Bulgaria – Business climate at a glance

The Bulgarian economy registered a GDP growth of 6.7% y-o-y in Q306, the fastest growth rate since the first quarter of 1998. Private consumption has grown by 7.4% and investment growth remains strong. However, the government is facing the challenge of ensuring that fast growth in domestic demand does not weaken the economy by increasing flawed current-account deficit. The burden of limiting demand falls on the government’s fiscal policy.

Property Market Forecast

For people looking to buy property in Bulgaria, it is worthwhile to note that the prices of property in Bulgaria could add some 14% in 2007, thus overthrowing prophesies that the market will skyrocket after the country’s entry into the EU. In the past few years, production materials grew by some 28% y-o-y which affected the prices of new property. The pace of the economic growth is not expected to influence the prices of real estate. In 2006, some 30% more construction permits were issued, among them many to foreign investors. Property buyers can expect some respite - at present, the economic situation is not suitable for significant price hikes.

Commercial property transactions in Bulgaria reached EUR 570 million in 2006, compared to EUR 215 million in 2005. The estimates of experts are that the country is unlikely to see such a real estate boom in the near future. However, analysts expect that some EUR 1.5 billion will be invested in commercial properties in the next couple of years.

Office property investors need to be a little cautious. The prices of rents for offices could go up driven by several factors. After Bulgaria’s accession to the EU, more and more multinational corporations will enter the country. European institutions will also seek office space. And last but not least, Bulgarian companies will have to leave their present offices, which very often are residential premises, to move to prime office buildings. At present the office vacancy rate in Sofia ranges from 6-8%.

Top deals and opportunities

Let’s focus on the hotspots of property investment in the recent months. The deal for Business Park Sofia topped the ranking, while there were three other massive deals for the sale of two malls in the capital Sofia and one mall in the old capital Veliko Tarnovo. Sofia could not absorb the large number of malls currently under construction. At present, there are about 10 such projects under way.

On the other hand, smaller cities with population of about 100,000 could be a good place for such developments. Openings of new malls lowered the high street rates in Sofia. In 2006, high street rents declined by 10%.

Bulgaria house buying process

Buying a property in Bulgaria - what’s it all about? If you are a foreign national buying a house with land, then you need to pay a 10% deposit and then get the property registered as a business. Remember, the consumer services like electricity and telephone will be charged at commercial rates.

You have to complete the legal documentation work in property buying in a two-stage process. You need to sign a Notary Act, which is the purchase contract. This has to be done in the presence of a Bulgarian public notary. The second stage involves the final legal contract.

A first time property buyer would find the entire buying process to be quite bureaucratic - in some cases, a real estate agent has to form a firm on a buyer’s behalf before a sale can be finalized.

Potential investors need to give thought to the introduction of the EU’s environmental programme Natura 2000. It is a major concern because it is still unclear how, if at all, the area included in the programme could be developed. The programme includes areas on the Black Sea, where the summer resorts are located, as well as mountain areas surrounding the winter resorts. Thus, investors must take in account the new legislation and adjust their building ideas to the new Master Plan.

As for the arable land, amendments to the Land Use and Ownership Act stipulates the land lords must give the lessee the first purchase option before offering it to a third party.

Conclusion

Currently, the real estate market generates profit in the range of 8-10% annually, but this indicator will fall in the years to come. In mid-term, the market will be run by large investment funds which will seek not fast profit but rather stable long-term earnings. Overall, I think all potential investors have a fairly good opportunity to buy Bulgarian property in the short- to mid term.

For more information on buying property in Bulgaria take a look at these resources:

http://www.bulgarian-property-advice.com/bulgarian-property-blog.html
http://bulgarianpropertyblog.blogspot.com/
http://bulgariarealestate.blog.co.uk/
http://www.overseaspropertymall.com/buying-property/buyers-beware/beware-bulgaria-property-investors-warned/
http://bulgarianpropertyblog.blogspot.com/2007/04/residential-property-prices-in-bulgaria.html

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