Anyone who has bought property in Bulgaria will tell you that the prices are so low, it is impossible to lose. Prices will continue to rise. The only uncertainty is by how much. And how long.
The Balkan country already has had 12 years of increases. And the National Statistical Institute reported in January that the average sales price per square meter for residential properties in Bulgarian cities had gone up 36.6 percent in the previous year.
But residential prices in Sofia still average only EUR 600, or USD717, per square meter, or USD 66 per square foot. That is much less than the EUR 750 average per square meter in Bratislava, Slovakia; EUR 850 in Bucharest and EUR 1,500 in Prague, according to the National Real Property Association of Bulgaria.
Those numbers have pushed Bulgaria squarely into the real estate spotlight, attracting West Europeans lured by the current hot place for vacation homes and, to a lesser extent, for investment. And real estate agencies from small European countries like Ireland and Malta have opened offices in Bulgaria in an effort to expand their businesses.
Foreigners were involved in 23 percent of the 220,000 property deals registered in Bulgaria in 2005, transactions that totaled more than EUR 4 billion, according to the property association. The year before they generated 18 percent of all sales, or EUR 3.36 billion.
Overall, real estate is one of the fastest growing sectors in the national economy, which grew by 5.2 percent in 2005. Observers say that while the foreign interest certainly has not hurt, the country itself is producing much of the change.
"I don't think this kind of growth can be supported by international investors," said Milan Khatri, chief economist at the Royal Institution of Chartered Surveyors in London. "It must be driven by organic, domestic growth."
Much of the interest is linked to the country's expected entry into the European Union. Bulgaria and its northern neighbor, Romania - the two poorest of the former Soviet bloc countries in Europe - are on track to join the European Union on Jan. 1, 2007.
Construction costs, sales prices and incomes are all expected to jump after membership, fueling a "now or never" air of urgency among citizens and foreigners alike.
"If the prices are so low, people assume the prices must go up a lot, which means that the GDP and incomes will catch up with the EU average," Khatri said. However, he cautioned, "they may never take off."
At the end of World War II, 85 percent of Bulgaria's population lived in villages. Communism brought industrialization and blocks of Soviet-style housing, most of it concrete and all of it drab.
In the years after the collapse of communism, Bulgaria adopted a post-Communist style common to much of Eastern Europe: garish construction done quickly and cheaply, unmistakably meant to impress. But things are changing.
Deyan Kavrakov, a partner with Equest Investments Bulgaria and a specialist in luxury properties, says about two-thirds of the better properties being sold now are new construction, partly because renovations can easily be one and a half times as expensive as new builds.
Isolde Pringiers, an interior designer from Belgium who moved to Sofia with her husband and two children in 1998, said, "Some of the best work is now being done by interior decorators who are going into building."
"They are traveling, they subscribe to the international magazines, they are very well informed," Pringiers said. "They go to the Milan Fair to see what's going on. They have much more of a sense of space and how you live."
When she bought her house in 1999, there was far less to choose from than there is now. She searched for months before finding what she described as a house "with a spirit." It was built in 1939 by a German architect, and she fell in love with it and renovated it.
Kavrakov said he finds affluent professional Bulgarians in their 30s - the first generation to reach adulthood after communism - are developing a taste for modern minimalist interiors with integrated high-tech systems: blinds, air- conditioning, audio systems, security and lighting. "There are excellent examples in the area of contemporary modern style with more space," he said.
While Bulgaria is stable politically and economically, with protection for the rights of property owners, the regulation of the public space outside a home is chaotic. Urban planning is very much a new concept. "You don't know what's going to be next to you next year," Pringiers said. "That's the scary part."
Also, the rental market is in its infancy. The rate of home ownership is one of the highest in the world - more than 90 percent - so few Bulgarians rent. Foreigners who are thinking of investment, or who are planning to help finance the purchase of a vacation home by renting it when they are not using it, should first think about how to find tenants.
The property market is linked to tourism, one of Bulgaria's largest industries even during the Communist era, when attracting Westerners was seen as an effective way of getting hard currency into the country. Much of the current growth along the Black Sea, for example, has its roots in those times.
But now, according to Orlin Vladikov, chairman of the national property association, green spaces are being preserved and the country's policy makers have learned "not just from bad experience but also from best international practices."
"It's not easy," Vladikov said. "But it's happening." (30.03.2006)