Real Estate Market

Perspectives of the Bulgarian Real Estate Market in 2014 – hotspots and dangerspots

The latest global view of the local Bulgarian real estate market has kept the valid conclusions, achieved in the previous five 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 good rate on long-term guaranteed rental incomes, etc. The worldwide economy recession has affected the Bulgarian real estate market and made it adjust to the new situation, despite what many parties may try to convince overseas property investors. A pure example of this situation are the many 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 ex local or overseas estate agents, united with local developers, promised "soap bubbles" only to collect 1500 e/sq.m. for off-plan property purchases in Bulgaria. For these projects the local government so far is not legally bound to assist for completion 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 2014 remain the Russian property investors who still look to buy completed 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. The positive fact is that the Russians do not buy in order to re-sell in short deadlines - i.e. they do not intend to play on the Bulgarian real estate market with re-sales. Unfortunately they are not interested in off-plan purchases or in buying a plot and then building something on it - obviously they have heard about the many failed developments and cheated assignors by builders. In relation to the UK property overseas property investors, small percentage of them are still interested to invest in Bulgarian properties, although there are many British investors who already are re-selling their apartments 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, 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 interested in making a long-term property investment 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 only if re-selling an apartment or home within three years after purchase (5 years for plots). 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 in our view 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 for 40 000 Euro or less, could be a good investment for your holidays. 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 5 years ago (it would be the right time to buy there if you love skying and are looking for cheap holiday apartment) and the Russians who are the major part of the buyers (resp. could rise the property prices), do not seem very much interested to buy properties there - presumably because having enough snow and cold weather in their own country. Their price is cheap because 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 some rental profit, no matter how much attractive "guaranteed rental contracts" or the newly invented type 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 surrounding area are overloaded with offers for newly built apartments for sale on reduced prices, compared to the prices 5 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.
3) Land plots are currently not attractive to local and foreign buyers, because most of the attractive plots have been already bought and built; the cities are not expanding so there are no new attractive plots. 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. Again we have to confirm that the Russian buyers are not interested in buying plots.
4) Off-plan projects won't be attractive in the next couple of years: 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 (the diary of the Sofia City court is full of these), 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 (i.e. to be a sort of competition of the prices). We can help you with further individual guidance and advice in order to clear your view. Contact us:

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 a holiday destination. Bear that these resorts are developed for more than 40-50 years and this is serious advantage. As well the capital Sofia which is being very well developed for the last five years thanks to the EU funds and keeps growing. The salaries in the capital are the highest in Bulgaria; the capital attracts local people so these who live there are often looking to buy a home. Owning a home is part of the Bulgarian character-roughly 90% of the locals own a house or apartment. The property market in big cities and in the capital is well developed for the last 15 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 and summer resorts, especially for young people who want to move there.
5) An apartment in the developed city, sea resort or in the capital Sofia can always and easy be rented out for long term (i.e. for 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 many 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.
* The above text represents only our personal view of the market on the base of our knowledge and experience on the territory of Bulgaria; it should not be considered as a concrete advice for purchasing a real estate. We respect foreign investors; this is why we believe every investor's situation and personal intentions are different so a best guidance should be obtained personally after a serious examination of the local market and legal/financial consultation. Fore more information, contact us: