Sun, sea and skiing have made Bulgaria one of Europe’s hottest fly-to-let investment markets – but with all the attention, are properties there still a smart buy? Nadia Elghamry reports  The all-too-perfect teeth of Scott Alexander beam out from the pages of the Sofia Echo. Nicknamed “Britain’s vainest man” – the the cosmetic orthodontia alone cost €80,000 – the perma-tanned multi-millionaire hit the headlines last year by claiming he was buying a whole Bulgarian town for just €4.5m. Narcissistically renamed Alexander, the Bulgarian name being too difficult for him to pronounce, he would redevelop it especially for British tourists.
The news sent tremors through the ranks of serious investors. If exuberant amateur developers were coming to the country, maybe it was time for more level-headed fly-to-let investors to move on. Indeed, Bulgaria has been a hot property destination for nearly a decade. With 350 km of coastline, as much sunshine as Greece and snow cover for 150 days a year, over three million tourists arrive each year. Emboldened by relaxed foreign ownership laws and capital returns of 20% a year, European property bargain hunters soon began to plunk down more than their beach towels. Returns from many coastal properties are fading faster than a summer tan, however; the emergence of bulk-buying foreign ownership clubs has encouraged developers to press ahead with large-scale schemes and the first signs of oversupply are showing, particularly in the popular Sunny Beach resort. Property consultancy Savills has all but stopped marketing coastal properties through its website. Ivan Velkov, general manager at property consultant Colliers Sofia office, adds: “It is a similar story to Spain. It’s not the total amount of square metres but the density of construction that is affecting the market.” Increasingly, Velkov says, developers are thinking about ecology and the environment in an effort to prevent overdevelopment. Kavarna and Varna in the north-east are examples of this. Bulgarian Land Development has poured a fifth of its resources into building the July Morning project, an 85,000 m2 resort in the Balchik-Kavarna area. Delivery is set for spring 2010, and managing director Dimitar Savov promises that no more than 30% of the site will be developed. Savov says the investor profile is also changing. “One year ago, interest was mainly from the UK and Ireland. We are now seeing a wider spectrum of Romanian, Russian, Scandinavian, even Polish and Czech investors.” For skiing, Savov tips Borovitz and Borgas, in the south-east of the country. “Borgas’ road infrastructure is improving, and this will help open up the borders with Romania,” he says. In general, mountain resorts look far healthier investment prospects. Yields are around 7%, and according to Lemore Kayvan, manager at Colliers, development lessons have been learnt: “Bankso is attracting more interest than the Black Sea, and the municipality of Bankso has put planning permission on hold to avoid overdevelopment.” Much of the smart money is heading for Sofia, and the capital is expected to reach two million inhabitants by 2010. This has led to a huge undersupply of housing, says James Beeton at Savills. “Sofia is looking to get the euro in 2009. The country’s currency is pegged to the euro and its credit surplus is positive, so the economy is doing very well,” he observes. One worry for buy-to-let investors is the high level of home ownership, estimated at around 90%. “Bulgarians don’t mind having a second property,” says Velkov. “It’s a Bulgarian tradition that when you go to college, you don’t get a new car; you get an apartment.” Rental prospects are improving as Sofia grows as a business destination and short-term lets to multinational companies take off. Beeton advises that investors look for capital appreciation, however. “If you put in 10% equity while getting a low yield, it won’t cover your financing costs and you will have to pay a company up to 10% to manage it for you,” he says. He advocates putting in as much equity as possible and holding properties for a minimum of five years: “In three years a lot of property will be coming back onto the market. I expect prices will level off then, and we’ll find out exactly how much was bought off-plan.” €150,000 buys a spacious two-bed apartment in a good location such as the five-star St George’s Lodge, Bankso (above, both pictures).
€300,000 buys a three- or four-bedroom house on the outskirts or a two- or three-bedroom apartment in downtown Sofia.
€600,000 buys a high-quality three-or four-bedroom apartment with good rental potential, or a luxury penthouse. by Todd Jones As Property professionals gather in Munich for another Expo Real we take a look at a brand new initiative that promises to offer a new way of networking and doing deals – Real Estate DealZone.  I met up with Cannes based entrepreneur, Chris Maughan to find out what this new website is all about. Chris runs the successful AES Cannes organisation which lets prestigious properties and runs events at Cannes festivals including MAPIC and MIPIM. Chris has worked with most of the leading Real Estate companies and has devised this unique online concept – a free to use 24/7 website for the Real Estate world.
TJ: Chris – This sounds quite a unique approach – what’s the basic concept here? CM: Well quite simply it’s a new website that’s free to use – which makes a change in this industry! If you are buying or selling property or looking to lease then Real Estate DealZone offers a quick search of all International available properties and land. We are carrying out research among potential users at present and the feedback is universally positive. We are listening to what the market is telling us is needed out there and this is adding exciting new features all the time. TJ: What’s the launch date? CM: Early January 2008 for the launch and then a host of extra features in time for MIPIM in mid March next year. TJ: Sounds a great idea... What about the framework of the site – what’s it based on? CM: It’s a custom built database which is updated and added to on a daily basis. We have made it easy and fast to use. Now, if you want prominence for what you have to sell or buy then we will be featuring a daily “TOP 10” to guarantee a high profile on the listing. There will also be a corporate reference section – a Directory of leading European firms, advisers and operators.  TJ: There are plenty of online initiatives out there from traditional publishers. What’s your view on how Real Estate DealZone stands up?
CM: It’s interesting – these sites are basically reduced down versions of the traditional paper magazine and they do not offer half the service that we are planning with Real Estate DealZone. TJ: Such as? CM: For a start there is a free monthly e zine to all registered site users which will focus on a hot topic. There are opportunities to sponsor this, which we already have a queue for! There is also a Finance section – a regular article written by a respected industry insider and an opportunity to find Finance facilitating. Real Estate DealZone is for the entire industry – it doesn’t matter if you are a CEO or a Student. We have a busy worldwide appointments section and the RDZ Forum, which we believe, given the social nature of this Property business, will be very lively and probably controversial at times! We will also offer a virtual private meeting room, which is designed to ensure a confidential one to one dialogue facility. TJ: how do we get to Real Estate DealZone, Chris? CM: It’s now up at www.rdzrdz.com. Registering is both easy and free of course. TJ: Thank you – it’s a great concept. Now why didn’t I think of that? A brief guide to picking up a property in this eastern European real estate hotspot  Foreign ownership laws
Foreigners can buy property but not land; the government has plans to change this in 2014, however. At present foreign investors can purchase freehold apartments, but the freehold sits on the space that the apartment occupies. The underlying land is held through an indefinite lease from the developer. Taxes and fees Legal fees and purchase costs are around
2.5%–3% of the purchase price. Mortgage financing based on a 20-year loan and a loan-to-value ratio of 75% is 6.75%–9.9%. Stamp duty is 2%, VAT is 20% and real estate tax on a yearly basis is 0.15% of the book value of the property. Current annual house price inflation In the last 12 months, prices have risen by 20% Types of property in demand On the coast and in the ski resorts, one-bedroom apartments of up to 50 m2 and two-bedroom apartments of around 80 m2 are most in demand. Lately there has been a move towards detached and semi-detached houses. In Sofia the popularity of compound developments is growing, as is demand for high-end properties for business people and embassy personnel. Average buy-to-let yields Rental returns should reach at least 7% gross. BUSINESS BOOM Sofia’s rise as a centre of commerce is good news for the city’s rental market |