The media in both Bulgaria and the UK continue to be enthusiastic about the phenomenal investment potential of the Bulgarian real estate market. This hype has led many people to invest in the market in the hope of a quick return. Mass publicity about rising property prices attracts many people to Bulgaria, but what is the reality of the situation?

Quest Bulgaria takes a look at the reality of property resales in Bulgaria and how much your property could be worth.

Knight Frank, one of the UK’s most respected residential and commercial property consultancies, recently published a report indicating that high increases in residential property prices placed Bulgaria second in a global table highlighting increases of property prices during the second quarter of 2007. Prices increased by 27.1%, so does this mean my house is now worth around £44,000 more than it was when I put it on the market earlier in the year? Should I increase the price according to market trends?

A report by another renowned company, property consultants, Colliers, reported similar trends in Bulgarian property, but focused more on the fact that it was the number of buildings built. Mountain resorts showed increases of 50% and the Black Sea coast of 39%. How easy it is to read this statement in relation to the price increase rather than the build rate and miss the part of the Colliers report, which states that sales prices have generally “remained flat for the past half year.” as supply continues to outstrip ask.”

The reality of the situation is that most reports measure the success of the Bulgarian real estate market in terms of price increases or construction fees and overlook the fact that in Bulgaria, the real estate market is unregulated and the seller price your property. The valuation process goes something like this: “Ivan across the street has advertised his house for sale at €20,000, so my house must be worth €30,000 because it’s bigger.”

Another form of valuation has been the result of cities and, in particular, villages adopting unofficial rates. All it takes is a professional developer to move into the area and the price they charge for their properties, usually a cost per square foot, becomes the official standard.

The town of Rogachevo on the northern Black Sea coast is a prime example. Bulgarian Land Development Plc, a newly incorporated company now listed on the AIM stock exchange, has started construction on a €6 million villa and apartment complex on the outskirts of the village. The price of the property in the urbanization ranges between 750 and 1,200 euros per square meter The conclusion among people who want to resell properties in the village is: “my property is now worth at least 750 euros per square meter”. The fact that the property for resale does not have the same scenic outlook, modern facilities or luxurious design is irrelevant to sellers. Bulgarian sellers have little experience in the real estate market because until a few years ago there was little demand. consequently, they are not used to working according to the laws of supply and demand. Many British sellers, coming from a mature property market, are lost without the skills of an appraiser and price their resale based on the following equation:

original cost + renovation costs + local market fees + desired profit = resale price

However, as everyone who migrated here attracted by cheap property and quick money now knows, the resale market is slow and underdeveloped. Apartment blocks are skyrocketing at a rapid rate, giving new buyers plenty of choice in both price and design. Renovated homes cost two cents, and who wants to buy a renovated traditional build in the middle of nowhere, when there are so many well-designed new builds to choose from? At the moment, it is safe to say that in Bulgaria, supply far exceeds demand in terms of land and property.

The image is not one of pessimism, but of caution rather than collapse. The market is far from a downturn, if it were you wouldn’t see UK currency speculator Joe Lewis investing £70m in the Bulgarian real estate market. And he is not alone, the Israeli investment and construction company BSR Europe recently bought around 80,000 square meters of land in Bulgaria for 37 million euros. Gardens Group is investing €400m in a 600,000m2 development in Lozen, a town near Sofia.

A Raiffeisen real estate source said most of the sales in the last 2 years are from resale customers. Most of these people bought land or property, occupied it for at least three years, and are now reselling it for a 20-50% profit. This is easy to achieve when looking for properties at the lower end of the market; Raiffeisen recently sold a property, which the client bought for €10,000 and sold for €15,000, but the demand for rural renewal projects has decreased. Land reselling is lucrative if the location is good. Apparently, there is good demand for regulated land near the coast. Once again, patience is the key. Raiffeisen has dealt with resellers who bought land in 2004 at 10 euros per square meter and sold it in October 2007 at 25 euros per square meter.

British buyers have a “promotion property” mentality. They expect the property to dramatically increase in value as it has for the last seven years in the UK. In this sense, they are not in tune with the rest of Europe; most of continental Europe considers their property as their home, while the British see their property as a way to earn money. Their foray into the Bulgarian real estate market has left many disappointed because, fueled by media hype, they expected the market to bring them big profits in a short space of time, as it had in the UK. The lack of regulation in the Bulgarian real estate market has meant that the seller is in charge of the valuation of the property himself, often choosing an inflated sales figure rather than checking the actual market rates for resales.

Property prices have increased in the last two years. Belinda Knowles, 42, a trainee lawyer from Dulwich, bought her one-bedroom apartment in the Golden Sands complex off-plan for €40,000. She took two years to complete the project and has just spent her first summer enjoying the fruits of her investment. A one-bedroom apartment in her block now costs €60,000, a staggering 50% growth, if she could sell hers. “I think the market is inflated by unscrupulous real estate agents. I am sure that if I put my apartment up for sale at this price I would be disappointed for two reasons. Why would someone buy my apartment when they can for brand new for the same price and if the demand is so great, why haven’t all the apartments been sold?” Fortunately, Belinda bought the apartment from her as a long-term investment. “I have two teenagers and package holidays abroad were getting ridiculously expensive. The kids are also reaching the age where they would rather come on holiday with their friends than me. I wanted to save money in the long run by having a place abroad that the whole family can use through the network of low cost airlines and I wanted to be sure it would be a safe place for my children to stay alone with their friends Golden Sands is ideal we got cheap flights with Wizz and British Airways out of Gatwick, which means we can come more often and the nightclubs here aren’t full of drug-addled louts, so I’m not shy about letting my kids go out.” She also knows that by the time they’ve outgrown Bulgaria, the apartment will yield a good return on her investment. “Ten years from now, when my children have their own lives and livelihoods, they may not want to spend their free time here. I am sure that with the rate of investment that is being made in the country right now, my apartment to sell at a higher rate than I paid and I will have saved money in the long run by not having to fork out package vacation fees.

Jayne de Sofía bought a dilapidated country house this year for €20,000. “I’ve been quoted another €20,000 to fix it and I’ve set aside a contingency budget of €20,000. I hope to be able to sell the property in two years for €70,000, which will give me a modest profit of €10,000. I think This is a reasonable profit.”

Assetz International Ltd, a renowned British investment firm, has warned its clients that growth rates of 20-30% in countries like Bulgaria will not be sustained and that the growth rate needs to be reduced to a more constant and sustainable one. Bulgaria was still labeled the best place to invest in foreign property, but as early as 2005, Assetz advised caution when investing in emerging markets like Bulgaria: “Low prices attract buyers looking for a ‘quick’ fix to pension shortfalls.” . , but as many agents will admit, there is no guaranteed resale market in Bulgaria and few benchmarks to measure price increases.” As early as 2005, they recommended that their clients view Bulgaria as a long-term investment rather than expect instant returns, considering the fact that, for a while, supply would outstrip demand.

Economic indicators, as we noted in last month’s copy of Quest Bulgaria, look healthy for Bulgaria and will go a long way towards increasing house prices on the market, but in the long run. What we need right now is a realistic adjustment in market prices.

The key to investing in Bulgaria is; location, location, location: be reasonable, expect good returns in the medium and long term. Choose Bulgaria because it is a great place to be and you can have a home for less than the price of a kennel in Britain. Bulgaria still offers incredible prices compared to the rest of Europe, which will provide you with cheap vacations, a low cost of living, easy access, beaches in the summer and skiing in the winter.

TIPS AND TIPS FOR PROPERTY RESALE IN BULGARA

Currently, supply exceeds demand in many areas, giving buyers a wealth of choice and the potential for good prices.

Don’t overestimate the return. Expect to make good profits in the medium and long term

Invest your money wisely – don’t take chances with a property portfolio if you need a quick profit or need the money

The location and type of property you purchase will determine the size of your earnings. So will future developments such as infrastructure, airports, cheap flights… Research, research, research.

Set reasonable prices on your resale, don’t pick numbers out of thin air or copy what others are doing. Market the best features of your property, what makes it special.

Ask people you know how much they would expect to pay for your property

Sit back and enjoy your property for yourself or consider turning it into a business to relieve the pressure of needing to resell it.