Bulgaria: Why, before you buy - 9 November 2007

Posted by Paul Collins 1 comment

There is no doubt that the opening up of the property market in Bulgaria has revolutionised the way that people look at buying property overseas. Firstly, we have Bulgaria to thank for introducing the now-ubiquitous phrase “emerging market”, but more importantly, Bulgaria has changed the way property overseas is built, marketed and sold.

The popularity of property in a seemingly dream location and for a price that is sometimes not far above what you might pay for a family car is logical enough, and this concept has made ordinary buyers into ‘investors’. There are plenty of instances of people who have been convinced to extend their finances in order to purchase one property for personal use, and another to rent out, often on the basis of predictions and projections made by agents and developers.

However, there are dangers to this. One expert has recently spoken out to tell how Sunny Beach is apparently full of empty apartments which are rarely, if ever, let out to tourists. Not only is there a huge amount of competition in the market place, but the predicted influx of visitors seems not to have appeared. There is also the impression that renting out an apartment will be easy, and somehow potential tenants will be beating their way to the doors of those who have the frontline beach properties.

It seems preposterous to imagine that there are people out there who are spending large sums of money on buying a property in a country they know very little about, but the evidence is starting to mount up. Partly, there is an impression that buying property for such cheap prices cannot fail to make a profit, and I think there is the feeling that you might miss out if you don’t put your money in straight away.

If you are buying in Bulgaria, you need to think about what you want the property for. If it is for personal use, you have to be sure that you are happy to visit the country and the area at least a couple of times a year for the foreseeable future. If you are looking to rent the property out, you have to be realistic about both the amount of money you might receive through the rental season, and also about the amount of work you will need to do yourself in order for the rental to be profitable.

Anecdotally, I met someone at a recent exhibition who had invested in a ski apartment in Bulgaria with the idea of renting it out and is more than little disappointed in the rental the apartment is actually generating. In fact, she said that at present levels, it would take almost five years of renting the place out to pay off the furniture package from the developer that she felt it was necessary to buy.

To be honest, I find the certain parts of the Black Sea coast quite worrying from an investment point of view. So many people have bought property there with the idea of renting it out to what they believed was going to be the influx of British tourists. These tourists just don’t seem to have arrived, and without this income, owners may be struggling to meet repayments, and will find it difficult to sell what is basically a holiday apartment where there aren’t any holidaymakers. There is the possibility of looking to other rental markets as an alternative source of income — Russia has recently been mentioned as potentially the biggest new inbound tourist market for Bulgaria — but if there continues to be a dearth of tourists for the resorts, will the infrastructure improvements that are essential to the development of the region still be honoured and completed?

This is not to say that Bulgaria is a bad place in which to buy property, or that this kind of thing is limited to that country, but the mantle of having being the first of the emerging markets means that this is felt more keenly in Bulgaria than elsewhere.

Are you buying in Bulgaria? Do you have a property overseas that you are trying to rent out, with limited success? Tell us about it now!

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