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Simeon Mitropolitski is a Canadian analyst, of Bulgarian origin, and a former syndicated columnist with the Bulgarian News Agency (BTA). He is the author of several hundred articles dealing with hot political and economic topics, both national and international.
He was part of the first group of Bulgarian intellectuals and students that began the opposition movement that finally put an end to the communist regime in this country in 1989, and in 1996-1997 participated in international observation teams during the elections in several Balkan countries - Romania, Albania and Bulgaria.
In 2002 Simeon and his family moved from Bulgaria to Canada where they live now in Montreal, province of Quebec. Simeon is a Master of Political Science from McGill University and a B.A. of Political Science and History.
Global Real Estate Project
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Is there a Baltic bubble?The Baltic states, now members of the European Union, and ex-Soviet republics, are among the best performers in the union in terms of real estate appreciation. They perform so well as many experts are starting worrying about a possible 'bubble' pending an 'economic catastrophe'. The numbers are really impressive. All three countries show economic growth of up to 10 percent and even better each year for many years. Unlike China, which can afford such fast development because it starts from much lower level and has non-market mechanisms for economic policy, the Baltic is in very different position. The real economy is already above the half of the major EU powers; its real estate market is already matching some West Central European markets such as Austria or Germany; the economies in these Baltic states are very liberalized by any standard. So, are the black prophets right? Or, can we add more years to this phenomenal growth?
Bubble ready to burst?Real estate bubble predictions look very much alike. The core assumption is that a given market develops too fast, and that the attained price levels are unsustainable. So, in the case of the three Baltic states, there isn't anything new. Similar black predictions were made exactly 6 months ago, 1 year ago, 2 years ago, and 3 years ago. If the market doesn't burst right now, they will be made one year from now, and so on, until the market really bursts or just stops growing. Then the advocates of the 'black scenario' will tell us, 'we told you so!' There are, however, serious flaws in this kind of prediction. To say that a market will go down is to say that there are cycles in the market, and this is really something trivial regarding the capitalist economy. Another major flaw is that nobody really knows exactly how much growth is too much. Comparing prices in a country X with prices in a country Y is a convenient tool when we make suggestions regarding the real estate value some money can buy in different places, but isn't a very convenient tool when we try to predict the market development in any of these two countries X or Y.A good lesson in this regard is the growth in Ireland since 1990s. When the prices there were very cheap, the predictions were that they would reach the levels of the cheaper English counties, and then they would stop growing or burst; when this didn't happen, there were predictions that Ireland could still go a long mile before it reaches the average level of England before the prices go down; when this didn't happen, the predictions were that the market needs some extra margin because it's a rather new and undeveloped. Only when Ireland started being a class of its own in terms of growth, only then many analysts started looking at fundamental reasons for this miracle. In a similar vein, the market in Estonia or Lithuania will inevitably reach its limits, but these limits shouldn't be searched in the current levels reached in Vienna or Berlin.
Not ready?Not ready? As the economy and the real estate market in Ireland isn't falling just because it has reached the levels of one or another European country taken as a point of reference, the three Baltic countries won't face economic catastrophe just because they develop too fast compared to Germany or France. We should look at the reasons why these countries perform so well in the first place. These reasons are liberalized mortgage loans, vast financial resources coming without hindrance from Scandinavia, but also indirectly from Russia, the small size of these markets and their better location between Europe and Russia, and large amounts of remittances sent back from thousands of well-paid economic migrants. Instead of asking ourselves whether the market is too high, we should ask ourselves whether the main sources of this market growth have any reason to stop contributing to it? Are the Swedish or Finnish banking systems unhappy with the returns they get in Estonia or Latvia? Are the rich Russians in a mood to withdraw their capitals from their 'near abroad' pending the next presidential election in 2008? As far as these factors remain stable, the market in the Baltic states may go up for a while. A market correction at some point will be inevitable, but the reasons for it will come from well-identified sources, not from uncertain points of reference.
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See also the directory of companies providing real estate services in, and general real estate information of Latvia, Lithuania and Estonia.
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