Bulgaria curiously offers some great property investment opportunities and also perhaps some of the worse property investments in Europe.
The Bulgarian property has been heavily sold in the last 5 years. Foreign agents sold beach and ski apartments to unsuspecting investors who were attracted by low prices and promises of quick and easy returns on their investments.
However, the only people who made money were the agents and developers.
As more and more investors piled in and more property was built there was very little real fundamentals to the market, other than foreign money. This has left the beach and ski resorts oversupply with property which no-one can rent or resell easily, and many investors have been left with dud investments.
As this trend became apparent the Bulgarian property market attracted a lot of negative press coverage.
Whilst this negativity is valid in the beach and ski resorts we believe that the overall Bulgarian economy, FDI and demographic trends mean the Bulgarian cities are well position to show good long term capital growth.
Government debt is low, FDI has created jobs, infrastructure being improved and wages are rising. And as mortgage debt in the country is still at a very low level there is large potential for significant amounts of money to be added to the Bulgarian property market.
Piraeus Bank was the first bank to offer mortgages on Bulgarian property to foreigners in mid-2004. There are now 10 banks offering such products. LTV’s typically are around 70-80%, interests rates start in the region of 6.5-7% and can go as high as 12%, but now there is some possibility of being able to refinance and take partial interest only payment periods.
The relatively good finance market (better than neighbour Romania) has been one of the curious benefits of so many foreigners buying property in the mountains and on the beach. And we expect these products to improve over time.
Overall the Bulgarian property market can offer some excellent opportunities if you choose carefully, but if you get it wrong it can be very painful indeed.
