Real Estate Overview

EnvironmentEveryone is into Bulgarian real estate these days. The market reached incredible heights in 2005 and 2006, boosted by foreign interest and by the increased purchasing power of Bulgarians due to the increased availability of mortgage loans. Hundreds of agencies have sprung up, not just in the big cities, but in the resorts as well. Others just have a website and appeal directly to foreigners, mostly British and Irish, who are keen to invest in inexpensive Bulgarian property, frequently with the aim of using it themselves as a holiday home, but also fairly secure in the knowledge that the money invested will appreciate faster than if it were sitting in a bank at home. Despite the huge increase over the past couple of years, prices are still relatively low by EU standards. It is not just foreign interest that has bumped up real estate prices. As the Bulgarian economy becomes stronger, people have disposable income to buy property, and the mortgage boom over last couple of years has meant that even those without savings can buy a first or second home. Main boom areas are the Black Sea regions, especially the southern stretch, which has begun to resemble the Costa del Sol with its concrete developments, and the ski town of Bansko. Over-construction is said to become the biggest problem of these areas, making them less pleasant for tourists.Many other opportunities are available, there are other large ski resorts for instance, and quite a potential for the development of new ski resorts in those places where there are currently only one or two ski tracks. Bulgaria is lucky in that almost everywhere in the country is beautiful. It is difficult to say that one mountain area is better than another, though, of course, location and proximity to cities, airports, etc., is of importance if you are looking to rent the property out.AgenciesThe market is thus far not regulated. Buyers do not need a licence to operate as a real estate agency, so the ground is ripe for various rip-off merchants to practice their trade. Various foreign investors have shared their stories, including one Brit who was alerted by a conscientious notary to the fact that he was about to pay a ridiculously high price for some property and ended up fleeing his agent in fear. Though he lost his deposit, he felt his physical safety was more important. Complaints about poor service, even from some of the expat-owned agencies, which are perhaps unable to cope with the demand and just leave their clients hanging are also abundant.If you are buying from abroad, do some thorough research on the many sites available, take a look at the photos of houses, get a good idea of price ranges and check out where is a good place to buy. You can also chat with the many foreigners who have already been through this experience both on The Sofia Echo’s forum and on others.PeculiaritiesUntil recently foreign individuals could not own land in Bulgaria. In the beginning of March 2007 Bulgaria’s Parliament approved amendments to the land ownership legislation, which changed the ban for a restrictive regime of land ownership acquirement.Currently foreigners and foreign legal persons are allowed to acquire land in the country, but only under a international contract. Foreigners also have the right to acquire land ownership by inheritance.EU citizens who are not permanently resident in Bulgaria cannot acquire land in the country.A legal loophole currently allows foreigners to set up a Bulgarian company (see Doing Business in Bulgaria), which can then buy the land. This little bit of bureaucracy means that you need to use a local lawyer to set up the company, do the deal for you and you will have to retain his or her services on a permanent basis to maintain the company for you. You will also need to use an accountancy company to submit annual tax returns, since the land is considered an investment. The good news is that although you have to pay the initial capital (5000 leva or 75 per cent thereof) into a bank account, you can subsequently withdraw it once the registration process is over. If you are buying an apartment and there is no land included in the deal, then you can buy it outright as an individual.The legal fees are usually quoted as a total of the court fees and the lawyer’s handling fees. They can range from 400–1000 euro. ResidencyAnother thing that may be an issue is getting permission to stay in Bulgaria. Cases are decided individually at present. Citizens of the EU member states, the European Economic Community (EEC) countries, Switzerland, Canada, the US or Israel may stay in the country for up to 90 days. Afterwards those have to apply for long-term or permanent stay permit.Foreigners, who are not citizens of the countries listed, have to obtain visa permits to enter the country.In the meantime, here is some advice: if you are retiring to your property in Bulgaria, you will probably get residency as long as you can provide the documents to prove you are retired, that you receive an income from outside the country, etc; if you are a freelancer of any kind you will probably not get residence because, although the law allows for it, in practice permits are not issued to freelancers. In many cases, however, depending on the value of your investment (in property) you may be granted residency, so you should choose a lawyer with a proven track record.MortgagesInterest rates are still high here. If you are eligible for a mortgage in your own country then you would be advised to do it there. Rates here will eventually drop, and the IMF has been pressuring the Bulgarian National Bank to put the brakes on lending in Bulgaria, causing banks to be cautious about lowering rates.