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Bulgarian Property Investment
By Damian Qualter, Fri Dec 9th
Why Bulgarian Property Investment?
The Bulgarian Economy is growing steadily and doesn’t seem to bechanging any time soon. There is currently a strong growth inindustrial production in Bulgaria. Employment and credit hasresulted in high GDP growth over the last few years. The economyin Bulgaria has grown at an average yearly rate of 4.8 % overthe last five years and in spite of this, inflation has beengreatly reduced to the of 2.3 % in 2003.
Foreign direct investment (‘FDI’) into Bulgaria has alsoincreased every year since then. FDI reached US$7.4 billion in2003 from a rate of US$5.7 billion in 2002 (which is a 30%increase). The outstanding growth in the Bulgarian economyshould maintain a strong property market and lead to higherBulgarian property prices. Bulgaria Property prices arecurrently low; making the best time to invest. Property in thebetter residential areas of Sofia sells for around £67 – £82 persquare foot.
It is clear that Bulgaria property is significantly cheaper thanmany other countries in the areas surrounding Bulgaria. When itcomes to the low Currency risk; the Lev has been pegged to theEuro since its introduction at a fixed rate. From 1997 the Levwas pegged to the DM at a rate of 1 Lev to 1 DM. The currentcost of domestic borrowing is relatively high - The rate thatBulgarians pay for a floating rate mortgage is around 10 – 12%pa.
It is currently possible to achieve high rental yields onproperty when you invest in Bulgarian property. The currentRental yields on residential property in Bulgaria are currentlyin the range of 10 – 12% of the purchase cost and on commercial/ industrial property you get yields of 16% which makes theproperty more obtainable to foreigners.
A lot of residential property that is available is unsuitablefor letting. There is currently no set up where individualleaseholders can be compelled to contribute towards the cost ofrepairs to common parts and
exterior of buildings unless theirleases specifically contain provisions about it. While suitableprovision can occasionally be made in the leases of recentlyconstructed buildings, the buildings that are constructed in thecommunist era, or earlier, hardly ever have these kinds ofclauses in leases. The result of this is that unless all theowners in a block agree to make the repair, nothing may be doneabout it all. Even in the best residential areas of Sofia thecommon parts of older blocks are often run down looking and are,difficult to let. Good quality modern blocks of flats thereforecommand a premium in the letting market. This allows the newinvestor to get their property extremely cheap.
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