The only segment of Bulgaria’s real-estate market last year that remained unaffected by the crisis and did not reduce its price was farmland. Against the background of the depreciation of all other property types, according to the National Statistical Institute, averaging over 6 percent annually, transactions in land lots showed appreciation of about 30 percent. Simultaneously they increased their share in total sales of real estate units from 15-17 percent in 2009 to 25-28 percent in 2011.
The reasons for this increased interest are several. Firstly, farm fields were a significantly undervalued asset in previous years. In 1998 for example, the average price per decare of agricultural land was BGN140, according to the Agricultural Market Information System. Deals were concluded even at leve;s below BGN100 in some regions such as northwestern Bulgaria. For 2011 there are still no aggregated data, but most estimates are that the average price per decare will be above BGN400.
The second reason is related to an increased revenue from land cultivation. Rising global food prices made agricultural production a very profitable industry. This is reflected in the rents paid by the tenants. According to the Association of Owners of Agricultural Land rents have increased by 22 percent annually. An average rent per decare reached BGN30-36 and in the most fertile Dobrudzha region – they hit BGN90.
Another important factor for the appreciation is related to the Common Agricultural Policy of the EU and subsidies for farmers. What is clear is that by 2014 it is the land that will be the key to obtaining grants and direct payments. The EC forecasts are farmers’ income from new Member States to increase up to 151 percent in 2015 compared to 2007, while income of farmers from the EU-15 will be less than 95 percent of those in 2007. However, the income gap between old and new farmers in the community will remain significant.
One should also not forget that the land is exempt of taxes, which means that owners do not owe anything to the state for what they own and in practice this is the only type of property that does not require maintenance, fees for buildings and garbage fee. Therefore, the aim of most landlords in the country is to become owners of as many fields by 2014 as possible. In this sense, the tendency among investors in land is to have many new players – companies and individuals who will continue to expand and strengthen their positions. While the withdrawal of foreign investors from other segments of our real estate market is almost absolute, the process in land acquisition is reversed – the interest of foreigners increases. Industry experts say that in 2011 Turks, Greeks and Russians bought land, through registered companies in Bulgaria, and the last transaction was carried out by a Chinese company. It bought a significant lot in Vidin, where it is expected fast growing tree species to be planted that will be used for biomass production.
Some Bulgarian companies that possess free financial resources, did not hesitate to invest in land – and for example one of the importers of new vehicles acquired more than 30 thousand decares. The same is done by individuals with higher income with the intention to maintain and increase their investments.
According to experts, in 2012 and 2013 sellers of land will be owners of smaller parcels, mainly attracted by the best prices and squeezed by financial problems as well as large investors who bought land three or four years ago and now can sell it at a profit. The fact that Bulgaria’s agricultural land is still the cheapest in the entire European Union continues to attract foreign investors.
The forecast of the Association of Owners of Agricultural Land is for land appreciation in 2012 of about 10 percent. This means that the average price per decare will be close to BGN500 – with the exception in Dobrudzha, where probably the level of BGN1000 to BGN1,200 per decare, depending on the size of the lot, will be maintained.
