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Since the fall of the Berlin wall in 1989 the former Eastern Block countries have restructured their economies leading to huge increases in local incomes and property prices, but is the boom ending?
Property prices in the Baltic States of Latvia Lithuania and Estonia which once offered double digit growth year on year have suddenly fallen sharply. Prices of off-plan properties in the Estonian capital of Tallinn have fallen 10% during their construction and the market is beginning to change in Poland.
Last year Poland saw average property price rises of over 50% but with the increased cost of borrowing and global economic downturn effecting inward investment prices rises are beginning to slow. Overall property prices in Eastern Europe are still upward, but with a slowdown in the areas that were initially most popular for inward investment.
With the emerging markets in the Baltic States and Poland seeming to have steadied there are still places in Eastern Europe showing significant growth. Bulgaria and Romania are seeing considerable growth and the Czech capital Prague is still performing well for investors. An established pattern for growth can be seen in former Eastern Europe with an initial phase of high property price growth followed by a period of stabilisation, then moderate more sustainable growth. Whilst the Baltic States and Poland seem a long way into this pattern the newer investment locations of Bulgaria and Romania may be good choices for property investment growth.
It is worth noting that not all of Eastern Europe is developing in this way, Hungary remains a poor choice due to the underperformance of its economy in comparison to its neighbours. The key for investment in the former Eastern Block would seem to be early investment in economies that have solid political infrastructure economic growth and wage rises.
16 March 2008
Author: Katie Morgan
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