Bulgaria Fact Sheet - Detailed information about the history of the Bulgarian property market.
Bulgaria is a country with extremely low real estate and land prices compared with Western European and most Eastern European states.
The harmonisation of Bulgarian legislation with that of the European Union means that the actual process of a real estate transaction in Bulgaria is not that much different now to the procedure that exists in other European countries, although there are still some major differences that need to be 'ironed out' if the market is to develop in a meaningful way.
In 1994 The National Real Property Association (NRPA) commenced activities, although with only 150 members out of some 2,000 existing real estate agents it does mean that to the 'unaware' practices can vary from shoddy to excellent! A good example of this is the 'two tier' pricing system in operation where a 'western' buyer will be quoted a higher price for the same property than would be quoted to a Bulgarian national. It is certainly a case of 'let the buyer beware'.
The costs associated with property transactions in Bulgaria are generally much lower than in developed economies, in spite of the problems that can arise, as are the running costs or the costs of refurbishment or improvement. All properties are bought freehold and more than 90% of occupied residential property is owner occupied.
Following Bulgaria's transition to a market economy the development of the retail property market has been difficult but steady and, with the initiatives to increase tourism, a large number of new construction projects have already been commenced along the Black Sea coast.
The real estate market in Bulgaria is (after ten years of transition from communism to a functioning market economy) just now starting to approach the conditions that already exist within more developed countries with respect to the processes of its own creation, market realisation and operation and to quantify it now as an emerging and independent new branch of the economy is probably quite valid.
For the first time a Real Estate Market Index was published in October of 2002, which in March 2003 reached 104.37. A small beginning but potentially the start of a longer-term trend.
Property and land prices are without doubt good value in Bulgaria. This may be due in part to the general historic neglect of its asset markets and also because the Bulgarian currency (the Lev) is undervalued. In addition, the current restrictions on a foreign persons ability to purchase title to land is further affecting the liquidity of the market.
With increased purchasing power will come product and asset price inflation. On the Black Sea coast this will additionally be fuelled by further growth in tourism with the increasing realisation of Bulgaria as being an acceptable alternative to say Spain, Portugal or Greece as a holiday destination and by increasing activity in the property market arising from interest by overseas buyers in owning a second or holiday home there or for retirement purposes.
Bulgaria was admitted as a member of NATO in 2004 and this is due to be followed by membership of the EU in 2007.This, combined with the removal of certain remaining constitutional restrictions on foreign investment in land (due to its incompatibility with EU membership) and in addition to the other factors mentioned, should cause an increase in the property markets liquidity and therefore its level.
In its April 2003 issue, the independent property related newsletter, Hot Property Alert was quoted as saying that "Bulgarian real estate has enormous potential".
The Times was also recently quoted as saying that "If Bulgaria joins the EU there is the possibility that property prices could take off, rewarding early buyers".
Bulgaria has also recently featured on Channel 4's 'A Place in the Sun' programme when it was stated that the country offered "excellent value for money for foreign investors with prices ranging from as little as £5,000 for a traditional cottage".
Other respected English newspapers have also run articles recently about the property bargains to be had in Bulgaria such as The Financial Times - "Time to probe Balkan Bargains" and the Sunday Telegraph with - "New kids on the Eastern Bloc". The Times again - "Bargain hunters look to the East".
As witnessed by the facts outlined in this document there are many pre existing conditions that would suggest property prices will increase in Bulgaria over the years up to and beyond their acceptance into both NATO and, in particular, the EU. The current low level of prices would also suggest that any 'downside' with regards to carefully selected property investment is fairly limited.
In a recent Real Estate Review compiled by Colliers International they state that "in addition to increasing demand from foreign expatriates (and the expected increases in tourism) the next few years also looks set to be revolutionary in terms of demand from wealthier Bulgarians as many banks have now started to offer mortgage financing and as a result the demand for quality houses and apartments will continue to gradually increase". Most of the recent rise in the Real Estate Market Index was indeed driven by the increase in the cost of luxury apartments by some 5-6%.
Two areas that are likely to experience the biggest growth rates could be the more desirable areas in and around the major resort centres of Varna (Golden Sands) and Burgas (Sunny Beach) and also in other selected 'premium quality' locations on the Black Sea coast.
Whilst it would appear that property prices are now starting to increase from their historically low levels it is probably also true that Bulgaria needs some initial big push forward to move the market up more substantially in the short term across the board and that this will be driven more so by the private than the public sector.
The upgrading of Bulgaria's tourism infrastructure is one of the highest priorities of the Ministry of Trade and Tourism and the government itself, chiefly for its potential in generating hard currency revenues. Currently the main tourist areas are the ski resorts well known to Western Europeans and the Black Sea beach resorts long popular with East Europeans. In 2001 nearly 3 million tourists visited Bulgaria. This was up by 17% on the previous year and 2002 showed a further 10% rise on this figure.
Projections for 2006 point to a near 30% growth of permanent employment within the tourist industry from the 130,000 currently employed. In addition are the seasonally employed workers. In 2002 tourism was practically all operated by the private sector with 98% of fixed assets in the sector being privatised.
The tourist sector is now one of the fastest growing industries in Bulgaria and, a recent survey undertaken on behalf of travel agent Lunn Poly, concluded that Bulgaria was the least expensive destination for short-haul breaks quoting a three course meal with wine as costing around £5.58 compared to £14.43 in Majorca. Commenting on the results of the survey, Lunn Poly retail director John McEwan said, "Being aware of the cost of living on holiday helps travellers make an informed decision about which resort suits their holiday habits. Bulgaria is quite new to the mainstream British holiday market, with more good holiday companies now including it in their brochures, but as it is such good value it's likely to do well".
As the euro continues to rise against the pound many tour operators are now expecting the price conscious British to increasingly start swapping their usual two weeks in the Mediterranean for breaks outside of the 'eurozone'.
As early as at the end of 1998 a major US consulting firm in Bulgaria undertook a survey asking foreign investors in Bulgaria to identify which sectors of the economy would provide the best opportunities for new entrants. Seven out of ten respondents pointed to tourism which is already a source of tax revenue 2 to 3 times greater than its share of national income even though much of the industry is characterised by a number of shortcomings and problems, chiefly that the facilities on offer being below those that would be expected using international standards as a guide.
All of that should change however due to the Marketing Strategy and Action Plan for Bulgarian Tourism prepared under the EU's 'Phare Program' which has started to encourage both private and public sector initiatives to build, restore, modernize and refurbish facilities and accommodation for tourists.
Indeed, as reported in March 2003 in The Times, Thomas Cook AG is creating a special fund amounting to Eur 100 million to be used for the reconstruction and building of nearly 15 hotels in Bulgaria.
In early 2004, one British tour operator has already named Bulgaria as the top place to visit this year, whilst a report in America in January 2004 also named it as being among the 10 best international destinations.
Thomson Holidays, Britain's largest tour operator, said that it had included Bulgaria in its brochure for the first time this year. Bulgaria, where a seven-day holiday in a three-star hotel, including bed and breakfast, costs from £259 per person, was already one of its three best-selling destinations, along with Florida and Cyprus.
"Bulgaria's biggest selling points are the great beaches and sunny climate combined with attractions including wine tasting, aqua parks, ancient monuments, nature parks, music and flower festivals," said a spokesman for Thomson. "It's also really cheap when you get there - a pint of beer is 50p, a meal for two can be had for under £5, and a decent bottle of wine for around £2. The holidays are considerably cheaper than the equivalent in Spanish, Greek or Portuguese resorts."
Sean Tipton, a spokesman for the Association of British Travel Agents, said that Bulgaria was the fastest growing holiday destination for 2004 and that at least 200,000 Britons were likely to visit this in 2004 alone - nearly double last year's total.
"Previously holidaymakers have been put off from visiting the country because it has been difficult to get there and because the accommodation was not up to standard," he said. "All that has changed in the last few years. At the moment it is fantastic value for money, but it won't stay that way for long."
First Choice Holidays, which has offered package holidays to Bulgaria since 2000, said that the country was its "star performer". Richard Curtis, its spokesman, said: "At a time when holiday bookings are down almost 25 per cent on last year to destinations across the board, Bulgaria's performance is phenomenal. We have already increased our sales of holidays to Bulgaria by 100 per cent and it is only the second week in January (2004)."
A report in the The Washington Post early in 2004 named Bulgaria as one of the world's top 10 international destinations of the year, alongside more predictable choices such as Botswana, the Bahamas and Ecuador.
Given the climate and safe sandy beaches, the incredibly low cost of living and low prices generally, in combination with the historical heritage of Bulgaria, it is clear that whilst the country may not have the same 'destination appeal' just yet of Spain or Portugal that may be about to change in particular the closer it gets to the entry of Bulgaria into the EU in 2007.