|
|
 |
Joining the Euro
With Bulgaria and Romania becoming the latest countries
to join the EU on 1 January 2007 and Slovenia’s
entry into the Eurozone on the same day, there has never
been a better time to wise up to the possible investment
opportunities these countries bring to the table.
With more and more investors looking to buy low and sell
high, the emerging markets of Eastern Europe – situated
in a strategic location between the rest of Europe, the
Middle East & Asia – are perfect for chasing
a profit.
Acceptance into the EU gives the new member both renewed
political stability, and the rapid investment opportunities
that will ultimately lead to vast economic growth. A far
more efficient economy with improved infrastructure and
resources will also attract numerous new business opportunities.
In general, EU/Eurozone countries make for far swifter
and easier investments, due to the familiarity of the
currency and lack of restrictions for foreign investors
– a Brit purchasing property or entering into the
capital market will be treated the same as a native investor.
Property is the most obvious medium for international
investment and vast amounts of money have been flooding
into these three countries over the past decade, albeit
in different volumes. As a result, the market has really
come along leaps and bounds and real bargains are to be
had, especially in Slovenia which remains more or less
untouched by the average foreign investor. However the
next wave of property developers are readying themselves
for an imminent onslaught, so the average price of £45,000
won’t stay that way for long.
Bulgaria and Romania are two other countries which feature
highly in the ‘must have’ sections of overseas
property wish lists, with house prices currently ranging
from £11,000 to £175,000, and £18,000
to £295,000 respectively across all regions –
though this is constantly changing as the much sought
after housing stock is depleted.
Rental stock only covers a tiny 4.1 per cent of the 8
million dwellings in Romania, with a lot of families living
in cramped conditions. This means that the demand for
larger, spacious rentals is very high indeed and there
are roughly 200,000 households with housing needs, meaning
investors in this sector will not fall short of prospective
tenants.
With this in mind it is safe to then say that property
investors are setting the ball rolling to restore the
equilibrium between supply and demand. Most overseas investors
are Austrians and Hungarians due to their close proximity
to the countries in question, but numbers of Britons and
Americans have really picked up in the months preceding
January’s accessions providing a more Western stronghold
for amateur investors.
In the wake of January’s accession, there are also
much more favourable tax limits and less interest rate
volatility within the two latter countries– although
it is advisable to get a good grip on the particular specifications
before charging on in. One example of this is Slovenian
taper relief which determines the percentage of Capital
Gains Tax (CGT) you will pay when selling up, with anything
over 20 years becoming tax-free.
If the current popularity was not enough, Romania are
also reviewing their domestic laws with a view to attracting
even more overseas investors, by allowing foreign nationals
to own the land the property stands on as well as the
property itself.
One bonus of European investment is that cutting out awkward
exchange rates, as well as avoiding any draining cross-currency
calculations, can help speed up the process, reduce the
risk of error and even help to keep you motivated if your
search drags on.
This is also a direct advantage when dealing with foreign
stocks and shares, making for an easier comparison across
all markets and allowing you to better visualise risk
– one decimal point hurriedly scribbled in the wrong
place could put a spanner in the works when dealing with
a relatively unfamiliar currently, such as the old Slovenian
Tolar.
Those who remain apprehensive about Bulgaria and Romania’s
economical past can take additional comfort from the fact
that, as both countries are now in part governed under
EU law, they will face penalties if they do not adhere
to the strict EU reforms on subsidies and home affairs
including justice and corruption.
Another medium for investors looking to enter the Bulgarian,
Romanian or Slovenian stock exchanges is to do so through
Investment Trusts, Property Funds or Venture Capital Trusts
(VCTs). The implementation of a fund manager in all cases
means that potentially risky decisions when it comes to
unfamiliar, overseas companies will be left in the hands
of a professional who is able to effectively control your
investment and maximise the total returns.
However it is important to bear in mind that investors
are constantly seeking bespoke ways of chasing a profit.
This can be a very profitable enterprise indeed due to
the specialist nature of the investment, but it also brings
with it a whole host of problems, because the more unusual
it is, the more risky and potentially volatile it will
prove to be.
|
|
|
|
