Bulgarian Property - a good proposition or Investment Bubble

25th October 2005,

Bulgarian property prices have risen consistently in Bulgaria over the last four years due to the interest from foreign investors, primarily from the UK and Ireland.

But does Bulgaria still offer investment potential or is it a speculative bubble ready to burst?

Experts in the Bulgarian property market give their thoughts and opinions and how they advise their clients wishing to buy property in Bulgaria.

There is no doubt that even though property prices have risen strongly over the last few years there are still some excellent areas for investment. There are also some areas that clearly offer less value from an investment perspective.

Bulgaria is a beautiful country and offers fabulous beaches, clean mountain air and strong skiing and winter sports facilities. This attraction means that some property purchasers do so for specific reasons, to use as a family holiday home or a base for skiing, mountaineering or walking. The price of property and potential for investment return is of less importance for these buyers.

It is of concern that some areas are attracting buyers for pure investment reasons and prices are becoming unrealistic, at least in the short term.

In Sofia, the National Real Property Association reports that 500 000 m 2 of residential floor space will be constructed by the end of 2005. This exceeds the demand by 250 000 m 2. There is an oversupply of property in this area and investors will be lucky to get any rental income and if they do the returns will be very low. What is worrying, if investors need to sell the property quickly, the resale market is almost non existent because buyers have the choice of buying one of the many new properties. This could result in having to sell the property at a substantial loss.

This is also repeated in the Sunny Beach area. This area offers cheap summer holiday to tourists, yet it is not to everyone's taste. Here too, there is a huge oversupply of apartments, poor resale market and potential for large losses if you need to sell quickly. Some apartments have been reduced in price from 1000 euro / m 2 to 600 euro / m 2.

So what are the potential investment areas? The areas around Balchik are very exciting, with the development of the new golf course at Topola and the huge investment recently announced to develop Balchik into a premier leisure yachting facility.

Still there are some areas around the ski resorts of Pamporovo and the mountain areas surrounding the Stara Planina mountains that have yet to be discovered. As a result, property can be bought at much lower and attractive prices.

The purchase of land is proving a solid investment for many buyers, it requires no maintenance and plots in good coastal areas that are not becoming overdeveloped have risen by 40% this year. This looks set to continue as good quality land for building becomes more scarce and Bulgaria gears up for entry into the EU in 2007/2008.

Best Bulgarian Estates Ltd,