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Superstar property investment markets only have themselves to blame

But the money was coming from foreign investors and economic growth was fuelled by excessive lending from western banks so it was only a matter of time before that started drying up once the credit crunch hit. It has become apparent that they are countries living way beyond their means.

Now the scenario is one where cranes stand idle on once busy construction sites and foreign holiday home investors sell, sell, and sell, even at a loss. Soaring inflation and high interest rates mean that domestic investors can't afford to buy property.

Everyone knows that hindsight is a wonderful thing but in real life what is happening to the property markets in these countries shows that it is simply too easy to take the money and not worry about where it is coming from.

The ideal of creating a buoyant middle class in these countries where professional people would invest in property and create western style markets is now no more than a dream.

An examination of who has had to go to the IMF for financial help shows just how serious the meltdown is. Hungary has $5 billion from the European Central Bank, $15.7 billion from the IMF and $1.3 billion from the World Bank, Ukraine needs $16.5 billion, Turkey, which borrowed from the IMF in 2001, is in discussions over a possible loan, Belarus has asked for $2 billion and has already borrowed heavily from Moscow, and Serbia is currently discussing a stand-by loan.

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'A common aspect of their problems is an over-expansion of domestic demand particularly in real estate which created property bubbles. A lot of this was loan financed from the west,' said Andreas Worgotter, a senior OECD economist in Paris.

One of the worst affected is Ukraine described by east Europe property expert Robin Bowman, of investment specialists Property Secrets, as 'in total meltdown'. Only cash from the IMF has stopped the country collapsing.

'The property markets in Kiev and Odessa were booming before the crisis struck but they were driven by a small elite who had few other investment options that to put their piles of cash into property,' he explained.

'A property market driven by an emerging middle class just hasn't happened and it won't for a long time. It was a speculators market and when recovery comes it will be again,' he added.

What about the future? The key question for Ukraine will be identity, according to Bowman. 'Ukraine is a nation in search of itself. Does it want to lean westward and be part of Europe, or towards Russia? Until it has sorted this out its going to be a hugely risky and uncertain place to invest in,' he said.

But another problem for Ukraine is denial. Gerald Bowers, general director of EFG Property Services, a property investment, development and management group active in East Europe, refuses to admit there is cause for concern. 'I do not think we will see a decrease in prices,' he declared just last week. 'We are not going to see the bubble burst. Demand is still there and supply is simply far behind demand.'

Few are as optimistic as Bowers. 'Ukraine is the most vulnerable,' said Jan Randolph, an emerging markets analyst at Global Insight. With real estate prices exceeding those in Rome, Berlin, Prague and Budapest, few expect other than a drastic correction.

Former communist states who have joined the European union like Bulgaria and Romania have experienced property booms which are now experiencing downturns, some more than others.

Romania is perhaps feeling the pain less than some of its neighbours. The property market in its capital Bucharest has come to a standstill but analysts say it is unlikely to suffer big difficulties.

In fact Romania is regarded as a good investment in terms of bargain prices. 'The economic slowdown has created a stand off between property buyers and sellers,' said Bowman. 'Developers who really need to sell will do anything rather than slash prices while buyers expect a bargain so transactions have ground to a halt. But eventually the seller has to sell. We expect there will be excellent buys in this market over the next 12 months.'

Bulgaria is seeing a severe downturn. Developers are going bust or cancelling work on projects with coast and mountain regions the worst affected. Bulgarian Land Development has halted projects in the ski resort of Borovets and Kavarna on the Black Sea coast which are now for sale. Black Sea Property has given up on its Tsarevo development. And Bulgarian Property Development has halted its investments in Bansko.

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The holiday property segment is being hit the worst with the number of deals shrinking by 10%, according to data from the Registry Agency.

Speculators are fleeing the market and selling homes for virtually no profit, according to Nikolai Pehlivanov, director of investment company Green Life. Foros real estate agency said that some 50,000 holiday properties are for sale on Bulgaria's Black Sea coast.

'There is a major risk that the Bulgarian boom could turn into a serious bust. The property market bubble is threatening economic stability,' said Lars Christensen, head of emerging markets research at Denmark's Danske bank. RBC Capital Markets also puts Bulgaria on its vulnerable list along with Romania. Citibank also lists Bulgaria and Romania.

Turkey, an aspiring EU member, is experiencing similar problems to Bulgaria in terms of its property market being driven by large scale development in tourist and coastal locations.

'We have never liked holiday investment locations as they are characterised by agents on high commissions who have no incentive to create a secondary market,' said Property Secrets Bowan.

'The investor is left being unable to sell surrounded by even more new developments that create supply saturation. On top of this Turkey has some serious economic problems and extremely high interest rates. Like all tourist destinations we think it will be hit hard by the general economic downturn,' he added.

However Turkey's longer term outlook is described as 'strong', particularly its domestic driven property markets in places like Istanbul. 'Turkey's population is young and the country has EU ambitions. Just stay away from the coast,' added Bowman.

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