Bulgaria Investment Property - Property market overview

Key points to note on Bulgaria Investment Property:

        Stable environment: strong GDP growth, healthy economy and currency linked to the euro.

        Strong capital appreciation to date: Estimated at 25% ( 2004) for specific types of property and location.

        Attractive rental yields: In 2004 yields were averaging  between 7 and  10 per cent per annum.

        EU entry:  Bulgaria is negotiating to enter the EU. This should further boost its economy. (GDP Growth 5.3% in 2004.)

          Exceptional growth of tourism:  and to grow further in the future. (In 2004 there were 4.2m visitors this has been forecast to rise to 12m by 2020)

         The new Spain: Bulgaria is often likened to Spain in it’s development approach. It is focused on large scale tourism. 

         Mortgage Market: Bulgaria has a developing mortgage market with improvements in bank mortgages - interest rates are falling, banks are competing for business.

         Possible issues of over supply: There could be issues of over supply in specific areas and markets.   For example some experts see intense construction works on Bulgaria’s coastline as the main threat to the property market.

 

Summary comments, Bulgaria Investment Property: Over the last four to five years Bulgaria has become one of the hot investment spots in Europe.  It is seen by some as the “new Spain”.

Bulgaria is also attracting prospective holiday buyers that are put off by what they see as overpriced property in Spain, France and Italy. According to King Sturge during 2005 property prices have risen at an estimate of 35% per annum and further strong growth is predicted in the medium term. The world Tourism Organisation placed Bulgaria near the top in terms of tourism growth, they described the growth as “remarkable”.  Bulgaria has many tourist attractions from “blue flag” award beaches to top class ski resorts.



  • Detailed information - Bulgaria

     

    • Country Information:

    Map of Bulgaria

    Situated in Southeastern Europe, Bulgaria occupies the northeastern part of the Balkan Peninsula. The country’s total territory is 111,000 sq. km.  It has a 378 km borderline with the Black Sea to the east. Bulgaria also neighbors Macedonia and Serbia and Montenegro to the west, Romania to the north and Greece and Turkey to the south.                                                                      

    Today, reforms and democratization keep Bulgaria on a path toward eventual integration into the EU. The country joined NATO in 2004.

    From January to September 2005, more than 6.1 million foreigners visited Bulgaria. This is six per cent higher than the same period last year, according to National Statistical Institute data. 

    Useful link

    www.bulgariandreams.com

     

    • Economic development

    In 1997, macroeconomic stability was reinforced by the imposition of a fixed exchange rate of the Bulgaria currency ( Lev)  against the German D-mark and the negotiation of an IMF standby agreement.  Low inflation and steady progress on structural reforms improved the business environment; Bulgaria has averaged 4% growth since 2000 and has begun to attract significant amounts of foreign direct investment

    Macroeconomic stability:

      Political and economic stability
      Sustained GDP growth of 4.7-4.9 % per year
      NATO membership achieved in 2004
      EU membership set for 1 January 2007
      Very competitive labor cost compared to the rest of Europe
      Very competitive tax regime - 15% corporate profit tax as of 1 January 2005
      Well educated, highly trained English speaking workforce
      Strategic geographic location
      Full national treatment of foreign investment
     

     

    • Property Market

    Price trends: 

    The average property prices in the major Bulgarian cities experienced a  10% - 30% growth through 2005, according to the Bulgarian National Statistics Institute. In 2004 some apartment prices registered almost 50% increase.

    Some agents believe that the real increase may be much greater and is not registered by official statistics because of the incentives of market participants not to report the real transaction price. We can not validate this claim.

    However, it is fair to say that 2005 has been an exciting year for the Bulgarian property market. It is expected that the transaction volume will top 250,000 for 2005 compared to 196,000 for the entirety of 2004.  

    It is important to notice that not all parts of the country registered significant increase but rather several big cities (biggest seacoast towns, the capital, 3 – 4 large places with dynamic growth and higher employment, as well as several mountain resorts). The most important reasons for this increase are:

             Stable economic growth for the past 3 years – 4.5% on average GDP growth

             Improvement in bank mortgages - interest rates are falling, banks are competing for business.

              Bulgaria's accession to the EU which will help stimulate property prices. 

              Foreign demand - specifically for new build summer apartments and cottages in the mountains.

              Huge increase of foreign direct investments.

              Legislative environment – introduction of Law on Special Purpose Investment Vehicles (2003), Law on Mortgage Bonds (2000) facilitated real property development and allowed for bigger scale investments.

              Overseas Bulgarian’s - Many are investing their money in real estates

              High home ownership - Bulgaria is among the countries with highest home ownership rate. According to official statistics approximately 91% of people own their place of residence.

    Rental Yields:


    Rental yields in cities across Eastern Europe have received a boost, with Sofia, Bulgaria, where property prices average 25,000, seeing yields of between seven and ten per cent per annum, and Prague, Czech Republic, where the average property costs 39,000, seeing yields increase to between five and seven per cent per annum.

    "Ten years ago no one would consider investing in
    Eastern Europe, but now property in the Eastern Bloc is selling faster than ever," comments Nick Clark, managing director of Homebuyer Events.

    "Holidays in countries that have recently
    joined the European Union are becoming increasingly popular so investors with a long term perspective will secure solid rental yields."