THE PROPERTY MARKET

There has been a media frenzy surrounding the Bulgarian market since 2000, and despite seeing price hikes as high as 40% during the last five years, it’s still one of the most popular destinations among British investors, with over 13% of all EU investors saying they would either purchase in Bulgaria or Romania. In 2006 residential property prices appreciated by an average of 4.6% across the country – lower than you might expect – although the number of properties sold surpassed the 260,000 mark for the first time.

There have been reports of the Black Sea coastline suffering from over-supply, due to the high levels of development the area has experienced in recent years. As most buyers there are investors, there are fears that the market will be flooded should everyone decide to sell but, in an attempt to counter this, the government has begun capping development levels.

While it is true that Bulgaria has developed somewhat back-to-front as a market – supply and newly-built developments came before demand, unlike most markets, which grow out of a massive tourism industry – agents argue that tourism and property demand are rapidly growing, and that with increasing awareness will come growing popularity. However, Bulgaria is still a young market in terms of its property industry and great value and excellent appreciation rates are in evidence. This is demonstrated by the fact that Spain issued 800,000 building permits in 2006 – more than the UK, Germany and France put together – whereas Bulgaria issued no more than 15,000 in 2005.

Now an EU member, Bulgaria has become a byword for property investment, offering many new developments and a Costa del Sol environment for a fraction of the price. Surprisingly, when compared to its Eastern European neighbours, property here retails at prices 50% lower than some areas of Romania and Poland. Mortgages have increased by 166% from 2005 to 2006, with a fall in inflation resulting in a drop in mortgage rates from 16% to 5.5%.

Many have over-rated the Bulgarian market, and it is important to be aware that the massive price hikes that have occurred in the property market cannot be sustained for a lengthy period – appreciation rates have fallen from 47.5% during 2004 to an average of 10.6% in 2005. Of course, it all depends on where you buy and while the Black Sea Coast has slowed, in the mountainous ski resorts prices have risen by 25%. Bulgaria is essentially a long-term investment, and while a few years ago you could have bought and then sold within six months, today you need to wait for three to five years before reaping the benefits, especially if you’re looking to build up a reliable rental income.

The EU effect

On 1st January 2007, the entire population of Europe didn’t wake up and decide to invest in Bulgaria. Appreciation rates didn’t treble overnight, and the likelihood is that they won’t for the first few months following EU accession. However, long term, the impact will be positive for property buyers.

EU funds are already pouring into Bulgaria, with a 2007/08 budget of €6.6 billion to be invested. The early 90s saw massive economic instability and a fall in living standards of 40%. EU accession has resulted in economic stability and introduced a stable currency, while increased affluence will be apparent in workers’ salaries. This will encourage investment and see secure appreciation rates, making Bulgaria a less risky investment.

What’s more, the law stopping foreigners from purchasing land in Bulgaria without setting up a company is in the process of being abolished. However, it won’t be until 2012 that it is fully deregulated.