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Bulgaria: Land of opportunity
Updated: 2007-05-15

Views and Records
By Simonne Pace
Times of Malta


We've heard good and bad stories about property developments in emerging Eastern European markets. However, surely, places like Bulgaria and other neighbouring countries are very much in the limelight, especially now that they've joined the EU, widening their business horizons and opening up to foreign investment.

"EU membership has increased the confidence of foreign investors in Bulgaria's real estate sector across the board and a wider range of nationalities are expected to invest in the country in coming years," says Andrew MacDowall, editorial manager of Oxford Business Group in Bulgaria, which produces online and print publications for Eastern Europe, North and South Africa, the Middle East and Asia.

He goes on to say that currently, 29 per cent of real estate sales in the country involve foreigners, mainly British clients (67 per cent) and Irish (12 per cent). Other EU members have been less enthusiastic about entering the market, with German clients accounting for four per cent of sales and Italians three per cent. It is expected this year that the British will account for most foreign purchases.

Leading Maltese real estate company Dhalia Group were the first to venture into property development in Bulgaria. Director Chris Grech and Franco Valletta, the group's chairman and CEO, told The Sunday Times last week that the challenge of investing and developing property in such a fast-moving country like Bulgaria, where the property market is vibrant, has its difficulties and challenges.

They say a professional corporate structure is what is primarily needed to deliver the right product on time and offer investors good value for money.

"We have tackled the project as we should, by employing the right project manager, the right property management and re-letting company and the right contractors, carrying out research to make sure that finishing standards are excellent, and preparing the right contract so the contractor is bound to deliver."

Construction on Dhalia's project in Bulgaria - the 7,500m2 Balkan Jewel - started last week and the company has just concluded a contract with AT Engineering Ltd, a top Bulgarian company with a 20-year track record in property development in Bulgaria. Targeted completion date is December 2008.

Project management is in the hands of UK company Vector International, "whose project managers responsible on site will monitor the property's quality and progress from beginning to end".
"Having invested in a project management company of such a high calibre proves we have the right product," Mr Grech explains.

In September 2005, when Mr Grech and Mr Valletta decided to source opportunities in Bulgaria and open a Dhalia office in Sofia, there was a lot of talk about this country being a land of investment opportunity. When the land between Bansko and Razlog was acquired a year later, excitement took over and the project started to materialise in earnest.

"We went one step further, going into added costs but taking future savings into consideration. Since we are small in Bulgaria and have not had the necessary experience to manage properties, we wisely invested much more and chose Colliers International," Mr Valletta says.

This leading real estate company, which offers a full range of investment and corporate advisory services in property management, manages not more than 1,000 units (apartments) in the whole of Bulgaria, including the Balkan Jewel, which comprises 160 apartments.

Fifty per cent of the Balkan Jewel units have been sold off plan to Maltese investors, since Dhalia has, so far, only launched the project in Malta. Starting from June, Dhalia hopes to market its development also in Birmingham, Manchester, Dublin and Moscow. The bulk of the one- and two-bedroomed apartments are selling at around Lm30,000 to Lm45,000.

Why all this interest in Bulgaria?

A global price index provided by property professionals Knight Frank shows that last year four nations in eastern Europe - Latvia, Bulgaria, Lithuania and Estonia - ranked among top ten destinations for annual house price rises, Bulgaria rating second with 19 per cent capital appreciation after Latvia (39.2 per cent).

The index, featured in the spring/summer issue of Property Magic, was part of an article by Graham Norwood entitled "My profit is bigger than yours".

Mr Valletta says it is extremely important that foreign investors look at tourist growth, gross domestic product growth, transparency of the property purchasing process, wage inflation and easier access to mortgages.

"Rapid tourism growth in Bulgaria is mainly due to a good mix of markets. You go to the heart of Sofia, which is truly elegant, yet is becoming a great commercial hub, attracting huge institutional investors. Then there are leading ski destinations such as Bansko, Borovets and Pomporovo, Black Sea resorts such as Albena, Golden Sands and Sunny Beach, central Bulgaria with its rose cultivation and perfume making, the Radopi Mountains, and other beautiful places such as Plovdiv, with its 20,000-year-old prehistoric remains, and Rila Monastery in the mountains."

Bulgaria's transition from communism to capitalism did lead to instability, but with EU membership things are changing. As mentalities change, pockets are increasing their spending power.

Countries like Romania, Bulgaria, Croatia, the Czech Republic, Slovakia and Montenegro are becoming strong destinations. It seems that people are seeing them as new lands of opportunity. Many have joined Europe, including Poland, gates are opening, educational standards are rising and some of these countries are truly beautiful," Mr Grech said.

"However, as a tourist destination, we feel Bulgaria's climate and natural beauty have made it a stronger destination at the forefront of foreign investment.

"We wanted a 12-month destination. In winter, the Black Sea cannot compete with Mediterranean destinations like Spain, Portugal, Malta, North Africa, Croatia or Italy. We wanted to invest somewhere where people would get excellent value for money all the year round, having three powerful anchors - skiing, golf and natural beauty."

Dhalia Group is in the process of trying to source new land opportunities in Bulgaria. However, branching into other countries is a prospect the company does not exclude. Mr Grech listens attentively to his partner, the strategist, as he directs the company towards further growth and expansion.

Definitely worth considering before investing are infrastructure, access to property and potential demand - what people want and what makes their investment sounder.

What makes an investment grow bigger is location and the support that location has, as well as the rate of return that property can have for potential investors, not only in waiting for an increase in value, but also an actual renting return on the property.

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