Buying a property in Bulgaria: how to avoid making a bad investment

Where is it possible to buy a property with your credit card? Bulgaria of course! With thousands of potential property buyers seduced by Bulgaria’s bargain property prices, the temptation is to think that getting a solid return is a no-brainer. Searching the internet, dozens of articles and property websites boast of 100% capital growth that can be achieved in Bulgarian real estate investments in the space of 12 months.

For first-time investors with small budgets looking for a step up the property ladder, this seems like an opportunity almost too good to be true! The result is that thousands of novice speculators and second home buyers flock to Bulgaria to take advantage of the investment opportunities it offers. But as the saying goes, if it’s too good to be true, then it probably isn’t.

Property prices are rising significantly, but mainly in the more established and desirable tourist hotspots. Investing along the Black Sea coast and in areas within 10 km of the two main ski resorts, Barovets and Pamporovo, is likely to yield healthy capital growth of 60-80% in a year. Buying a new apartment in these areas can cost as little as EUR 30,000 and is likely to be a sound investment, as they can easily be rented out to the growing number of tourists who come to experience the delights of Bulgaria.

A quick search through Bulgarian real estate portals and you are likely to find hundreds of properties under €15,000. With prices like this, the temptation is to rush in and buy, sometimes without even seeing the property. It is wise not to be swayed by the prospect of a property at this price doubling in value in a year. The problem with many of these properties is that they tend to be located in the most isolated and rural areas of Bulgaria. These areas are often weak in infrastructure and services and can lag behind the rest of Bulgaria for many years.

Investing in the more established locations in Bulgaria, such as Varna, Sofia or Barovets, may seem more expensive for the low-budget investor. But when you consider the additional headaches and expense involved in renovating an older property in rural Bulgaria, as well as language difficulties, your budget purchase might turn out not to have been such a good deal after all! Also, these properties could be very difficult to rent. Although Bulgaria is gaining popularity among ecotourists, this tourism sector has not taken off to the same extent as more traditional ski or sun holiday destinations.

Consequently, the likelihood of property prices rising so dramatically in isolated areas is very slim. Even if property prices take a big leap with Bulgaria’s entry into the EU in 2007, they will most likely increase in rural areas by 15-30% at most.

The situation is similar in Spain and constitutes a good example. Although Spain experienced a more than 100% increase in property prices upon joining the EU, it is still possible to find property in the most isolated areas inland for as little as €35,000. These areas are only now gaining the interest of property buyers priced outside of the most desirable locations in Spain.

The situation will be similar in Bulgaria. Tourists will flock to the most popular ski resorts, the Black Sea coast and mountainous regions. Consequently, developers will continue to invest in these areas. New developments will attract more buyers and tourists and areas will see continued capital appreciation on investments. Isolated areas, which lack amenities and services, will be overlooked, and property prices in these areas will remain significantly lower than in the rest of Bulgaria.

For intrepid investors willing to take a long-term view of their investment and wait 15-20 years to see significant returns, then cheap, isolated properties are worth considering. But the certainty of a return and the ability to approximate what that return will be is much more likely with properties in the more established Bulgarian destinations.

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