27th August 2008
Foreign Property Shop.Com Ltd
Recently topping Knight Frank’s global property index, Bulgaria is one of the most popular countries to purchase in. And with prices starting from under 10, 000 GBP for freehold property, it is easy to see why. However some of the best buys in the country are from distressed UK owners who are putting silly prices on otherwise great property.
There are distress sales all over the world, but at least purchasing one in Bulgaria you will know that you are buying in a country that has sound fundamentals, unlike countries such as Spain which are experiencing similar economic as we are here. Properties in those countries are likely to go down even further in value so what you thought was a great buy last month could sink much further in value.
So, you are looking for a holiday home in the sun or a medium term investment and have chosen Bulgaria as the country you want to buy in. Do you purchase direct from a Bulgarian, or in the case of new builds, a Bulgarian developer? No. There are some much better deals out there available from cash strapped UK buyers who have got in above their heads. Bulgarian sellers usually don’t have the financial pressures to sell and will be stubborn about wanting the market value for their property.
The usual story behind a typical distress sale is as follows, Colin and Sue have purchased an off-plan apartment in Bansko with the intention of renting it out to holiday makers on completion. They chose Bansko as it had the best ski facilities, a good snowfall and there was a great lack of Western standard holiday accommodation.
They mortgaged up their property in the UK to be able to purchase a one bedroom apartment but didn’t think about the long term implications. Namely, they were going to be in competition with hundreds, if not a few thousand other apartments for rentals and that with the impending economic problems in the West, their UK property portfolio on which they financed their Bansko apartment, was likely to suffer. As a result, Malcolm and Sue will take whatever they can get for their Bansko apartment.
This opens up some great offers for ‘vulture investors’ who have waited until the Bansko property boom has subsided before coming in and picking up a really cool new build apartment in Bansko (or indeed, any other resort in Bulgaria). The unlucky Brit who you are purchasing from will probably have furnished it aswell. With prices starting from only 15, 000 Euros for a completed apartment, there are some great offers out there.
The Long Term Future
The long term fundamentals of Bulgaria are good. It has a consistently growing economy, small government and low taxes. But we don’t recommend buying with a view to selling a month later for a 50% profit as it is unlikely to happen. Instead, purchase and hold on for a minimum of 3-5 years (at which point, you wont be paying Capital Gains Tax either on leasehold apartments).
Prices in resorts such as Bansko are much lower than in French ski resorts, but the skiing just as good (particularly if you are a beginner!). The Bulgarian middle class is growing and buying interest from non-EU countries is quickly picking up too. That means over the next few years, the numbers of buyers coming to the country is likely to increase. And resorts are always favoured first.
The number of new builds being released onto the Bansko property market has been greatly reduced thanks to much tighter building regulations and a stabilisation of the market. This ensures the long term value of any property you buy in the resort.
The effect of EU entry is continuing aswell, with more funds being released to improve infrastructure in the country. This stream of investment is bound to underpin property values, as it did with Ireland 30 years ago.
Don’t make the mistake of short termism Western buyers who have had their fingers burnt by not thinking their actions through and panicking at the first sign of trouble (dispassionate investors would realise they would be better off unloading their UK property instead of Bulgarian ones).
To view our latest selection of ‘distress sales’, why not contact us on 00359 885 250497 or via email on email@example.com