Bulgaria has become one of the most popular locations for Brits investing in overseas property in recent years, a trend that is likely to soar now that the country is on track to join the EU in early 2007.
According to foreign currency specialist, HIFX, in the first part of this year one-in-ten of all its currency transactions for property purchases were destined for Bulgaria, making it the third most sought after location behind joint favourites France and Spain, with Australia in second place.
Foreigners have only recently been allowed to buy property in Bulgaria, but it has caught the imagination of UK investors, partly due to its increasing popularity as a tourist destination, but also because of the low cost of property and potential returns on investment.
Some industry commentators have put the capital growth in parts of Bulgaria as high as 116 per cent, with average growth around 30 per cent. Properties start from as low as £27,000 for a one-bedroom apartment through to £183,000 for a penthouse, although prices are creeping up as Bulgaria’s membership of the EU gets closer.
Decisions decisions
The first decision for would-be investors is whether to go for an existing Bulgarian home or a new development. Bulgaria has few quaint or traditional homesteads and most older properties will need a lot of work to get them up to UK standards. New developments offer a wide choice of location and styles, all built to exacting standards. Off-plan developments probably offer the greatest potential return as they are currently increasing in value even before construction is complete.
There are many developers operating in the country and there are estate agencies that provide access to both new-build and existing properties. Most of these organisations will be reliable, but it always makes sense to find out about who you will be dealing with and preferably get some recommendations.
When it comes to a mortgage there are only a handful of banks offering home loans in Bulgaria, none of whom are UK-based. The major players are Greek bank Piraeus and locally based lender DSK. Last month, Piraeus launched its lowest ever loan at 5.90 per cent, more than a percent lower than its competitors, which is a self-certification product available for a term of up to 25 years at 70 per cent loan-to-value (LTV). The lender will also take into account up to a quarter of potential rental income, so it is ideal for borrowers looking for holiday lettings potential.
As banks don’t lend on off-plan purchases until the building has been completed, buyers will need to raise a loan on their existing UK property to cover the purchase and then take out a local mortgage when their Bulgarian home is finished. It is important that borrowers seek advice from a mortgage broker experienced in the overseas market before making any decisions.
Legal issues
The same is true of legal advice and buyers should ensure they find a reputable Bulgarian solicitor to advise on issues such as ownership, property inspections and land registry. In reality buying in Bulgaria is actually more straightforward than in the UK as once an offer has been accepted the buyer puts down a 10 per cent deposit, preventing gazumping, with the deal usually completed in three to four weeks.
Currently foreigners cannot own land as individuals, but they can own a Bulgarian company that is allowed to own land. This procedure is simple to set up and only costs around 600 euros.
Bulgaria’s legal system is modern and trustworthy, and there are no strange land laws like in Spain and Croatia. A good estate agent will be able to recommend a solicitor, although many developers offer buyers legal and financial services on a one-stop-shop basis. For added security a notary records all documents and agreements.
Bulgaria is an ideal foreign property option for UK buyers, whether they have invested in an overseas home before or not. Great weather, friendly people, a relaxed culture and fantastic value – but they need to be quick because the secret is out and prices are on the up.
