Country Article / Postcards

Put Your Smart Money on the New European Tigers

Date: 03/16/2007

Break out the green beer and Irish flags--it’s St. Patrick’s Day. Irish pubs will be full around the world…including the new E.U. member countries, all hoping to emulate the economic success Ireland has enjoyed (coined the "Celtic Tiger") over the past couple of decades.

Economists don’t think countries like Romania, Poland, and Bulgaria will see the same rate of prosperity that Ireland saw. But while the initial factors for low economic activity in Ireland and the Eastern European countries are different, I recommend you don't dismiss the potential for an extended boom in the new Europe.

Ireland had an economic boom that created appreciation in its real estate market for decades…and now the same thing is likely to happen in the new E.U. countries.

When I moved to Ireland in the 1990s, I saw a country similar to what the U.S. was like in the 1950s--an expanding middle class fueling an economic boom. Nine years later, the boom in Ireland is still going…especially in the real estate market. Despite short-lived slow downs and regional variances in appreciation, real estate prices in Ireland have been going strong for more than a decade…with no sign of the prices retrenching anytime soon.

Real estate prices aren't the only thing on the rise in Ireland. The cost of living has increased to match other Western European countries--Dublin costs ranked between those in Paris and Rome in 2006. Ireland has become a First-World country (although I argue that road infrastructure in parts of the country remain Third-World) and Dublin real estate has become as expensive as that in Paris.

The initial fuel for the economic improvements in Ireland was E.U. funds and an influx of foreign investment. Companies like Intel and AOL set up shop, hiring thousands of employees. In a country where lay-offs of less than 100 people make the national news, the increase in employment from foreign investment allowed for a rapid expansion of the middle class. With more people buying cars, electronic goods, and household goods, the expansion of the economy eventually took on a life of its own.

Now the Irish are the foreign investors. They are investing in real estate across Eastern Europe--rental properties, residential developments, and commercial developments. Along with the rest of Western Europe, the Irish are helping fuel the economies in the new E.U. countries. Will these countries see rapid economic growth for the next 10 to 20 years, as did Ireland? The experts are divided. Here's what I think: Real estate prices in Eastern Europe will reach the levels of their western counterparts in the next decade or two, just as Dublin real estate prices have increased to compete with Paris and Rome.

Lief Simon
For International Living

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P.S. I tell you more about the potential growth in Eastern Europe in my regular column in the print edition of International Living .