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Agricultural land market
06/27/13

Agricultural land market

Agricultural land market in 2011 regained levels similar to those prior to the crisis. By July in Bulgaria more than 1.2 million acres are traded and 124 000 transactions have been realized. The average price of land in 2010 was 345 lev/acre, and in 2008 350 lev/acre, which emphasizes the stable yield of agricultural land in 2011, attracting numerous and diverse market participants.
 
Extremely dynamic market of agricultural land has proven to be a segment that was barely affected by the crisis, when prices of residential and vacation properties reached the bottom of the real estate market.
 
In 2011, there was a rise - increase in transactions, participants and territorial expansion in the market. In the previous years, participants in the transactions were mainly investment companies and to a lesser extent tenants, but in the past 2011 the agricultural land market observes the active participation of farmers, who in 2012 became major buyers. In the industry the emergence and participation of investors from other sectors has been observed increasingly. 2/3 of real estate services in Bulgaria belong to the agricultural land market, as annual growth of 35% is reported. Demand for agricultural land as an asset is a tendency worldwide.

In the past year, the secondary market of agricultural land really developed. Funds of investors launched projects 4-5 years ago, have already added value after they have concentrated and aggregated their parcels, which thereby increases the price of land in the follow-up transactions. At first glance it seems speculative. Maybe yes! Almost each purchase and sale is speculative. The secondary market is very important and it should gain confidence that good governance of an asset can increase its value. Investors are oriented to areas where rents guarantee return for a short term - the territories in Central, North, Northeast Bulgaria and recently the region of Stara Zagora. Some of them build long-term plans and invest in areas with potential that is not currently visible. The idea is this land to be developed and within 2-3 years to begin to return deposits. The region of Haskovo is a good example. It is expected to develop its potential in the next few years.
It brings us to the topic of occasional buyers of agricultural land market, namely those who are not closely profiled in this business. Questions arise then as - why do they buy the land, what do they intend to do with it, how do they return investments, adding value to the asset. Another fact is that at this time on this particular market, there are participants who are far away from answering these questions and risk their investments. In order to buy the offered land "at any cost" usually too high above the market price, they fall under the heading of "owners of expensive land" which does not bring the desired profitability.

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