Interest toward Bulgarian agriculture sector

The Sofia Echo, 27th February 2006

Bulgaria’s forthcoming accession to the European Union in 2007 or 2008 has triggered an unusual interest both in and out of the country towards buying agricultural land here.

The growing dynamism of farmland sales and leases in Bulgaria, which was particularly noticeable in 2005, is likely to be sustained in 2006. The process will almost certainly entail a price rise for farmland in the country’s least attractive part, the northwest.

Deputy Minister of Agriculture and Forestry Svetla Buchvarova made this forecast on February 16.

“The farm land market in 2005 was active and attractive,” Buchvarova said.

The year saw 66 345 transactions for a total of 60 000 ha of farm fields, 20.6 per cent up from 2004. Sold land plots averaged a little less than a single hectare.

Demand was highest in the north-eastern Dobrich region, which is in the heart of Bulgaria’s wheat producing area. There, owners sold larger land plots, averaging 1.65 ha, for which they got up to 3000 leva (1530 euro) a hectare. Unlike in other parts of the country, in the Dobrich region, demand exceeded supply.

Between 2004 and 2005, the average market price of farmland in Bulgaria grew 26 per cent to 1690 leva (864 euro) a hectare. Price rates were lowest in the north-western regions of Vidin and Vratsa, and in north-eastern Turgovishte.

Land market dynamism was also in place where new owners transformed the use of the farmland they bought. Such sales increased threefold in 2005 from 2004. They involved the selling of 3525 ha of land for prices averaging much higher than the above-mentioned levels: 285 000 leva (145 700 euros) a hectare in 2005, compared to just 45 000 leva (23 000 euro) in 2004.

In the case of land-use change, demand for farmland was highest in south central Bulgaria, particularly in the highlands around Smolyan and Dospat (close to the skiing resort of Pamporovo). In terms of number of sales, such transactions were most frequent in the northeast of Bulgaria, but there prices were lower.

Now, Bulgaria’s land market is expected to grow in both price and the number of deals as the country heads towards EU membership and demand exceeds supply.

“As a whole, prices of land in Bulgaria are still low, compared to prices of land in the region, which attracts investors, but this will be corrected in 2006,” Bachvarova said.

In neighbouring EU member Greece, for instance, land prices vary between 1200 euro a hectare of non-irrigated land, to twice or thrice higher prices for irrigated land.

Buchvarova added that farmland prices in Bulgaria were going towards levels ineffective for farming, because if one had to invest too much in land, that capital could not be used for other purposes.

“Those, who buy land count on the fact that they will have stable income in 2007, due to EU farming subsidies,” said Bachvarova.

The ban of 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 said.

About 250 000 hectares of land have been purchased in the past three to four years. But it is just a small fraction, as long as total arable land in Bulgaria is estimated at over three million hectares.

In the real estate sector, February brought news that foreign citizens bought about 55 000 business and residential properties in Bulgaria in 2005. Foreigners spent at least 880 million euro on housing and business estates in Bulgaria in 2005.

Deals with foreign investors accounted for 15.3 per cent of the total deals in 2005, compared to 19.19 per cent in 2004. The percentage decrease however, was not very significant and was due to increasing local competition for attracting foreign buyers.

Cyprus, Greece and Turkey also offer summer holiday housing. Moreover, prices of Bulgarian properties have gone up significantly in the past years, and low prices are no longer a Bulgarian competitive advantage.

By contrast with summer housing, the advantages of Bulgarian winter resorts remain uncontested. Winter holiday housing is relatively rare in Europe and prices in Bulgaria still remain below average EU standards.

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