09.02.2011 Investing in Agricultural Land – Prices, Possibilities and Latest Trends
Polina Stoykova, Chief Operations Manager of BULGARIAN PROPERTIES
According to the data of BULGARIAN PROPERTIES prices of agricultural land dropped by 30% on average in 2009 and demand in most of 2009 decreased by about 50% compared to the peak points in 2008. If in 2008 the average price of sold agricultural land was about 179 Euro per 1,000 sq.m. in 2009 it was sold for about 128 Euro per 1,000 sq.m. The active players on the market withdrew and the number of concluded deals plummeted. The exceptions to the common trend are the big and consolidated plots – there was no actual decrease in their price as their supply is limited and the demand is stable. These are plots of arable land with an area of over 100 decares.
Since the beginning of 2010 the market of agricultural land became more active compared to the previous year, which is mainly due to the reduced prices in 2009 and their return to their levels from 2006-2007. It is difficult to speak of an increase in the prices of agricultural land in 2010 but we witnessed a more dynamic market and an increase in the number of concluded deals. There was interest both in big and small single plots of land for investment by private persons with a budget of between 2,000 and 15,000 Euro. Sales were made at an average price of between 150 and 250 BGN per decare (77 - 128 Euro per 1,000 sq.m.) while in the peak before the crisis prices were between 250 and 500 BGN per decare (128 – 256 Euro per 1,000 sq.m.) and even higher for some plots in specific areas.
Our observations show that what are sold most at present are cheap plots of land with good parameters mainly for investment purposes with the idea that in the long run their prices will increase. In the last few months local buyers in Bulgaria have become more dynamic in buying agricultural land as they expect that there will be increase in demand by farmers and by investors from around the world. The cheapest plots are to be found in northwestern Bulgaria and traditionally the most expensive land is in the northwestern part of the country, as it is very fertile and arable.
According to a ranking of consultancy company Savills based on Eurostat data and various other sources for the period 2007-2009 prices of agricultural land in Bulgaria rank third among the lowest in the EU. Agricultural land prices are lower only in Lithuania and Slovakia. According to the information the prices in Bulgaria at the end of 2008 – the most current data about the market in the country used by the company, were about 1,700 euro per hectare on average (170 Euro per 1,000 sq.m.). To compare, in Ireland, which has the highest land prices in the ranking, agricultural land prices in 2008 were over 40,000 euro per hectare.
The company said they are expecting to witness a future stable growth in agricultural land prices in CEE. These are big countries with fertile land. With the right investments in resources and infrastructure (roads, ports and cultivation equipment) they are in a perfect position to make use of the effects of the global growth, the increased wealth and the demand for renewable energy, as all of them lead to increased profits.
BULGARIAN PROPERTIES experts also support the opinion that agricultural land in Bulgaria is the cheapest in the European Union and the trend is its price to increase, especially after the last few very successful years for farmers in Bulgaria. According to our observations agriculture is the sector least affected by the crisis in Bulgaria. On the contrary, 2010 was the most successful year for farmers in Bulgaria in the last 20 years.
Advantages in investing in agricultural land
1. There is no annual tax on arable land.
2. Prices of this type of property are expected to increase in the next few years, as well as their demand. Research shows that price of this type of property remain relatively stable during a crunch.
3. Owners can rent out their arable land to local farmers and receive rent without having to make any other investments in the land.
4. There are no limitations for resale of land – it can be done at any moment by anyone as there is no tax for physical persons selling land which they have owned for more than 5 years. When the owner of the land is a legal person they owe corporate tax on the profit to the amount of 10% (this is also valid for all foreign owners of land).
Categories of agricultural land in Bulgaria
When trading with agricultural land in Bulgaria the category of the land is always noted but not everyone knows what this category actually means. BULGARIAN PROPERTIES present summarized information on the topic:
Agricultural land in Bulgaria falls into 10 categories (so called land productivity categories) according to the fertility of the soils, the climatic conditions, the relief and the land’s technological qualities, its suitability for producing different kinds of plants and the imposed limitations for the land’s use. The higher the grading, the better and more versatile the agricultural land is.
The ten arable land categories are defined as per the assessment of specific soil-climatic conditions in relation to the land’s suitability for growing a specific set of crops. According to the division of agricultural land in Bulgaria the land placed in the first and second category is of the highest quality which gradually decreases as you reach the tenth category.
The categories are defined as per the average land productivity assessment* and are as follows (the maximum rating being 100):
1. first category – land with assessment over 90;
2. second category - land with assessment from 81 to 90;
3. third category - land with assessment from 71 to 80;
4. fourth category - land with assessment from 61 to 70;
5. fifth category - land with assessment from 51 to 60;
6. sixth category - land with assessment from 41 to 50;
7. seventh category - land with assessment from 31 to 40;
8. eighth category - land with assessment from 21 to 30;
9. ninth category - land with assessment from 11 to 20;
10. tenth category - land with assessment up to 10 inclusive.
What agricultural land buyers should bear in mind is that its price is formed on the basis of its category, i.e. a higher category means a higher price.
*Average land productivity assessment – average assessment of specific soil-climatic conditions in relation to the land’s suitability for growing specific types of crops.
Can foreigners buy agricultural land in Bulgaria?
Foreign citizens have the right to buy all types of land in Bulgaria only after registering a Bulgarian limited company. This is due to the limitation for foreigners to own land as physical persons. The company formed by a foreign person in Bulgaria is a Bulgarian legal entity, which is allowed to acquire land in Bulgaria by Law. This way foreigners own a company in Bulgaria and the company owns the land. It is a simple procedure to register a Bulgarian company and this usually takes about a week.
Will foreigners be able to buy land in Bulgaria in their own names and when?
Foreigners meeting certain requirements are allowed to own land in Bulgaria The amendments to the Ownership Act after Bulgaria’s accession in EU allow foreign physical and legal persons to buy land in their names only if they:
1. Are citizens of a country, which has a special international treaty with Bulgaria signed after 1.01.2007, which has been ratified and recognized by the Parliament of the Republic of Bulgaria.
2. Inherit the property by Law.
3. Are EU citizens or citizens of EEA EFTA States, who have permanent residency in Bulgaria.
4. Are self-employed farmers in a EU country, who want to buy agricultural land in Bulgaria for farming and move to live and settle permanently as farmers in Bulgaria and are registered under the Law for BULSTAT Register as farmers.
Important notice: EU physical and legal persons will be allowed to own land in Bulgaria in the coming few years. The Treaty of Accession of Bulgaria to the EU allows Bulgaria to keep the prohibition for EU physical and legal persons to buy land in Bulgaria for up to 5 years for land and up to 7 years for forests and agricultural land after its accession to the EU. The 5-year term has now finished and since 1.01.2012 all EU persons are allowed to buy plots in Bulgaria (all plots that are withing the zoning of the settlements, houses with gardens and ideal parts of the land coming with apartments) without any restrictions. For agricultural land and forests EU persons still need to register companies in Bulgaria in order to buy these types of properties and these limitations will be valid till 1.01.2014.
All foreign physical and legal persons, who don’t meet the above stated requirements, are still not allowed to acquire land in their names. In these cases a Bulgarian company still needs to be registered in order to buy land in Bulgaria.
NOTE: This material is purely analytical and of informative nature and should not be considered a call for investing in agricultural land.
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Copyright: 2011 Bulgarian Properties Ltd. All rights reserved. For further information or advice please contact us on tel: +359 2 9 11 50 or e-mail: firstname.lastname@example.org. 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 this article.
© Bulgarian Properties Ltd. 2011.
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Polina Stoykova MRICS, Executive Director of BULGARIAN PROPERTIES
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