13.12.2007 Review of the Agricultural Land Market

Sergey Pelovski, BulgarianProperties

On 28th November at the Sheraton Hotel a conference on the topic “Investments in agricultural land” was held, duly organized by Dnevnik and Elana Property Management.
The participants presented their reports and after that comments followed on behalf of all those present at the conference.

According to the experts’ reports, in 2007 the major institutional investors own about 1 million decares of workable fields which makes about 4% of the total area of the agricultural land in Bulgaria (25 million decares). The plan for the next year (2008) is the portfolio to increase by 100%.
Currently, the individual owners of agricultural land are 2-3 million people and the plots owned by them are small and fractured. Some of the other features of the market include:
 The national public fund and the municipal fund have at their disposal 6 million decares workable land
 The average price per 1,000 sq.m. increases with stable rates: 15-20% per annum, there are certain areas where an increase of over 50% has been achieved for the last year
 There are a number of participants on the market (farmers, investors, small vendors)
 The agricultural land market is real, strong, and its volume increases with higher rates compared to the other segments on Bulgarian property market.

Characteristics of the agricultural land market

Some of the main features and changes on the agricultural land market in the last few years are its high liquidity, segmentation by regions and prices as well as the fact that some banks have started considering the acceptance of quality plots of workable (rentable) agricultural land as a security against certain types of loans.

The Deputy Minister of Agriculture and Food Supplies Biurhan Abazov presented the policy for development of the agricultural land market in line with the strategy for land consolidation. In his words, transparency of the procedures for land substitution should be insured by the government and the competent authorities. Difficulties in land consolidation have led to the change of the conducted policy – more efforts are thrown into concentration rather than consolidation. In a few words, this would mean that it is necessary for farmers to work on the same amount of land rather than exactly the same plots. Mr. Abazov pointed out that 76% of the workable land is in large scaled farms (over 100 decares of land). These, however, are only 0,6% from all farms in Bulgaria.

In order land to be effectively managed it should be consolidated. Throughout the process it is very important that the interests of all owners are effectively protected. The Deputy Minister added that the plots which have not been acknowledged by their vendors will be administrated by the so called “remainder fund”. If not claimed by their owners in three years, the land will become property of the local municipality. Mr. Abazov agreed with participants in the conference that these local funds, which have a good amount of land to administrate, are not properly managed.

Another important issue raised was the possibility of concluding “win-win” deals between the Ministry and interested parties (Funds investing in agricultural land). He promised to be the leading force in implementing the idea of the investors – in view of consolidation the interested parties to change ownership of plots where they are neighbors.

From the beginning of 2008 the national electronic information system of agricultural land will start functioning, Rumen Popov from the Land Registry Agency said. The program is now working experimentally in Dobrich, Balchik and Blagoevgrad with great success. At the moment all documents are being scanned and uploaded in an integrated system. The latest statistics was quoted by the agency: considered on an annual basis there has been an increase of deals with agricultural land by 7%; the land-leasing contracts signed between farmers and owners have doubled.

As for the world trend in the recent years it is characterized by an increasing demand for food and food supplies due to the growing number of the population. The practice electricity to be produced from wind power stations (respectively the demand for strategically situated plots is increasing) is becoming more and more widely spread. Furthermore, up to 2020 more than 10% of all fuels in the EU will be bio-fuels (produced by rape seed, etc.).

The overall condition of the agricultural land market has changed drastically in the last few years. Bulgaria now has a working, stable market with an increasing number of participants and interested parties.

EU Funding

From the beginning of 2008 it will be possible for farmers to receive financing from the EU funds to purchase machinery against mortgaging their land for the purpose of improving the management of their agricultural activities. These resources would make up not more than 10% of the total amount of the financing. In order to get the subsidies farmers should have been working on the land for at least 5 years. It is not necessary these to be the same plots, it is the quantity that will matter. Subsides of up to 65% of the investment amount will be granted for unfavorable regions.

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