Price of Agricultural Land in Bulgaria Increases by 19 Percent

Sergey Pelovski, BULGARIAN PROPERTIES

On 11th November 2008, the third annual conference entitled Investments in Agricultural Land was held in Sofia. The topics covered included the strategy for land consolidation, mechanisms for EU subsides and, quite importantly, the market in Bulgaria under the conditions of a global financial crisis.

The conference was opened by the Minister of Agriculture and Food Supplies, Valeri Tsvetanov. He announced an average price increase for agricultural land of 19% for 2007 according to the statistics of the Ministry. The increasing interest is due to several reasons. First of all, compared to the other Central and Western European countries, the prices are several times lower. It is also very important to note that 80% of the agricultural land in the country is ecologically clean, thus suitable for such production (compared to 20% in the UK).

The Ministry has several projects for land consolidation in corporation with the Dutch government. The funding exceeds 1 million BGN and the expectations of the Minister are that this will be a successful model to be followed in the future. All participants agreed that the process is late, having started in the wrong direction in the 1990’s and immediate changes are needed. Some of them even expressed opinions that there should be some “compulsory” legislative measures in the package of measures.

In line with the Minister’s statement, Kamen Kalchev, chairman of the board of directors in Elana Property Management, highlighted the fact that the most serious problem in the sector is that the agricultural land is divided into over 10 mln small pieces. The average size of a plot is 5,000 sq.m. This logically leads to less effective production and problems for the major land owners and producers. In terms of prices, as it has been for the last 200 years, over the long term the trend will be the same and they will increase steadily, Kalchev said.

About 90% of the land in Bulgaria is owned by minor vendors. Most of them are not really interested in doing anything with their plots which makes the land consolidation process even more complicated. One of the interesting solutions to the problem came from Veselin Petrov, an executive director of Elana Property Management. “Instead of being the owner of 2,000 sq.m. in a 100,000 sq.m. lot, we suggest that the vendor has rights over 2% of the big plot”, Patrov suggested. He claims that this will increase the value of the land and will make it more interesting for investors, not only for domestic producers but foreign speculative buyers as well.

Bulgaria will receive about 280 million EUR from the EU as subsides for agricultural producers. Currently it cannot exceed 25% of the subsidies given to old EU member states. It will increase with 5% in each of the first 3 years of membership and 10% afterwards. Even though the final calculations are not ready yet, this makes about 7-8 EUR per 1,000 sq.m. for 2009.
Additionally, the government has planned 378 million BGN (about 193 million EUR) as national subsides.
Among the most attractive EU subsides are those for energy cultures (45 EUR per Ha) and strawberries and raspberries (230 EUR per Ha).

In Bulgaria there are 69 registered special investment funds buying agricultural land with a total capitalization of 257 million BGN. It is very interesting to note that this is an increase of 5 times over the last 3 years. Even more impressive is the fact that market value of the assets has risen 11 times for the same period.

The representatives of the DSK and Societe Generale banks shared their experience with the financial side of the market. The new products are credits against EU subsides which benefits from great interest on behalf of the agricultural producers. The increase of loans for the last year is a fantastic 500%.

All participants agreed that the market is stable, prices will increase and more land will be bought.

View our offers of agricultural land

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Copyright: 2008 Bulgarian Properties Ltd. All rights reserved. For further information or advice please contact us on tel.: +359 2 9 11 50 or e-mail: info@bulgarianproperties.com. The use of this article by third parties is allowed only with proper quotations of the source www.BulgarianProperties.com and the Author of the article. The data in this material has been collected by the Author and Bulgarian Properties Ltd. and is presented for information purposes only. We have made every effort to ensure the accuracy of the data. However, Bulgarian Properties Ltd. cannot be held responsible for loss or damage as a result of decisions made based on the information presented in this article.
© Bulgarian Properties Ltd. 2008.


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