| The media in both Bulgaria and the UK is still raving | | | | as a way to make money. Their foray into the |
| about the phenomenal investment potential of the | | | | Bulgarian property market has left many |
| Bulgarian property market. This hype has lead many | | | | disappointed, because lead on by media hype, they |
| people to invest in the market in the hope of making | | | | expected the market to earn them vast profits in a |
| a fast return. Mass publicity about rising property | | | | short space of time as had happened in the UK. The |
| prices lures many people to Bulgaria, but what is the | | | | lack of regulation in the Bulgarian real estate market |
| reality of the situation? | | | | has meant that the seller is in charge of valuing their |
| Quest Bulgaria takes a look at the reality of re-sales | | | | own property and often they choose an inflated |
| of property in Bulgaria and how much your property | | | | sales figure rather than checking actual market rates |
| might be worth. | | | | for re-sales. |
| Knight Frank, one of the UK's most respected | | | | Property prices have increased in the last two years. |
| residential and commercial property consultancies, | | | | Belinda Knowles (42), a trainee solicitor from Dulwich, |
| recently published a report stating that high increases | | | | bought her one-bedroom apartment in Golden Sands |
| in residential property prices placed Bulgaria in second | | | | resort off-plan for 40,000 euro. It took two years to |
| place in a world table highlighting property price | | | | complete the project and she has just spent her first |
| increases during the second quarter of 2007. The | | | | summer enjoying the fruits of her investment. A one |
| report stated prices increased by 27.1%, so does this | | | | bed roomed apartment in her block now costs |
| mean my house is now worth around £44,000 | | | | 60,000 euro - a staggering growth of 50% - if she |
| more than it was when I put it on the market at the | | | | could sell her own. "I think the market is inflated by |
| start of the year? Should I be increasing the price in | | | | unscrupulous real estate agents. I'm certain that if I |
| line with market trends? | | | | put my apartment up for sale at this price I would be |
| A report by another reputable company, real estate | | | | left disappointed for two reasons. Why would |
| consultants, Colliers, reported similar trends in | | | | someone buy my apartment when they can by a |
| Bulgarian property but focussed more on the fact | | | | brand new one for the same price and if the demand |
| that it was the number of buildings constructed. The | | | | is so great, why haven't all of the apartments been |
| mountain resorts showed 50% increases and the | | | | sold?" Fortunately, Belinda bought her apartment as a |
| Black Sea coast 39%. How easy it is to read this | | | | long-term investment. "I have two teenage children |
| statement in relation to prices increasing rather than | | | | and package holidays abroad were becoming |
| that of the rate of build and to neglect the part of | | | | ridiculously expensive. The children are also getting to |
| Colliers report, which states that overall sales prices | | | | the age where they would prefer to come on holiday |
| have "remained unchanged for the past half year as | | | | with their friends rather than with me. I wanted to |
| supply continues to outpace demand." | | | | save money in the long-term by having a place |
| The reality of the situation is that most reports | | | | abroad that the whole family could use via the low |
| measure Bulgaria's property market success in terms | | | | cost airline network and I wanted to be sure that it |
| of price increases or build rates and neglect the fact | | | | would be a safe place for my children to stay alone |
| that in Bulgaria, the real estate market is unregulated | | | | with their friends. Golden Sands is ideal. We get |
| and the seller puts the price tag on their property. | | | | cheap flights with Wizz and British Airways from |
| The valuation process goes something like this, "Ivan | | | | Gatwick which means we can come over more |
| across the road has advertised his house for sale at | | | | regularly and the nightclubs here are not filled with |
| 20,000 euro, so my house must be worth 30,000 | | | | drug-taking louts, so I have no qualms about letting |
| euro because it is bigger." | | | | my kids go out." She also knows that by the time |
| Another form of valuation has resulted from towns | | | | they have out-grown Bulgaria, the apartment will yield |
| and in particular villages adopting unofficial rates. All it | | | | a good return on her investment. "In ten years time, |
| takes is a professional developer to move into the | | | | when my children have their own lives and means of |
| area and the price they charge for their properties, | | | | support, they may not want to spend their leisure |
| usually a cost per square metre, becomes the official | | | | time here. I'm sure that with the rate of investment |
| standard. | | | | going into the country at the moment, my apartment |
| The village of Rogachevo on the Northern Black Sea | | | | will sell at a higher rate than I paid for it and I will |
| coast is a prime example. Bulgarian Land Development | | | | have saved money in the long run by not having to |
| Plc, a newly incorporated company now listed on the | | | | fork out for package holiday fees." |
| AIM stock market, has started the construction of a | | | | Jayne from Sofia purchased a run down country |
| six million euro apartment and villa complex just | | | | house this year for 20,000 euro. "I have been quoted |
| outside of the village. The price of the property in | | | | a further 20,000 euro to do it up and have set aside |
| the development ranges from between 750 to 1,200 | | | | a contingency budget of 20,000 euro. I expect to be |
| euro per sq.m. The conclusion amongst people | | | | able to sell the property within two years for 70,000 |
| wishing to resell properties in the village is, "my | | | | euro netting me a modest 10,000 euro profit. I think |
| property is now worth at least 750 euros a square | | | | this is a reasonable gain." |
| metre." The fact that property up for resale may not | | | | Assetz International Ltd, a reputable British |
| have the same scenic outlook, modern facilities or | | | | investment company has warned its clients that |
| luxurious design is irrelevant to the sellers. Bulgarian | | | | growth rates of 20 -30 % in countries like Bulgaria |
| sellers have little experience of the property market | | | | would not continue and a cutback to a more steady |
| because until a few years ago there was little | | | | and sustainable growth rate was necessary. They still |
| demand. Consequently, they are unused to working | | | | labelled Bulgaria as the best place to invest in foreign |
| to the laws of supply and demand. Many British | | | | property, but as early as 2005, Assetz advised |
| sellers, who hail from a mature property market are | | | | caution, when investing in emerging markets like |
| lost without the skills of a valuer and stamp a price | | | | Bulgaria, "Low prices attract purchasers who are |
| on their resale based on the following equation:original | | | | keen for a 'quick fix' solution to pension shortfalls, but |
| cost + renovation costs + local market rates | | | | as many agents will admit there is no guaranteed |
| +desired profit =resale price | | | | resale market in Bulgaria and little existing benchmark |
| Yet, as everyone who emigrated here on the lure of | | | | for measuring price increases." Even as far back as |
| cheap property and a fast buck now knows, the | | | | 2005, they recommended that their clients view |
| resale market is slow and underdeveloped. Apartment | | | | Bulgaria as a long-term investment rather than hoping |
| blocks are shooting up at a rapid pace giving new | | | | for instant returns, sighting the fact that for a time |
| buyers lots of choice in both price and design. | | | | supply would outstrip demand. |
| Renovated houses are two a penny and who wants | | | | Economic indicators, as we pointed out in last months |
| to buy a renovated traditional build in the middle of | | | | copy of Quest Bulgaria, look healthy for Bulgaria and |
| nowhere, when they have so many well-designed | | | | will go a long way to increasing house prices in the |
| new builds to choose? At the moment, it is safe to | | | | market, but in the long-term. What we need right |
| say, that in Bulgaria, supply far exceeds demand in | | | | now is a realistic adjustment in market prices. |
| terms of land and property. | | | | The key to investing in Bulgaria is; location, location, |
| The picture is not one of doom and gloom, but of | | | | location - be reasonable, expect good returns in the |
| caution rather than crash. The market is far from a | | | | medium and long term. Choose Bulgaria because it is |
| crash, if it was, you would not see UK currency | | | | a great place to be and you can have a home for |
| speculator Joe Lewis, investing 70 million pounds in | | | | less than the price of a dog kennel in Britain. Bulgaria |
| the Bulgarian property market. And he is not alone, | | | | still offers incredible prices compared to the rest of |
| Israeli construction and investment company BSR | | | | Europe, which will provide you with inexpensive |
| Europe recently bought around 80,000 sq.m of land in | | | | holidays, a low cost of living, easy access, summer |
| Bulgaria for 37 million euro. Gardens Group is investing | | | | beaches and skiing in the winter. |
| 400 million euro in a 600,000 sq.m development | | | | TIPS AND HINTS FOR BULGARIAN PROPERTY |
| Lozen, a village close to Sofia. | | | | RE-SALES |
| A source from Raiffeisen real estates said that most | | | | Supply currently outstrips demand in many areas |
| sales over the last 2 years are from re-sale clients. | | | | giving buyers a great deal of choice and the potential |
| Most of theses people bought land or property, sat | | | | for good prices. |
| on it for at least three years and are now re-selling | | | | Don't over-estimate the return. Expect to make good |
| for profits between 20 and 50%. This is easy to | | | | gains in the medium to long term |
| achieve when looking at properties at the low end of | | | | Invest your money wisely - don't take risks with a |
| the market; recently Raiffeisen sold a property, | | | | property portfolio if you need to make fast profits |
| which the client bought for 10,000 euro and sold for | | | | or need the money |
| 15,000, but the demand for rural renovation projects | | | | Location and the type of property you buy will |
| has declined. Land re-sales are lucrative if the location | | | | determine the size of your profits. So will future |
| is good. Apparently, there is good demand for | | | | developments such as infrastructure, airports, cheap |
| regulated land, close to the coast. Again, patience is | | | | flights.... Research, research, research. |
| the key. Raiffeisen have dealt with re-sellers who | | | | Set reasonable prices on your resale, don't pick |
| bought land in 2004 at 10 euro per sq.m and sold it in | | | | numbers out of thin air or copy what others are |
| October 2007 for 25 euro per sq.m. | | | | doing. Market the best features of your property, |
| British buyers have a "rising property" mentality. They | | | | what makes it special. |
| expect property to increase dramatically in value as it | | | | Ask people you know how much they would expect |
| has done over the last seven years in the UK. In this | | | | to pay for your property |
| sense, they are not in tune with the rest of Europe; | | | | Sit back and enjoy your property for yourself or |
| most of mainland Europe look at their property as | | | | consider turning it into a business to take the |
| their home, whereas the British view their property | | | | pressure off the need to re-sell. |