ARTICLES 
The Property Market in Bulgaria
The Business Online, Article by Cheryl Taylor - Property editor, 29th January 2006
BULGARIANS have been able to take out a mortgage and buy a home only in the past four years. The change has unlocked a property boom. Prices are rising as British investors scramble to buy low-cost property there in pursuit of rising markets and fast profits. With EU membership in January 2007, an economic transformation is under way.

Money is pouring into Bulgaria in foreign investment and funding from the EU and the World Bank. Much of the foreign aid is aimed at raising the countrys economy closer to the EU average in preparation for membership. Much of that money is being spent on infrastructure, including roads and facilities to boost tourism.
It is also receiving investment to redevelop key areas, notably in Sofia, the capital city. New emb-assies, offices, conference centres and hotels are under construction and firms such as Citibank, SAP and Deloitte are moving in.

Investment potential

Demand for rented property in the capital, Sofia, is underpinned by a shortage of affordable homes, costing between E 50,000 and E 90,000 for a two-bedroom flat. The rate of increase in average earnings has lagged behind property gains of 20% in 2005, but prices are still lower than in other former communist capitals like Prague and Budapest.

The future earning potential of such properties is being used to facilitate lending on buy-to-let investment largely by foreigners and property values are predicted to grow by 15% over the next year.
Tourism has grown rapidly in recent years, with a 62% increase in British visitors over the past year. The sun drenched Black Sea coast that runs from Turkey in the south to Romania in the north is becoming an alternative to Spain and Greece. The mountains are developing as a skiing alternative to France and Switzerland.

There is no agreement to allow budget airlines into Bulgaria. But their arrival is expected to transform tourism and boost demand for holiday accommodation and second homes. Rental yields in Sofia and in the mountains are around 7% to 10%. Also on the Black Sea coast, between May and October.
Sunshine and beaches

British investors are buying to let on the Costa Bulgaria, with its sandy beaches and direct scheduled flights from many UK destinations to Bourgas and Varna airports. Sunny Beach, at the centre of Bulgarias Black Sea coast, half an hour north of the airport at Bourgas, is the Bulgarian equivalent of Spains Costa del Sol, complete with crowded beaches and cheap booze.

With prices starting as low as £ 20,000 for a beachfront pad and high rental returns from tour operators, there are profits to be made although there is a risk of oversupply and resale cannot be guaranteed. The holiday market is maturing and more sophisticated developments are being built among the pine forests, set back from the sea. A three-bedroom villa within a gated estate, with a garden, a communal swimming pool and a distant sea view, can be had for £ 71,000.
The scenery improves around the old harbour town of Balchik, close to the airport at Varna, where a new yacht marina and three new golf courses are planned; two designed by Gary Player and one by Ian Woosnam. New apart-ments being built next to the Gary Player course, with views over the fairways to the sea, offer scope for investment priced from £18,000 for a studio; £39,000 for a two-bedroom flat. Golf courses, marinas and other leisure facilities, will help extend the letting season beyond the summer months. But the Black Sea coast is cold and wet in winter, so is less well-suited to retire-ment than the milder, westerly climes of Spain and Portugal.
Mountains and skiing

With growing investment in infrastructure in the mountains, Bulgaria looks set to compete with the Alpine resorts for the 2012 Winter Olympics. Its ski capital Bansko, a two-hour drive from the airport at Sofia, boasts the most modern lift system in Europe. Situated in the Pirin Mountains, Bansko is a dual season resort, a nature reserve and a World Heritage site, offering thermal baths, golf, climbing, hiking, riding and access to winter skiing at 1,400 to 2,500 metres. The ski season is from December until April, but occupancy rates are also high during the summer months. It has an attractive old town with cobbled streets and lively tavernas. Building regulations are strictly enforced: no building may exceed four storeys and all are constructed in traditional style, with whitewashed walls and wooden balconies. Inside there are beamed ceilings and open log fires. Some new developments include indoor swimming pools, fitness centres, cafes and restaurants.
Bulgaria has the best developed market for ski property in central and eastern Europe, but demand for accommodation in Bansko still exceeds supply. Investment prospects look good, with tour operators offering rental returns of up to 10% on ski-flats. British developers are already moving into the area and alpine-chalet style schemes are being built.

Property prices on the pistes in Bulgaria are a fraction of those in France or Switzerland, although they are rising. A studio close to the ski-lift in Bansko starts at around £22,000; one-bedroom flats from £31,000; two bedrooms from £45,000. An airport planned at Razlog, 10km from Bansko, is expected to boost values.

There are bargains to be had south in Pamporovo, a ski-resort at 1,650 metres in the heart of the Rhodopi mountains, 90 minutes from Plovdiv airport. At 280 days a year, it is the sunniest ski resort in Europe, yet with ski areas over 2,000 metres, the snow record is good.

There are plans for the ski area to be tripled by 2009, but prices are lower than Bansko: a three-bedroom lodge with skiing to the backdoor can be had for under £100,000; a studio from £16,000; a one-bedroom flat from £22,000.

How to buy

Foreigners can buy property but not land in Bulgaria (a Bulgarian holding company must be set up). Buyers pay 20% VAT on new homes (usually included in the purchase price). Prices are quoted in euros and euro mortgages are available for up to 70% of value at 7% (variable). Transfer costs and notary fees are about 2% of the sale price, plus 5% notary fees, half of which is often paid by the developer. There is a 15% withholding tax on rental income. Capital gains tax is levied at 15% on any profits made on resale.

* POLITICAL ANALYSIS: A former king, Simeon II, headed the government until last year, bringing about reforms to lay the groundwork for the countrys accession to the EU. He brought an end to communist rule, which has delayed the countrys modernisation.

* ECONOMIC ANALYSIS: The communists were dispatched in 1989. Crumbling and abandoned concrete buildings loom along major highways in contrast to the wave of new buildings in the capital, Sofia, the Black Sea and Bansko. GDP per head has been rising for the past few years reaching over $8,179 in 2004. Inflation has been falling and wages rising.

* WEATHER: Summer on the Black Sea can be baking hot, but cold in winter. Crisp and clear around the ski resorts from December until April.

* WHERE TO EAT: Restaurant food is grim. Sadly, the safe option is the international hotels such as the Panorama restaurant in the Grand Hotel in Sofia and the Intercontinental Plaza.

* CURRENCY: The lev. £1 buys 2.85 leva, but the euro is widely accepted in the major tourist locations.

* PRICE OF A CAPPUCCINO: 50p, beer 60p. Taxi from the airport to central Sofia £3.

fact stars Henry Harington

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