


     The Brasov county and its surroundings are the most attractive zone for foreigners buying up holiday cottages. This includes the area up to Sighisoara and the Saxon villages and fortresses down to Sibiu.
     "Brasov is identified as the place in Romania offering the best potential return on investment," says Damien Thiery, managing director of Romanian Properties Ltd.
     The buyers, according to Thiery, are investors and holiday-makers, such as skiers and hikers. His firm only took a few weeks to sell 11 apartments in an apart-hotel in old Brasov. All the flats went to Brits.
     Like Switzerland and Austria, the district has the benefit of tourism in winter for skiing and summer for hiking. In Campulung Muscel, around 50 km from Brasov, Essex-born Rodger Mead runs an English-style guest house ‘Casa Anglia’. He sees mainly foreigners buying up property in the area " including the British, Italians, Germans and Austrians.
     Some are opening hotels and facilities for tourists, while a ski resort is under construction six kilometres from the town. "Almost any type of tourist business would work here," says Mead. "Western style bistros, bars and clubs will be required when the town attracts winter tourists to the ski resort."
     There are some speculators buying the land because of its anticipated hike in price. This trend, Mead says, is becoming "silly".
     "Locals here have been asking 35 Euro per sqm and getting it," he argues. "The real price should be 20 to 25, but even at the higher price it will show great returns in the not too distant future."

Bulgaria has been a disaster for investors in the UK and Irish
markets. Prices have not grown and rental yields are low,"
David Cosgrave, Romania Off-Plan


     Bulgaria is over, argues David Cosgrave, who runs Romania Off-Plan, a real estate firm selling properties in Bucharest, which includes residential blocks on Blvd Basarabia and Splaiul Independentei.
     "Bulgaria has been a disaster for investors in the UK and Irish markets," he says. "Prices have not grown and rental yields are low. There are a lot of empty apartments in winter resorts that have a very short season. We believe agents have massively oversold Bulgaria."
     But he argues that Romania remains attractive because the demand is outstripping the supply. There is availability of mortgages for first-time buyers and the prices are still low. He predicts five more years of capital growth for properties.
     "Bucharest is wide open," Cosgrave adds. "There is so little development when compared to other cities in Europe." Many UK speculators are buying up Romanian land or apartments off-plan and then selling them on, before the project has finished construction, sometimes to another speculator. But Cosgrave is not recommending his investors to sell on the property to a third party, but to hire out the properties in Bucharest, because there is a massive deficit in flats for rent.
     In Bucharest, Thiery says the British are looking for new-built apartments, mainly one-bedroom, and villas in central Bucharest and the northern Baneasa area. He says they target an annual capital growth of 20 per cent with at least seven per cent gross rental yield.
     Romania Off-Plan’s customers are all individuals. Many of these part-time speculators are sitting on a home computer in, say, Saffron Walden or Chipping Norton, and have never been to Romania. These are ‘virtual foreign investors’."We have supplied a Google Earth interactive map with a full video animation of the project," says Cosgrave. "We also supply investors with a full fact-file on the city. I would say 90 per cent of the investors purchase as a result of the reports we supply them."

Many of the British individuals
investing in Romania have never been to the country

     Meanwhile, Michael Beckerman, director of Romtrade Consult, assists foreigners in buying property abroad. He is based in Odorheiu Secuiesc, one of the cities in the majority Hungarian-speaking county of Harghita. This is deep in the heart of the Transylvanian forest " which is still roamed by bears and wolves. German and American tourists love the area because of its lax rules on hunting.
     "It’s pretty wild around here," says Beckerman.
     In Harghita’s wilderness, Austrian, German and British investors are buying up holiday cottages. The buyers tend to be middle classes in professional jobs such as ex-lawyers. Many have family contacts with Romania and some are looking to settle.
     The attraction is the notion of escape. Unlike Bulgaria, where holiday villages have pubs that serve pints of Carling and all-day-breakfasts airlifted from Heathrow, this area offers a retreat from modern trappings. The hope is that this is The Good Life made real, with chickens on the front porch, pigs in the outside toilet and cows in the garage.
     There are houses inaccessible by road and virtually no supermarkets in the area. Farmers still barter goods and selling prices for fresh cheese and meat are low.
     "They don’t understand what you mean when you ask for organic food here," says Beckerman, "because everything is organic."
     Plus it’s still cheap. A house in a village in Harghita county can cost between 30,000 and 50,000 Euro.
     Many of the new expat investors, says Beckerman, re-mortgage their house in the UK or downsize to a smaller house after their kids leave home. They use the released capital to pick up a small property in Harghita county. Some UK investors buy up land and then sell six months later without making the journey to Romania, but have doubled their investment. But Beckerman argues that investors must be careful who owns the land. A document from the land registry detailing who owns the land is essential.
     At present, there are 150,000 pending cases of litigation over disputed properties in Romania.

Advice for the small-time entrepreneur

Nothing is simple in Romania. Rodger Mead runs an English-style guest house in Campulung Muscel, in Arges county, which includes motorbike tours. From his experience, he offers advice for a budding entrprise:  
1. When setting up a business here, it is vital that any activity you wish to carry out is listed on your documents. Additional activities that you either decide you need or were not listed will cost more money at a later stage.
2. Trusted interpreters and lawyers are essential. I recommend double-checking with trusted expats on this issue.
3. When you have the articles drawn up, ensure that the laws to which your activities refer actually cover what you need. If you are not sure, just keep asking and probe the lawyer as to what you can do.
4. Ensure that your foreign qualifications are accepted by the authorities so you can function in your chosen path. Find out which Romanian qualifications may be required.
5. You will need to appoint a fluent speaking Romanian as your company administrator, as all documents are in Romanian.
6. Allow about six weeks for the company to be formed, and ignore any promises that it will be ready in two weeks.
7. Allow plenty of time, for any permits to be granted. Not allowing sufficient time could mean a ‘problem’, and this may lead to you feeling that an ‘incentive’ [to the authorities] may help. Don’t go down that path. Ever.


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