1. Why investing in Bulgaria?
a. Tourism Potential
b. Political Stability
c. Economic Factors
2. Investing in Off-Plan Properties
3. Investing in Land
4. Information for Developers
5. Making the Right Investment – Lets talk money!
1. Why investing in Bulgaria?
a. Tourism Potential
In recent years Bulgaria was labelled by international investors as
the new hot-spot. Whether you are a small, private investor or
commercial developer, there are few countries that can offer you the
capital returns that Bulgaria does. It is therefore not surprising that
the country was labelled by Channel 4 as one of the “20 best places to
buy in the world”!
Of course Bulgaria is a beautiful country with an excellent capacity of
attracting tourist throughout the year – the long sandy beaches, a
number of first-class ski resorts and a countryside with splendid
scenery can leave few to wander how come they have never visited the
country before.
Well, it would be misleading to assume that no one knew about Bulgaria
– in fact traditionally the country has attracted millions of tourists
throughout the year, mainly from Russia, the Czech Republic, Poland,
Germany, Holland and other eastern and northern European countries.
However in the past 2 years the tourism industry has seen an unusual
boom, to be precise more than 4 million tourists have visited the
country for the purpose of “recreation and leisure” – this is an
increase of 13.5% form the previous year, an impressive figure taking
into account that most countries have seen a decrease in the number of
tourist visitors.
Apart from the nationals of the countries which have traditional links
with Bulgaria, visitors from other locations have emerged, among others
British tourists, the number of which has increased by more than 60% in
2004.
This tourism potential of the country attracts investors, who will be
guaranteed excellent rental yields, the present level of which are on
average between 6% to 10%, for their properties.
Factors to be considered:
- The diverse geography and climate have provided an excellent
environment for the development of both ski and beach holiday resorts;
- The Black Sea international airports in Varna and Burgas are about 3 hours flight from Britain;
- There are circa 220km of sandy beaches on the coast;
- Many major international holiday companies have placed Bulgaria
on their books – the demand from holidays is steadily increasing.
b. Political and Social Stability
In the last 15 years, Bulgaria has experienced a rather troubled
transition from communism to democracy, however the progress which the
country has made in the past 5 years is undisputable:
- the country is set to join the European union in 2007;
- Bulgaria became a NATO member in April 2004;
- The Bulgarian national currency, leva (or BGN) is currently very stable and linked to the EURO;
- Very low crime levels (in fact lower than the average in the EU or Britain);
- One of the countries in Europe with the lowest costs of living;
- Bulgaria is prised on international level for its progress, legal, political and economic reform.
And this is what a serious investor would consider – a safe environment
and profitable way to invest his money!
c. Economic Factors
Did you know that:
- in 1997 Bulgaria entered into agreement with the IMF, which resulted
in the creation of the Currency Board and a substantial decrease in the
inflation levels, which are at present set at 5.9%;
- as the market was liberalised, the foreign trade between Bulgaria,
the EU and EFTA and CEFTA countries was substantially enhanced;
- the GDP growth between 1999 and 2001 has increased from 2.5% to 5.8%;
- in 2000, an astonishing 85% of the indistry underwent privatisation;
- the economic gwoth in 2004 was 4.8%.
2 . Investing in Off-Plan Properties
There is currently a large demand for off-plan properties in
Bulgaria. Many investors who have missed the opportunity to invest on
time in Spain, are now learning from others and put there money in
various off-plan developments on the Black Sea coast and the ski
resorts.
If you buy an apartment in an off-plan development during the early
stages of the building process, you will benefit from a substantial
discount given to you by the developer and from excellent capital
growth. Furthermore you are not required to tie-in your invetsment
capital at once, as the payment schemes for such investments is fairly
flexible and you pay the developer at stages.
Of course, it is important to ensure that the developer is sound and
experienced, and we are more than happy to show you the devloper’s
previous projects and to arrange for you to inspect completed projects
in person, where possible.
3. Investing in Land
The vast majority of investors have focused on the market of newly
completed or off-plan properties. In result the demand for such
properties pushed up their prices in relation to other investment
options, such as building plots. At present we can therefore observe
the following trend: the price per square meter of completed building
or off-plan property in a prime area (along the Black Sea coast,
near the major ski resorts or in large cities) averages 900 EUR
per square meter. At the same time the average price of regulated
land (with planning permission) in the same areas averages 60 EUR
per square meter. Building costs are on average 250-300 EUR. The
other costs for developing communication links or/and utility supply
(such as water and electricity) reach up to 50 EUR per square meter.
The total cost for building a property on a regulated land amounts
to circa 400 EUR per square meter.
And these are relatively conservative estimate… With good management
and clever planning these costs could be further reduced. It could be
interesting for you to know that the profit margins the property
developers of new and off-plan properties enjoy vary between 40% and
250%. The latter might sounds like a story tale, but the example below
could illustrate how it could be achieved in practice:
The developer buys a plot of regulated land for 50 EUR/sq.m and
finances the initial stages of the building himself (1/3 of the costs
per sq.m are about 100 EUR + building communication links etc. which
would reach circa 50 EUR/sq.m). After completing the first stages of
the development, he sells the building off-plan with a price tag of
circa 900 EUR/sq.m. With the funds so raised he finances the remaining
building work. As a result, the developer net profits are realistically
expected to reach 500 EUR/per sq.m for an investment of about 200
EUR/sq.m. This scheme is well known and widely used by the property
developers… It represents a huge opportunity for investment!
Our main strategy is to find investment options with highest potential
for future capital gains increase. In this way your returns will be
affected by both the capital appreciation of the land over time and
from its development.
We will also assist you with your application to transfer and register
agricultural land as a regulated one. The process takes about 9 months,
yet it could save up to 40% from your investment. As the old cliche
says 'time is money' and therefore all planning stages could be
completed even before the planning permission is obtained by the local
authorities. We are involved in many similar projects at the moment.
The average return on capital for our clients is estimated at 58%
per year, yet in some cases the projections show a return on investment
of 140% per year. We achieved these results by choosing the plots
of land with potential higher than the average, clever and careful
planning and professional building development. Good connections with
the local and central authorities help us to obtain the necessary
licences and permissions within reasonable time. What we proved is
that reality is sometimes stranger than the fiction…
4. Information for Developers
To those who want to renovate a property or build a new one, we offer specialist services.
An experienced developer and architect will have a meeting with you, during which you can discuss your expectations and plans.
The architect will draft plans for the project, which you can amend
until you are satisfied with the final version. A planning permission
would have to be obtained, and this will also be arranged by our firm.
You will be guaranteed to work with only the best in the field, who
have the necessary experience to make your project a success!
We can provide you with a complete solution: finding a suitable land
in hot-spot areas of the country, assisting you in the purchase process
and getting the required planning permissions and licences. Using our
experienced team of architects, planners and builders we can undertake
even the most difficult and complex projects. Even if our forces may
prove to be insufficient, we can rely on a broad network of close
property development companies with varied specialisation. Our aim is
to maximise your profits – your success is a measure of our success!
You will be involved in all stages of your development, from
selecting the right plot of land, to chosing the building materials
(the quality of which can vary enormously) and inspecting the
development when necessary. Our aim is to establish an effective
communication with our clients, so that resources are invested in the
most efficient manner and time and money are used to our clients’
advantage.
Should you wish to rent or sell your property, then of course we are
here to assist you and provide our services to you.
5. Making the Right Investment – Lets talk money!
The Bulgarian property market is the current investment hotspot and
offers countless opportunities to any open-minded investor. According
to the recent report released by the European Bank for Development and
Reconstruction, property prices in Bulgaria have increased by 145% in
the last two years, with an annual property price increase for 2004
being 25%, and much higher in some areas. This trend is expected to
continue until 2007 when Bulgaria is due to join the EU.
Most investors so far have been attracted by the extraordinary capital
returns. The very low base from which the market started its
development and the continuously increasing demand from investors from
Britain, Ireland, Germany, the Netherlands, Scandinavia and Russia
caused some disparities to appear on the market – these provide some
exciting new prospects to those clever and open-minded investors who
can spot the opportunity.
We are looking for the most efficient solution for your personal circumstances!
For smaller investors, with capital of circa £ 10,000, we have a number
of properties and plots of land which can be bought for medium to long
term invetsment and be sold after Bulgaria enters the EU in 2007, when
the property prices are expected to stabalise. As prices are forecast
to double in in the next couple of years, smaller invetsors can
certainly enjoy good returns on this type of invetsments.
Many smaller investors, or home buyers, also want to buy a property for
renovation – whether they plan to sell it later on or keep it for their
personal use and to obtain some rental income during the season. Such
investors can benefit from our excellent local knowledge and buy a
property in an up-and-coming area and use our network of builders, who
can renovate their properties at very reasonable prices. We can advise
such invetsors on what buyers want, so that their properties are sold
easily after the renovation completion. Returns on such invetsments can
vary and be as much as 60%, or vene more, considering the fact the
sellers would also benefit from the constant incdrease in the property
prices during the period of the development.
For off-plan investors who buy an appartment in one of the most famnous
sea resorts such as the Balchik, Golden Sands, Sunny Beach, Albena, ,
St Vlas, St Constantin and Elena, or ski resorts, such as Borovetz or
Bansko, the expected returns are as follows: annual capital growth of
between 15-20% and rental yields varying from 7-10%.
Hopefully the above information would help you to look at the Bulgarian
investment opportunities in a different light and understand the
particularities of the Bulgarian property market in a broader way. If
you have any questions regarding the issues raised above please do not
hesitate to contact us.
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