Property investing in Bulgaria: the pros and cons

Article by Lorna Bourke, Money Columnist at Citywire UK, 10th April 2005 *with excerpts

With residential property in the UK having peaked for the foreseeable future, investors have been casting around for alternative locations with investment potential, and Bulgaria fits the bill.

Many investors have already spotted that Bulgaria offers very good value for money, with letting potential as a holiday destination. The best investment opportunities include the ski resort of Bansko and the Black Sea resorts of Varna and Bourgas. The capital Sofia is developing rapidly as a commercial centre, signalling that capital appreciation and rental yields should be very strong in the future.
Bulgaria saw property price increases of 35% in 2004 but average yields on rental properties are still 8% to 12% with most investors (80%) buying in the Black Sea coastal resorts and 15% in ski areas. Some 80% are investing in new developments.

For example, studio apartments in the Black Sea resort of Sunny Beach can cost as little as £16,850.

There are good opportunities for both city-centre buy-to-let properties and holiday homes with letting potential, but despite promising returns, investors must be wise to the risks involved of buying in an emerging economy.
Low prices attract purchasers who are keen for a quick-fix solution to pension shortfalls, but as many agents will admit there is no guaranteed resale market in Bulgaria and little existing benchmark for measuring price increases other than more and more investors paying higher prices monthly.
That is why long-term investment are recommend to instant returns.

There is a genuine demand for quality rental properties but written contracts with holiday companies are vital as a means of ensuring a guaranteed yield. Travel agents and tour operators who are no longer enjoying big mark-ups in Spain are looking for higher profit margins in Bulgaria and this does underpin the long-term future. High street travel agents and tour operators do have a substantial number of sun and ski holidays available in Bulgaria today and they are selling well, boding well for future returns for quality locations and developments.