Recently Bulgaria has become one of the most prominent places to join the European trend of middle class holiday investing largely fuelled by British, Irish and American investors. Property; very cheap and surprisingly profitable property is at the top of the shopping list for many lay families and individuals looking to enjoy “the good life” when schedules permit. Bulgaria has proven through its tourist and property industry to be worthy of its recent favour.
One of the frequent questions is: why Bulgaria? The answer to those who have invested before is all in the history of the numbers. While Bulgaria doesn’t have a long history in the property market, the budding market is spawning a lot of happy investors harvesting their rewards and forging a long term trend, the beginning of which yields the answer to the “why” in investigating the “when”. It was in 2001 and 2002 that Bulgaria made public their efforts to come up to par with western nations through substantial efforts to transform the nation from a defunct, all but nameless former soviet satellite to a contributing and valued member of the European and International communities. Bulgaria set off to accomplish this by working to qualify for involvement in international organizations such as joining NATO early in 2004 and signing the European Union Accession treaty during the Luxembourg Presidency of 2005. It was arguably these political steps that displayed to Europeans and the world that Bulgaria was open and on the road to stability, ready for investments in some of the cheapest and most profitable properties available in Europe with diverse areas from beach front apartments and villas to ski resort and mountain side chalets and bungalows lining the highest European peaks east of the Alps. With property prices incontestably lower than the competing western nations and a local service industry that makes the cost of living just as negligible, foreigners have a lot to gain when purchasing in Bulgaria, not the least of which is improving their quality of life without going above and beyond the credit limits. For example – it’s possible for a middle class British investor to purchase a property in Bulgaria and use home media development services to have a partially automated and fully media accessible home with LCD screens and audio in every room without spending more than £30-40k on the entire endeavour. Services like HomeMediaBg ([http://www.homemediabg.com]) and scores more make these wonders into a possible standard for many.
Between the years 2001 and 2005 Bulgaria’s property market has maintained an average growth of 20-30% on property value appreciation annually. Furthermore, above average appreciation occurs annually in the tourist regions where the idea of owning a holiday apartments or villa on the Black Sea beaches or a chalet in the popular ski resorts has maintained substantial appeal to more than just a few working class property seekers. In that same period, many Bulgarians profited from the markets as well with a number of shrewd, business-minded people seeing an opportunity to capitalize in the spirit of new found capitalism, they quickly established themselves in the path of the deluge. Bulgaria’s property market went from accommodating 2 major agents in 2001 to spawning approximately 3,000 by the 2005.
In Bulgaria’s present market, future, former and current investors share a common curiosity: “What lays ahead for a property market that has been surpassing expectations for four (4) years?” It’s a question that even the thriving and bold Bulgarian property agents are hesitant to broach. No one can claim to know how far the market will rise before a doomsday-like market correction is required to normalize prices and remedy artificial inflation. To understand the hesitance to address the concern and ignorance that most buyers have about the future state of the Bulgarian property market, it’s necessary to understand the driving force behind the evolving market trend.
In the Beginning…
The inauguration of Bulgaria’s property rise neatly coincides with Bulgaria’s courting of the European Union for eventual membership status in the new face of Europe. In large part, when subject to scrutiny, the reasons for the property boom is clearly a combination of potential EU membership driving an economy to grow exponentially with the aim to be on par with its EU neighbours, in conjunction with a tourism market that was established long before Bulgaria debuted on international property market maps. Bulgaria’s property market is therefore dependent on the country’s success in becoming and EU member in the short term and on the development of the tourism industry in the long term.
The Role of EU Membership in Bulgaria Property Market
Having signed the EU accession treaty in 2005 and commencing and completing a number of reforms to comply with EU requirements, Bulgaria has successfully bolstered its property market. EU memberships is scheduled for 2007 or 2008, dependent on Bulgaria’s ability to mitigate the amount of upper-level corruption by establishing and enforcing stronger laws and punitive measures for such crimes. With EU membership all but certain, in under 2 years, the next logical question is, “what lies in the through the cloud beyond EU membership?” The answer: In all likelihood, the achievement of EU membership will propel the property market further in its current direction for a while afterwards while the market continues to adjust to new standards. While this is all speculative, consider the facts:
- While Bulgaria’s prices have been steadily increasing in tandem with GDP and inflation, prices of securities, commodities and property are not yet up to the rest of Europe’s popular tourist destinations
- Even with approximately four (4) million tourists visiting Bulgarian annually (2005) after a 50% increase since 2001, studies prove that the majority of Europeans avoid Bulgaria for the sole fact that it’s not yet part of the EU and thus has not yet earned their trust and security.
- If a correction occurred shortly after EU membership it would be very short lived because the overwhelming majority of Bulgarians cannot afford the properties that many Europeans and Americans can buy in multiples. If a dip occurred the only people to sell to would be the large amount of foreigners that have not yet enjoyed the splendour of the market, benefiting from a new dip in prices and fuelling the next rise.
The Symbiosis of the Tourism Industry and Property Market
Bulgaria’s tourism industry has existed even through the communist error. While it may initially seem like a strange fact to many propaganda enriched westerners, upon further consideration it’s quite logical: even former soviet communists enjoy beaches, skiing and mountain vistas and Bulgaria’s geographic location (same latitude as the French Riviera) featuring mountains, valleys and beaches in a area of 1/5 that of France lends itself perfectly to the holiday image.
When the property boom began, the already mature tourism industry began a second stride that has already over shadowed the first (1970s) by being the primary residual beneficiary of property craze success. Hotels in the three larges beach resorts, Sunny Beach, Golden Sands and Albena (in descending order) began to multiply like crocuses in an open meadow during early spring. Many of Bulgaria’s largest companies at the time of this writing are hotel companies with properties in the beach resorts. With growing diversity in the consistently expanding tourist population, tourism in Bulgaria is feeding the property market directly through the purchase of land and property for ever more hotels and villas for rent combined with a substantial volume of impressionable middle class foreigners who are looking for a decent means of securing a their ticket to the good life.
While the future of any type of market can only be based on speculation, the Bulgarian property market still shows many signs of increase and more importantly is building a price foundation for support. The support provided by the tourism industry and foreign investment in Bulgaria help to mitigate the chances of near immediate correction after EU membership is obtained. What waits to be seen is when these supporting pillars will be insufficient to abate the inevitable balancing correction that is surely on the distant horizon and how those already invested will employ their resources to profit from the redistribution process.