Bulgaria Property Investment

Bulgaria property - is it a good investment? I have been asked that question a lot over the last few months.

Very difficult to make a sweeping statement - as there are some fantastic opportunities and some not so clever deals (isn't there always!)

It is a market that has seen huge interest and, with interest rates dropping, mortgage markets opening up, low house prices and huge sums of money getting spent there you can see why has been an attraction.

So why have I been looking at Bulgaria property investment over the last 18 months? Let's look at some facts:

- Bulgaria has had 7 years of sustained economic growth, with GDP growth averaging 4-5% per annum and inflation contained to single digits

- The national currency, the Lev, has been euro-pegged since 1997 stabilising the economy.

- It has one of the lowest and most competitive tax regimes in Central and Eastern Europe.

- Bulgaria is top of the list to join the EU in 2007.

- Bulgaria property prices are relatively very low, there is equally low cost of living and 350km of sandy beaches.

- Mortgage lending - it has only been in the past few years that Bulgarians have been able to acquire mortgages. Currently, mortgages represent just 5% of the total credit supply within the local banking sector. This makes the Bulgaria property market very attractive to locals. And this is the first time foreigners can get mortgages in Bulgaria, which clearly gives more overseas buyers an opportunity to purchase Bulgaria property. This will in turn generate a much more competitive marketplace - just look at what happened to UK prices, as the mortgage market became more advanced.

- Bulgaria has become Europe’s most popular new tourist destination.

- Thomson Holidays, First Choice and Going Places all said Bulgaria was in their top 10 most popular package holidays for 2004. They anticipate an even greater surge in its popularity in 2005.

- More than 3.5 million tourists visited the country in 2003 - an 18 per cent growth on the previous year. When the figures for 2004 are compiled, they are expected to show a further increase of some 20 per cent.

- The Bulgarian economy is one of the most stable and quick developing of the Balkans, so investment opportunities exist in both the short and long term in Bulgaria property.

- Bulgaria is a politically stable country, and the introduction of a currency board in 1997 stabilised the country's economy (Price Waterhouse)

- "Bulgaria has the right mix of macroeconomic policies to continue to enjoy robust growth and macroeconomic stability… The government's commitment to exercise caution and maintain flexibility in the conduct of fiscal policy, combined with strong bank supervision, provide assurance that under adverse scenarios macroeconomic stability would be safeguarded…" IMF staff appraisal (July 2003)

- For the first seven months of 2004 the number of UK tourists marked a 67.6 pct rise compared to the same period of 2003 and already come third in terms of number after Greeks and Germans. Officials from World of TUI claim they cannot meet the big demand for Bulgaria in Britain due to the lack of bed contingents to comply with the high requirements. This is the reason why their British tour operator Thomson will bring 15,000 instead of the planned 25,000 tourists to Bulgaria. TUI Nordic expects to end the year by around 60,000 tourists, up 50 pct year-on-year. The number of UK tourists is expected to double in 2005, while that of the Scandinavian tourists - to mark an at least 20 pct increase year-on-year.

- Besides, the new EU members prefer Bulgaria for economic reasons - the prices are low for their standard of living and it is cheaper than the resorts in the euro zone.

Just a few reasons there!

With tourism and investment rising rapidly and consistently year on year, you would expect prices to continue to rise - but must look at the different, distinctive areas that are being currently marketed.

3. Sofia city

My thoughts on the beach resorts?

Well if are looking for a place for yourself, or your family, then can get an excellently priced apartment with sea views to enjoy over the summer months. In particular Sunny beach is a lovely beach - to get a seafront apartment for family holidays is an excellent spot.

If are looking for a good buy to let property then this is definitely not the answer for now. Why?

- Too much supply

- Not enough demand

- Not enough choices of flights

All make this unattractive right now. Demand will increase as more flights get scheduled and the budget airlines get in - scheduled for 2007 - increasing demand for self catering apartments, but for the next 2 years I expect rental demand to be low.

Therefore I feel there are better Bulgaria property prospects right now for investors.

Ski Resorts

These offer better Bulagria property rental prospects - if you link up with a tour operator. I was in Borovets in January 2004, and it was packed out, with 6 tour operators all present.

Again though I think longer term is still an immature market, and am not sure where the re-sale market will come from, certainly not over the next 2-4 years, simply because there are not enough flight choices.

So be willing to hold for a minimum of 5 years I would suggest.

Sofia city

Sofia, as the capital city, is getting great interest and the population is growing both from Bulgarians and ex-pats meaning good demand in the Bulgaria property market there. Sofia has seen a huge increase in its population over the last 5 years, and has seen a great deal of interest from multi national firms.

The Business Park Sofia, already has over 165 companies based there – including Ernst and Young, Motorola, 3M, Allied Domequ, Johnson and Johnson and HP.

The most popular investment for investors has so far been city centre apartments. Prices are still good, around £80,000 and yields of 8% are achievable.

However as with many city centres in the UK and overseas, the construction of apartments is growing at a huge rate - and shows no sign of slowing down.

Therefore again I would urge caution if looking at the apartment market - but there are deals to be done.

With any other questions on investing in Bulgaria, please email us at bulgaria@property-investment-deals.com