Article Talkback Telegraph Britons pay the price on Costa del Scam

A recent article in the Telegraph highlights a particular Costa del Sol property development involved in the infamous Marbella Town Council corruption scandal resulting from Operation Malaya (cunning disguise there).

Spain and its property scandals are a firm favourite of the British press who seem to never miss an opportunity to berate the Sunshine coast, but this unhealthy fascination with Spain is taking the heat off other media property favourites Bulgaria and Turkey.

Several new scandals about alleged corruption at state and municipal level have made the news in Bulgaria in recent days regarding the case of Valentin Dimitrov, the former head of Toplofikatsia Sofia, the city’s heating utility. Currently, Dimitrov is in custody, under investigation for money laundering. An audit report sent to the Prosecutor-General’s office, suggested Toplofikatsia’s management had caused losses of nearly 17 million euros to its subscribers as a result of overcharging.

In a ranking of economic freedom for 2006, statistics released by the Heritage foundation and the Wall Street Journal showed Bulgaria occupies the 64th position slipping 14 positions from 2005 when it ranked 50th. Countries like Peru, Saudi Arabia, Mongolia, Mexico and Macedonia come before Bulgaria in 2006. The index features 157 countries ranked according to criteria such as economic openness to foreign investors, trade policies, government interference and regulations. The decrease of Bulgaria’s rank came as a result of the poor evaluation of regulations and private property rights criteria. The analysis points out, that corruption among high-level officials has increased. Problems with the judicial system pose a risk to investors who might be unable to defend their rights, Sega newspaper reported.

The property market in Bulgaria has experienced huge growth since EU membership talks began in 2000. Over the past 6 years, the purchase of property in Bulgaria has become incredibly popular with widespread favourable press promoting the latest ‘hotspot’ investment opportunity. However Bulgaria’s EU future looks questionable since a report released by the European Commission’s monitoring report on May 16th, in which Bulgaria was criticised for levels of corruption in both healthcare and education.

April 2005 saw both Bulgaria and Romania sign an accession treaty to join the European Union in 2007 however membership could be delayed if both countries fail to carry out tough reforms to fight corruption, strengthen border controls, beef up judicial and administrative systems and improve rules on state aid to industry and deal with organised crime.

EU entry is the cornerstone of Bulgaria’s continued property success and ascension will provide Bulgaria with billions of euros in aid to repair dilapidated roads, clean up the environment and modernise antiquated industries however there are still some Western diplomats that believe countries, especially Romania, are not yet ready the join the EU because of rampant corruption, inefficient courts and insufficient protection of the Roma ethnic minority.

Corruption is a major cause for concern for investors and is something that would almost certainly have a knock on effect on the future prospects of the country’s real estate sector. Bulgaria’s prime minister has set wheels in motion in riding the country’s from the problems that have plagued it in the past; Sergei Stanishev’s new anti-corruption strategy fixes on the idea of modernisation at every level for and is in direct response to the European Commission’s monitoring report. The rapidity of Bulgaria’s response in beginning this anti-corruption strategy is testament to the resolution to meet any conditions specified by the EU and its desire to stamp out corruption and to combat some of the other legal concerns that have been Bulgaria’s perennial weakness in years gone by.

Even with approximately four (4) million tourists visiting Bulgarian annually (2005) after a 50% increase since 2001, studies prove that the majority of Europeans avoid Bulgaria for the sole fact that it’s not yet part of the EU and thus has not yet earned their trust and security.

The same applies to Turkey where criminal investigations are underway into alleged corruption in Bodrum, Mumcular, Konacik and Yalikavak relating to the unlicensed construction of buildings that contravene zoning law. 15 people have so far been arrested, including the Zoning Director of Bodrum Municipality with computer and paper records are being seized. Post investigation, any unlicensed buildings will be subject to demolition. Turkey’s building boom has the potential of ‘Spanish’ levels and as such there is an obvious cause for concern by both agents and buyers involved in Turkish property investment. New levels of residential property taxation come into place in January 2007 which rise some 9.8 per cent. Taxes remain at 0.1 per cent of a home’s value per year, but the new sliding scale rates rise to reflect Turkey’s increasing property values.

Dubai is also a victim of property market success which saw the jailing of a multi-million pound property fraudster in Dubai in June. Maz Ahktar, a British citizen of Pakistani origin, will serve at least 30 years in jail for masterminding property scams in Dubai that swindled US$4 million from UAE residents and expats alone. Collecting fake deposits against a fictious property development called The Seven Wonders Of The World offering the usual residential, recreation and commercial accommodation as well as a similar non-existent Star Islands development off the coast of nearby Sharjah.

It is a common misconception that these scams exist in high risk investment countries however Ahktar concocted the same scam in Spain with his Reserva de Miraflores Golf Resort conning namely Norwegian investors.

Spain has had the misfortune to be first into the mainstream overseas property marketplace and now has become a victim of its success as fodder for property scandal stories, but it has come a long way in the corruption stakes. Bulgaria, Romania and all of the new, up and coming property hotspots still have some way to go to rid ingrained corruption which still seems to form part of daily life.

These stories should continue to be a warning to all Overseas Property Buyers about the dangers of buying property off-plan without seeking both professional and legal advice first. Contracting a well qualified international lawyer to carry out detailed searches on land and perform thorough investigations on title ownership is a must but above all individuals seeking to purchase property abroad need to do their research.

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