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Archived Articles
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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East Central Europe: Falling returns, falling interest rates
Falling returnsCapital returns in real estate in East Central Europe are falling steadily in the recent years. This phenomenon started from the best performing new markets, such as Hungary, Poland, and the Czech Republic. Now, as far as we can assess, this trend is moving eastward to Romania and Bulgaria, the two newest European Union members. From 15% returns of different real estate market segments, they are expected to fall below 10% in this year, moving close to those in Central Europe. The reason why we shouldn't be surprised of seeing this trend was that the past investments actually exceeded the absorption capacity in many countries for years. Since the early 1990s, when the capital returns were artificially high due to low supply of high quality properties, the situation on the market changed radically. Since the second half of the 1990s the market was gradually flooded with many new residences, offices, and to a lesser degree, with new retail outlets. This trend first started in best performing market nations, such as Hungary and Poland, so it was quite natural that these countries would first experience some fall of returns. Today we see that even the late-comers and less well-performing countries are moving in the same direction, and are reaching the same lower levels of returns, meaning that the market mechanisms of regulation are working well also in this corner of Europe.
Falling interest ratesAnother interesting, but not so obvious trend in East Central Europe, is the falling interest rates. It isn't so obvious because the main central banks are moving their interest rates up, following the moves of the U.S. and the European central banks. This paradox can be explained with the fact that more and more customers in this part of Europe are choosing to take loans denominated in Swiss francs. Technically, some of them still can do it, because they are still not part of the zone of the Euro currency. The difference between the rates of the Swiss national bank, and some other main central bank institutions in the world, is very significant. Thus, if in the U.S. and in the U.K. the main interest rate is above 5%, and in the Eurozone it's very close to 4%, in Switzerland it's barely above 2%, no doubt thanks to the tight financial policy that keeps the inflation under control. The interest rates in Switzerland are also moving up, but starting from much lower levels, they keep a good and widening distance from their main competitors. Unlike the other main financial centers that may provide money to East Central Europe, Switzerland is practically an inflation free country, which means that the gap between it and the alternative financial providers may only get wider. It will be for the benefit of the customers in East Central Europe.
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See also the directory of companies providing real estate services in, and general real estate information of Czech Republic, Hungary and Poland.
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