EU membership = speculative magnet



The trend continues. EU membership comes concomitant with lower foreign investment rules, bringing a wave of speculation in real estate as rent seekers invest early to sit and wait until marginal rents bump up to the European average.

Is such speculation contributing productively to the economy? With no mention of any land bounty captured for the public in Romania’s tax mix, speculators are guaranteed a free ride. Some new buildings will be funded by foreigners, but these benefits will be drowned out by the rising rents, strangling small business and pushing greater concentration of ownership amongst the top echelon (as hinted below).

Romania has become a new hotspot for real estate sharks as they have no property taxes. The speculative invasion will build up steam as hot money leaves cold western markets. The other new EU member, Bulgaria, collects some land rents via poorly implemented property taxes. Other recent members such as Czechoslovakia also have property based taxation. However, like many others, they have adopted the US model of taxing land and buildings, rewarding land bankers over home builders. The payback for political cronies in Romania will be a swathe of EU funded infrastructure projects.

Romania: A European Property Frontier

Now that it has joined the European Union, there is no question that Romania has been discovered both by a growing number of tourists and property investors.

Romania’s 2007 inclusion into the European Union has helped the economy expand.

Demand for quality housing is increasing in tandem with the rising income of the city’s residents. On the flip side, the income gap between the rich and the poor has continued to grow since the country opened up its economy.

“Non-Romanians cannot buy land except through a company, which they can own,” said Michael Beckerman, owner of Romtrade Consult SRL in Romania.

“The properties are then owned freehold. A company can be set up for around £820 without traveling to Romania,” said Thiery.

“Capital appreciation of around 20 per cent per annum over the next three years is expected on selected properties,” said Thiery.

The Romanian real estate market is expected to continue its growth along with the economy for the coming years. It still has quite “a long way to go before it reaches Western European prices, but it will eventually,” said Beckerman.

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https://prosper.org.au/2009/02/25/eu-membership-speculative-magnet/