Property Buying
The latest global view of the local Bulgarian real estate market has kept the valid conclusions, achieved in the previous couple of years – dropped prices of completed holiday apartments in the Bulgarian holiday resorts, lots of non-finished projects and developments (i.e. dead local off-plan property market), lack of interest on regulated plots of lands, difficulties to achieve long-term guaranteed rental incomes, etc. The worldwide economy recession unfortunately has hit Bulgaria too, despite what many parties may try to convince overseas property investors. A pure example of this situation are the hundreds non-completed skeleton developments, abandoned for the last 3-4 years in various ends of Bulgaria only to remind the trustful investors about the past times where overseas estate agents united with local developers, promised “soap bubbles” only to collect 1500 e/sq.m. for off-plan property purchases. For these projects the Bulgarian government so far does not assist to be completed and respectively later to generate local tax incomes towards the government and the municipalities. The main focus of the Bulgarian government is situated quite away – namely on the solid EU funds released for financing various infrastructure public projects, while the private overseas investment funds although been serious amounts of fresh cash for the locals, stay aside from their view and are not considered by the rulers of the country, which is non-understandable. A small step in this direction is the easier procedure since 2012 for non-EU citizens to get up to one-year visas for Bulgaria at the Bulgarian consularies worldwide, but as detailed above this is not related to the EU residents. The biggest part of the foreign buyers of Bulgarian properties in 2012 remain the Russian property investors who still look to buy holiday apartments and houses near the Black Sea coast as a square one for traveling in the EU during vacations, while the Bulgarian winter resorts do not attract them that much. In relation to the UK property overseas property investors, about 2% of them are still interested to invest in Bulgarian properties, although there are many British investors who already are re-selling their houses and villas in Bulgaria. In additional to the frame, for the purposes of the investing process by overseas property investors, we need to point also the current requirements by local Bulgarian banks in relation to foreign individuals, which are mostly: - the banks require the real estate to have Act 16 issued (Certificate for exploitation) in order to release a mortgage loan for buying it. Most of the local banks release loans amounting up to 50-60% only of the fair market value of the newly built real estates and the amount of the annual interest rates on mortgage loans for foreign individuals vary 8-11%. Nothing unusual here - just the banks have their right to be careful so they require a higher insurance that they will get all their money back in case of non-payment of the loan, which is understandable in the current financial worldwide crisis. Although the Bulgarian property market is moving forward on 2nd gear, in our opinion there is still a good investment that can be made if you are iinterested in making a long-term property in Bulgaria. Why to buy it now? The answer: Capital gains – if you are looking to buy and to re-sell after few years, now is the right moment – following the latest amendments in the Bulgarian Tax legislation, a property seller is liable for Capital Gains if re-selling within three years after purchase. In other words – you won’t be liable for Capital Gains if you re-sell after three years, for whatever profit you achieve from the prospective sale. Below we will detail couple types of attractive properties that could bring actual financial outcome. For example, a property investor may focus on the developed cities on the Black Sea coast and in the capital Sofia. Buying a middle sized (1-2 bed) newly built or up to 10 years old apartment, within a city situated on the Black sea coast or in the capital Sofia could be a good property investment. But first of all, we need to point the situation with the other types of Bulgarian properties attractive to investors, respectively to compare it with them: 1) The Bulgarian winter ski resorts like Bansko, Borovets and Pamporovo are currently overloaded with offers for sale of completed holiday apartments there on very reduced prices, compared with the prices of the same apartments 2-3 years ago (of course it is the right time to buy there if you love skying and are looking for holiday apartment) and the Russiansa who are the major part of the buyers, do not seem very much interested to buy properties there - presumably because having enough snow and cold weather in their own country. Not on a last place, holiday apartments, situated in winter resorts are seasonally occupied only, and these depend on the short winter season in Bulgaria – mostly snowy January and February only to achieve rental profit, no matter how much attractive “guaranteed rental contracts” or the newly invented by the rental companies “flexible rent contracts” may be offered to apartment owners. 2) The Bulgarian Black sea resorts like Sunny Beach, Obzor, Nesebar, St.Vlas, Ravda, Kavarna and the area are overloaded with offers for newly built and off-plan apartments for sale on reduced prices, compared to the prices 3 years ago, and although many locals and foreign property buyers purchase there, the overloaded market ensures property prices won't rise in the next couple of years, although the summer season in Bulgaria proceeds mid of May-mid of September – but still apartments there are seasonally occupied, respectively relying only on these months to generate rental income, no matter how much attractive “guaranteed rental contracts” or the newly invented by the management companies “flexible rent contracts” may be offered to apartment owners. 3) Land plots are currently not attractive to buyers, because on the base of the current low speed of the market there are no investors neither developers who have enough money to put in long-term building projects. On the other hand due to bad reputation of local developers and the great number of civil cases for refund, started by foreign property investors against local developers in relation to failed projects (just check the online diary of the Sofia City court), for sure won’t help the eventual treatment of this part of the Bulgarian real estate market soon. This means not many new holiday developments in the resorts to be built soon. Now, here we would like to outline couple advantages of apartments situated in the cities on the Black sea coast and in the capital Sofia: 1) On the other hand, apartments in developed and peaceful cities near the sea (like Varna, Burgas, Balchik, Kavarna, Sozopol, Obzor, etc.), are always attractive to locals and to foreign buyers; as well the capital Sofia which is being very well developed for the last 1-2 years thanks to the EU funds and keeps growing. The salaries in the capital are the highest in Bulgaria so the people who live there are these mostly looking to buy a home. The property market in big cities and in the capital is well developed for the last 10 years, compared to the other parts of the country. 2) there is never too much competition of newly built apartments within these developed cities so the prices won't drop further (technically you can't overbuild a Bulgarian city because of the prohibitions of the local building legislation), 3) a local Bulgarian bank can always give a mortgage loan for a newly built or not very old apartment situated in the city or in the capital to you or to the next buyer (if you are a seller), and believe us, banks know best where to invest. 4) there is always a permanent search for homes on sale & rent by local Bulgarian investors in the cities, especially for young people who want to move there and please bear that prices of newly built apartments may rise soon. 5) An apartment in the developed city or in the capital Sofia can always and easy be rented out for long term (we mean years) to return your investment; the apartments situated in the city are not depending of the holiday season only, what would the situation be with a seasonally occupied apartment in Sunny Beach or in Bansko, for example; but the apartments in a developed city on the Black sea coast still attract workers and tourists. 6) In conclusion do not forget that people get attracted by the fact that it is always cheaper to have a summer holiday in the town but still the the beach and the sea is only 10 minutes away and you just use the city transport, instead of paying non-licenced and suspicious taxi to take you there.