Spare a thought for poor Romania, home of Vlad the Impaler (aka Count Dracula), tennis ace Ilie Nastase and former dictator Nicolae Ceausescu. All going well, it could be just a year before the country joins the European Union, but while the name of Bulgaria, set to become a member at the same time, is on the lips of every property investor, Romania barely gets a look-in.

Don’t get too carried away with your sympathy, though. This unsung corner of the northern Balkans has registered some of the highest rates of property growth anywhere in eastern Europe over the past few years, with annual rises of 30%-40% in the price of flats and houses and a doubling or tripling of land prices. This goes not just for Bucharest, but also for provincial towns such as Targoviste, 65 miles north of the capital, whose principal claim to fame is that it was where Ceausescu and his wife, Elena, fled and were executed on Christmas Day 1989.

For Dave Wellen, managing director of Chindia Estates, who guides foreigners through the process of buying in Romania from his base in Targoviste, British perceptions of the country lag behind reality. “I get people ringing up, asking me, ‘Is it safe to go there?’ ” he says. “You look at GDP growth and all the foreign investment pouring in and it’s a no-brainer. And once it joins the EU, people will think it’s safe and there will be a second wave of investors.”

Bucharest itself is a grandiose place, with wide boulevards, neoclassical public buildings and ornate private villas. Its transformation into the Paris of the East began in the 1860s (it even has its own Arc de Triumf. Under Ceausescu, however, parts of the centre began to look more like North Korea. The most visible of his legacies is the gargantuan Palace of the People (now known as the Palatul Parlamentului). Twelve stories high, it has more than 1,000 halls and rooms, as well as its own nuclear bunker. Sadly, you can’t buy a chunk of the palace, but there are plenty of other extravagant residential buildings on offer. The smarter districts, such as Primaverii, where Ceausescu and his communist cronies used to live, have spectacular 1920s villas, which go for anything from £300,000 to well over £1m.

Further out towards the airport in the Herastrau, Baneasa and Pipera districts are their modern equivalents: luxury apartments and villas in gated communities aimed both at the Romanian nouveaux riches and the growing number of western expat managers working for companies such as Orange, Avon and Colgate Palmolive, which have been investing heavily in operations there. It is all very Footballers’ Wives — almost literally. A substantial chunk of northern Bucharest has been developed by Gigi Becali, a former shepherd turned football tycoon, who owns Steaua Bucharest and drives around town in a £300,000 Mercedes Maybach limousine.

Some of the price tags in these parts are close to £1m or more, but you could buy a two- to three-bedroom villa, suitable for letting to an expat family, for £200,000-£300,000. An alternative would be a more modest apartment in one of the blocks in Bulevardul Unirii, the avenue that leads to Ceausescu’s palace, or an off-plan flat in one of the new developments in the west aimed at young Romanian professionals. Prices are about £800-£900 per square meter, and you should earn 8%-9% in rent.

James Emmett, 32, a surveyor from Berkshire, saw the potential of Romanian property when he was working in the country in 2003 on a construction contract. “I saw the market, I saw the opportunity and I plunged in,” he says. His first purchase, a 130sq m duplex in one of the showpiece blocks in Bulevardul Unirii, cost him £77,000 and is let out to the branch office of a Greek shipping company for £890 a month — giving an impressive gross rental yield of 16%. It is now probably worth £110,000 or more. He was so pleased with his purchase that he has snapped up three more flats since and is buying up farmland north of the capital to convert it to building use.

With prices per square metre behind those in Budapest or in neighbouring Bulgaria, Emmett thinks the market still has some way to go — even if Romania has an image problem with many Britons. “There are a lot of Spanish and Israeli investors, some Greeks, Germans and Dutch, but for some reason, the English are still staying away from Romania,” he says.

Anybody buying now will find rental yields have fallen back, but should still be an attractive 8%-9%. “Two years ago it was all about rent, but the main thing now is capital gains,” says Razvan Iorgu, corporate manger of Eurisko, a Bucharest-based estate agency. The main motor is the growing availability of home loans that, although still expensive at close to 9%, are encouraging young Romanians to mortgage themselves to the hilt. Too good to be true? There are certainly drawbacks: even if you wanted to take out a mortgage at these rates, you would not be able to do so as the banks do not yet lend to foreigners. There can also be uncertainties about title, while local businessmen do have a reputation — sometimes deserved — for duplicity.

Walking the streets of Bucharest can also be a somewhat uncomfortable experience: the beggars are aggressive, while the old women selling packets of tissues or other items are a reminder of the gulf between the villa dwellers and the mass of ordinary people.

For Rob Burke, who runs Romauction, an agency that sells property in the country, Romania is not for the fainthearted. “There can be a lot of hassle, but there are fantastic earnings and great yields,” he says. “It is really a case of knowing all your paperwork and making sure you do all your checks before you go too far down the deal.”

Chindia Estates, www.chindiaestates.com; Eurisko, 00 40 21 313 1020, www.eurisko.ro

Read Peter Conradi’s overseas property weblog

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