Bulgaria's Property Market Could Go Either Way

In Spain you have properties that are being slashed in price, in the UK you have a real estate market that is stagnating, in Northern Cyprus you have a market that has stagnated for so long that it is actually doing quite well thanks to its genuine bargain status, and then you have Bulgaria’s property market that could go either way – i.e., up or down.

There are robust fundamentals supporting a residential and commercial property market that bode well for long-term strength in Bulgaria – but there are also some serious and significant flaws in Bulgaria’s property market that could undermine it catastrophically and for the long-term.  Here’s what we think…

Bulgaria has a good little tourism industry.  It is built on a number of positive factors – the nation is easily and affordably accessible by a large number of people because of its geographic location.  Despite strong inflation, Bulgaria remains a relatively cheap holiday location making it of more appeal to a broader market base.  Additionally, Bulgaria is very beautiful and it does offer a range of holiday experience – again, this expands its appeal to a broader share of the potential tourism market.  These fundamental factors have meant that revenues from tourism rose by almost 11% last year – no mean feat.

However – undermining this overall positive situation is the fact that Bulgaria is attracting a class of tourist less willing or able to spend significant sums of money when they are on holiday in the nation.  This has a pronounced effect on the Bulgarian economy and it has a very real effect on the potential revenues a fly-to-let investor can expect to earn from their property assets.  This in turn has an impact on the value of real estate, which in turn has a knock on effect in terms of the appeal of property in Bulgaria which of course means a pricing and capital appreciation restriction.

This entire scenario is limiting – and it does mean that there is a real risk that Bulgaria’s property market has peaked and that it will never amount to more than not very much.

However, there are those in the know and in authority and positions of prominence who are well aware of the limitations on the market and who are calling for and trying to action a ‘stepping up’ of the tourism market.  Reports suggesting that holidaying in Bulgaria is like holiday in the 1970s and that restaurants run out of food and infrastructure issues result in unpleasant power cuts and holiday horrors have forced Bulgaria to be realistic about its appeal.  But there is a balance to be struck – if investment is to be warranted then Bulgaria has to be able to attract a type of tourist with a bit more wealth in their pocket that they are willing to spend.  But who is willing to take the gamble that this will happen?  It’s sort of a chicken and egg situation – i.e., which will come first, the investment or the tourists?  As outsiders to the market and vociferous, opinionated commentators who have no real right to have an opinion we’ll just say that you will not get the higher end traveller even taking a sniff at Bulgaria until it ups the ante, improves property product, infrastructure and appeal.

So, if you’re a property investor looking at the market, you need to look at what you think is achievable from the locations and types of property you’re looking at.  If you’re an optimist you’ll buy property in Bulgaria now and be confident that your yields and will improve and your vacancy rates will constrict as the nation’s overall appeal improves – but if you’re a pessimist, (or perhaps a realist?), you won’t.  It’s really not for us to say! amberlamb.com