Investment Advice

Investment Opportunity in Bulgaria – A personal view

Bulgaria is turning into the hottest property market in Europe. It has been interesting to see the development and recognition of the market over the past eighteen months. Nobody asks me anymore ‘’ I hear Bulgaria is a great place to invest, but, tell me, where is it!’’ – I swear this happened to me. However, the number of agents and developments has also increased dramatically. The choice of client is now wider than ever, both from development and the choice of agents. I cannot advise you the agent to choose but, be careful out there. The most important questions are – do they know the market and are they direct agents for large, well established developers.Let me try and answer here the most repeated questions I am asked on a daily basis.

1. Why should I invest in BG?
   Simple one to answer - currently for capital appreciation and low cost of entry. Also, secondary consideration has to be, the people and the country. We have seen gains for our clients of 30-40% in the past 9 months without exception. Current average cost per square meter of 800-1000 Euro for key developments in Sunny Beach and Sofia will also result in good gains over the next 12-24 months.
   
2. Where should I invest?
   Hmm, more difficult to answer. My standard response to that question is another question –what do you want it for –investment only or a mix of holiday/investment? Sunny Beach remains the best beach holiday resort in Bulgaria. In terms of ski, look to Bansko, Borovets and the upmarket Pamporovo. Remember, it will be possible by end of 2005 to reach the beach resorts in Northern Greece from Pamporovo. Sofia, as the capital, is worth it from the investment point of view. Be very careful of the areas you invest. If you pay less than 900 Euro/sq meter in Sofia then you are in a developing/ distant area.
   
3. Stage payments ?
   Yes, it is normal practice. Expect normal payment of 30% down with 3 X 20% stage payments and 10% at title deed stage. Some developers ask for more up front. We only deal with developers who accept wire transfers and refuse to deal with cash payments.
   
4. Why Stage payments?
   My answer comes down to the banks in Bulgaria. Bank loans are not available to developers so, they use the stage payments to fund the complex. Obviously, the larger developers are not totally dependent on selling all the apartments prior to commencement of development.
   
5. Why so much emphasis on Sunny Beach?
   Easy one – it is the best beach resort in Bulgaria. 7 Km of the best bay and sand you will see. Very well developed infrastructure. Close to Burgas and Varna airports. In general, sympathetic developments and best opportunity for renting your apartment.
   
6. What about Sofia?
   With 1.2m people and less than 3% unemployment, the capital of Bulgaria is developing very quickly. I have seen amazing changes in the city over the past three years. Of, course, not perfect by any means with parking and general roads/pavements the main problems. As capital of the country and with the number of office/business parks currently in construction we can only expect the rental market to expand rapidly.
   
7. Where in Sofia?
   Lozenets and area around Hotel Kempinski is the main area on offer from most agents. Frankly, although central, it is becoming a very boring landscape with apartment block after apartment block under construction. I don’t personally like it. Some general rules, for apartment purchase, would be to keep within the ring road around Sofia (beltway) - keep away from anything close to airport and also, anything in North or east Sofia. Area down Bulgaria Blvd is developing into good area with great views down to Vitosha Mountain. Area close to new American Embassy, Lozenets (as mentioned above), Doctors Garden area (mostly older apartments). Remember, this is just my personal opinion but, based on many years experience walking round the city and talking to people on the ground.
   
8. What about ski resorts?
   Bansko is the only one of the ski resorts not purpose built. It is a lovely old town that attracts tourists in winter and summer. Sure, not the best developed of the 3 resorts but, the one where most money will be invested over the next 3 years. Only 2 hours from Sofia and a great jazz festival during August every year –ok, I like jazz! Borovets is starting to get the first apartment developments and Pamporovo is the most exclusive of all the ski resorts and very beautiful.
   
9. Buying apartment –
   Do I need to setup company? No, is the short answer. However, buying houses or land and you will need to Set-up Company. Cost for company setup is approx. 600 Euro with annual return every year not to exceed 200 Euro.
   
10. Property Tax?
    Yes there is property tax and is paid annually based on 0.15% of the property value.
    
11. VAT – I have heard horror stories –please explain?
    Normally developers will declare the build price to be 30% or less, of the purchase price. Entirely up to buyer to ‘’come clean’’ and pay the extra VAT on the full amount. 99.99% of clients never do this. Some developers will say that VAT is included in the price. I often wonder what that means! Be aware that a person can own up to two properties in Bulgaria and, as long as you keep them for longer than 5 years, there is no Capital Gains Tax to pay.
    
12. What about country areas?
    Bulgaria is a very large country with lowest level of new births in Europe and mass exodus to the main cities. Probably the most beautiful countryside in Europe with breathtaking landscapes. Buy in country areas if you never want to rent. Houses can be very cheap but, please oh please, check the area first. We specialise in area between VelikoTarnovo and Sliven in the Balkan Mountains and are fortunate to be in position to offer clients rental income for select houses. We never advertise these on the website so, please contact us for details.
    
13. Should I wait until 2006/2007 to invest?
    Absolutely not ! The market will show gains in 2007-2009 for sure. However, the large gains are to be made up to 2007. Remember, we sell developments today off plans that will not be ready until July 2006.
    
14. With incomes of 200 Euro/mth how can locals buy apartments?
    Don’t believe all you read about salaries. The largest purchasers in Sofia and Black Sea are locals.
    
15. Why should I purchase from Buyinbulgaria?
    Another question we are always asked. We try to be as impartial as possible. We match the client to location and apartment complex. We constantly follow up with clients and remain main point of focus throughout the process. We are a total provider with furniture/ letting and resales. Finally, knowledge of Bulgaria remains one of our key strengths.
    
16. Why not villas, why all apartments?
    We are starting to see villa developments for release. Check our website for latest offerings
    
    What are your charges?
    
    As a total provider we charge a flat fee of 3% for new apartment developments. Old houses/land/villas we charge 4.5%-5% excluding any local charges. Searches for specific property or development/investor opportunities are negotiated on case by case basis.
    

I hope I have answered some of the basic questions in the above. At least it should give you a better appreciation for the Bulgarian market.

Tom Fingleton
CEO buyinbulgaria.com