Quick Guide to Bulgarian Property Investment

Bulgaria is a very popular market for property investors in Europe and was one of the hottest markets in 2005. It has been interesting to see the development and recognition of the market over the past few years along with the number of agents and developments increasing dramatically. With all the hype, it can be confusing for investors to obtain the information that they require to make an objective decision whether to invest or not in this location. Given this, we have provided some information about investing in Bulgaria which we trust will be of use and interest.

Where to invest

Don't be tempted by the low priced properties that are heavily cited in Bulgaria as offering 'good value for money'. Even in this emerging market, it is true to say that you get what you pay for! We have found that, for property priced under £10,000, investors are generally looking at property in isolated areas with low rental potential and poor capital growth. With the prospect of EU membership looming, Sofia, being the capital of Bulgaria, also has strong investment potential with corporate and business lets on quality property giving the highest rental income. Be careful when you buy property that you know who your target rental market is as Bulgaria is relatively poor and even low cost property could have to have unrealistic rental levels if you overpay.

Buying before full EU accession should mean instant capital returns once Bulgaria becomes a full member, although bear in mind that nothing is certain in this regard. A number of low-budget airlines are scheduled to fly to Sofia from 2007, which should enhance the appeal of this city to holiday makers as the location becomes more accessible to the rest of Europe.

We anticipate that the Bulgarian property market will perform well over the next 5-10years, with growth rates of 8-9% anticipated in 2006 followed by up to 10% growth in 2007. As Bulgaria becomes more popular, tourism demand is rising but we may see a temporary oversupply of houses in the market suppressing rental yields in the short term but medium term and long term investors should achieve excellent returns.

Ski resorts like Borovets, Bansko and Pamporovo offer both winter and summer rentals - however occupancy levels will be lower in the summer and rents are around half the winter level per week. Even so, this gives ski resorts an advantage with regard to rental income especially as they are cheaper still than the coastal locations.

The beach resorts offer good value for money but be careful to buy quality if paying a high price. Don't pay front line prices for a second line location and do check out the latest golf and spa resorts that are coming soon if premium property and rentals is what you are after.

How to invest - a few essential points

• Payments in Bulgaria are usually around 80% of the purchase price prior to completion and this is organised into a series of staged payments. We would not usually recommend paying over 80% before completion for any investment, but in some circumstances a developer will offer a substantial discount from the purchase price for a higher deposit.  Be sure to ask for copies of relevant building licenses and/or bank references before committing to such a large proportion of the monies.  
  
• Ensure that your deposit is paid via a lawyer, not direct to the developer. Your lawyer will ensure that your contract is in order before passing any funds over to the developer.  This is important as bank guarantees, such as those available in Spain, are not available in Bulgaria. As always, we recommend that you obtain full legal advice in relation to your investment.
  
• The Bulgarian Mortgage market is relatively immature at the present time. With interest rates currently at 7%, we would recommend releasing equity in the UK from existing property to fund a purchase.  We can assist with any financial questions you may have.
  
• Rental guarantees in Bulgaria should be treated with caution but may be useful in the next two years as rental yields lower temporarily through more supply. In the absence of rental guarantees check your rental strategy carefully for the short term as competition is expected to be strong over the next 2 years or so at least.
• You should contact us directly with any further questions that you have about the legalities of investing.

To conclude.....

Bulgaria is looking likely to provide a lucrative long-term investment, and any risk of investment in this "emerging" market is outweighed by the advantages to be gained by investing in a low cost location on the verge of EU membership. 

Property prices remain amongst the lowest in Europe and a burgeoning tourist market is growing significantly. Between 2000 and 2004 there was a 50% increase in tourism, in 2005 there was a further 35% increase and by 2010 tourists to Bulgaria are expected to exceed 20 million, making it one of the world’s greatest emerging tourism markets. However, to obtain the best returns on investment you need to have an insight into the right types of property and the right locations in which to invest.

As the Bulgarian economy is in a period of growth at the present time, and as this is likely to continue in the medium to long term, now is the best time ever to invest in Bulgaria and obtain maximum returns. We can assist you to achieve this successfully.