Real Estate Boom Shatters East Europeans' Dreams

"...Real estate prices have risen as much as 100 percent in the eight former communist states that joined the EU in 2004, driven by buyers from Western Europe. Many local residents, with less than a quarter the buying power of their neighbors, have been locked out of the market, adding to frustration with EU membership and eroding support for budget cuts needed to adopt the euro.

The real estate boom is stoking opposition.

"It was created without their participation and doesn't reflect at all their wealth, which hasn't changed much since EU entry," said Mariusz Sochacki, an economist at the Polish Real Estate Market Researcher in Warsaw. "All they hear all the time is that they should sacrifice for future generations and keep spending discipline, while at the same time EU investors come, buy properties and lift costs to unreachable levels."

The price surge also has triggered investor concerns that the bubble will burst as interest rates rise, saddling banks with bad loans. The boom has been fueled by floating-rate mortgages as low as 4.4 percent, but now central banks are lifting rates across the region...

So far, British and Irish investors have led the surge of homebuyers into the new EU countries, searching for bargains and investments after house prices boomed in their own countries, said Mihails Morozovs, a managing partner at Colliers International..."read more
By James M. Gomez Bloomberg News