Bulgaria is the Latest Property Investment Hotspot But Investors Should be Cautious
The real estate market at present
With one of the most stable and fast-developing economies in the Balkans, Bulgaria currently offers investors the opportunity to buy properties at some of the lowest prices in Europe, with studio apartments in the Black Sea resort of Sunny Beach costing as little as €16,850. However Assetz, the UK’s leading property investment specialist, urges potential investors to be cautious in this immature market. Stuart Law, Managing Director of Assetz, offers the following advice: “Investors face a barrage of potential pitfalls when considering investing in an immature market such as Bulgaria’s. There are good opportunities for both city-centre buy-to-let properties and holiday homes with letting potential, but despite promising returns, investors must be wise to the risks of buying in an emerging economy.” Tips for investing in Bulgaria Assetz International advises investors to consider the following tips: • Tax on purchases is not fixed, meaning investors face the possibility of being stung by unexpected charges – watch out for the ‘tax estimation’ charge on the final bill for the property. • It is a legal requirement for investors to set up a company before they can purchase either more than one property in Bulgaria or the land as well as the building (as many investors wish to), costing at least £600 plus annual charges, which can be a very tricky process in Bulgaria. • Low prices attract purchasers who are keen for a ‘quick fix’ solution to pension shortfalls, but as many agents will admit there is no guaranteed resale market in Bulgaria and little existing benchmark for measuring price increases other than more and more investors paying higher prices monthly. We would therefore recommend preparing for a long-term investment rather than hoping for instant returns. In addition there are so many cheap properties being built there seems to be an oversupply situation developing which will not become apparent until investors try to sell at completion. • There is a genuine demand for quality rental properties but written contracts with holiday companies are vital as a means of ensuring a guaranteed yield. Many developers are claiming they have 10 year contracts with big tour operators like Thomson and that these allow them to offer 10 year rent guarantees of 8% income hence justifying the price of property but they often offer this guarantee from a shell company that could fold if the rentals do not materialise leaving the investor with a difficult to sell property. • Travel agents and tour operators who are no longer enjoying big mark ups in Spain are looking for higher profit margins in Bulgaria and this does offer confidence in the long term future as the high street does have a substantial number of sun/ski holidays available in Bulgaria today and they are selling well – boding well for future returns for quality locations and developments. Stuart Law continues: “An abundance of beautiful beaches and world-renowned ski resorts combined with a low cost of living, has made the country ripe for long-term investment in particular. The best investment opportunities include the ski resort of Bansko and the Black Sea resorts of Varna and Bourgas. The capital Sofia is developing rapidly as a commercial centre, signalling that capital appreciation and rental yields should be very strong in the future, however investors should be aware that this is in no way guaranteed. People looking for a quick fix to cover a pension shortfall should not invest in Bulgaria.” Assetz is currently considering expanding its international service to cover Bulgaria by the end of the year, in addition to its current operations in France, Spain and Cyprus. http://news.assetz.co.uk/(06.04.2005)