Bulgaria Property Investment

Bulgaria property - is it a good investment? I have been asked that question a lot over the last few months.

Very difficult to make a sweeping statement - as there are some fantastic opportunities and some not so clever deals (isn't there always!)

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It is a market that has seen huge interest and, with interest rates dropping, mortgage markets opening up, low house prices and huge sums of money getting spent there you can see why has been an attraction.

So why have I been looking at Bulgaria property investment over the last 18 months? Let's look at some facts:

- Bulgaria has had 7 years of sustained economic growth, with GDP growth averaging 4-5% per annum and inflation contained to single digits

- The national currency, the Lev, has been euro-pegged since 1997 stabilising the economy.

- It has one of the lowest and most competitive tax regimes in Central and Eastern Europe.

- Prices of new build residential Bulgaria property has almost doubled in Sunny Beach compared to 2002! The National Real Property Association (NRPA) forecast that this upward trend will remain for the next few years with an average rise of 10-20% per year until 2007. This is due to a predicted increase of foreign direct and indirect investment in real estate.

- Bulgaria property prices are relatively very low, there is equally low cost of living and 350km of sandy beaches.

- Mortgage lending - it has only been in the past few years that Bulgarians have been able to acquire mortgages. Currently, mortgages represent just 5% of the total credit supply within the local banking sector. And this is the first time foreigners can get mortgages in Bulgaria, which clearly gives more buyers an opportunity to purchase property there, which will in turn generate a much more competitive marketplace - just look at what happened to UK prices, as the mortgage market became more advanced.

- Thomson Holidays, First Choice and Going Places all said Bulgaria was in their top 10 most popular package holidays for 2004. They anticipate an even greater surge in its popularity in 2005.

- More than 3.5 million tourists visited the country in 2003 - an 18 per cent growth on the previous year. When the figures for 2004 are compiled, they are expected to show a further increase of some 20 per cent.

- The Bulgarian economy is one of the most stable and quick developing of the Balkans, so investment opportunities exist in both the short and long term in Bulgaria property.

- Golf courses are being built which clearly bring money, two by Gary Player will in place by 2006 along its Black Sea Coast, with one of the courses incorporating a country club and a five-star hotel.

- Bulgaria is a politically stable country, and the introduction of a currency board in 1997 stabilised the country's economy (Price Waterhouse)

- "Bulgaria has the right mix of macroeconomic policies to continue to enjoy robust growth and macroeconomic stability� The government's commitment to exercise caution and maintain flexibility in the conduct of fiscal policy, combined with strong bank supervision, provide assurance that under adverse scenarios macroeconomic stability would be safeguarded�"IMF staff appraisal (July 2003)

- For the first seven months of 2004 the number of UK tourists marked a 67.6 pct rise compared to the same period of 2003 and already come third in terms of number after Greeks and Germans. Officials from World of TUI claim they cannot meet the big demand for Bulgaria in Britain due to the lack of bed contingents to comply with the high requirements. This is the reason why their British tour operator Thomson will bring 15,000 instead of the planned 25,000 tourists to Bulgaria. TUI Nordic expects to end the year by around 60,000 tourists, up 50 pct year-on-year. The number of UK tourists is expected to double in 2005, while that of the Scandinavian tourists - to mark an at least 20 pct increase year-on-year.

- Besides, the new EU members prefer Bulgaria for economic reasons - the prices are low for their standard of living and it is cheaper than the resorts in the euro zone."

Labour costs and land costs are so much cheaper in Bulgaria, so the cost of building property is so much lower.

Consequently Bulgaria property can afford to be sold much more cheaply. At the same time the demand for this property is coming from European countries like Germany, Norway and the UK.

With tourism and investment rising rapidly and consistently year on year, you would expect prices to continue to rise - but must look at the different areas that are being currently marketed.

Well if are looking for a place for yourself, or your family, then can get an excellently priced apartment with sea views to enjoy over the summer months.

If are looking for a good buy to let property then this is definitely not the answer. Why?

Demand will increase as more flights get scheduled and the budget airlines get in - scheduled for 2007 - increasing demand for self catering apartments, but for the next 2 years I expect rental demand to be low.

These offer better rental prospects - if you link up with a tour operator. I was in Borovets in January 2004, and it was packed out, with 6 tour operators all present.

Prices still good and rising. Again though I think longer term is still a very immature market, and am not sure where the re-sale market will come from, certainly not over the next 2-4 years.

Sofia, as the capital city, is getting great interest and the population is growing both from Bulgarians and ex-pats.

The most popular investment for investors has so far been city centre apartments. Prices are still good, around �80,000 and yields of 8% are achievable.

However as with many city centres in the UK and overseas, the construction of apartments is growing at a huge rate - and shows no sign of slowing down.

Therefore again I would urge caution if looking at the apartment market - but there are deals to be done.

I would be looking at investments around Sofia - but perhaps not apartments. I am a fan of some of the new build houses - 3,4 bedroom houses being built in suburbs around Sofia, often in gated developments.

The big attraction to these is high demand, low supply - as most developers are taking the easy option and building apartment blocks.

I also think commercial property has some excellent opportunities over the next 5 years.

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Photos from a recent trip - of the Borovets ski resort - with 6 UK tour operators there, this was full, and a villa on the road to Borovets available for around �40,000, 30 minutes from Sofia, and 15 mins from Borovets.