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Bulgarian Property Investment - Will The Bubble Burst?
By K Damian Qualter BA MBA, Fri Dec 9th
Can Bulgarian Property Investment Stay on Top?
Many politicians and government officials, as well as, otherindividuals, believe that Bulgaria’s accession to the EU andNATO will drive real estate prices up practically overnight. Letme tell you that this will not happen that fast, but it willhappen over a longer period of time. The accession to the EU andNATO has both positively affected the development of theBulgarian property investment market, which gave us a sense ofsecurity to Bulgarians and foreign investors alike.
The Bulgarian property investment market has dealt with seriouschanges in the beginning of the year. The residential propertymarket in the larger cities was dealt with in US dollars. Thedecline of the dollar against the euro has forced most of thesellers to convert the dollar price values into euro. What’shappening here is that they did that at an exchange rate thatwas a great deal different from the market which is what drovesales prices up at least 10 per cent.
Although prices have been driven up, this is a really positivething for the market in the long term. The Bulgarian lev ispegged to the euro, and the average salary there is denominatedin leva or in euro, and so it just makes sense to have propertyinvestment prices to also be denominated in these twocurrencies. The commercial market has already experienced that ayear ahead, except the reasoning behind it is different.
All of these positive economic and political signals combines inthe Bulgarian economy have been the driving force behind boththe Bulgarians and foreign nationals in purchasing residentialproperties with an investment purpose in mind. They can do thisbecause of the excellent potential that the rental market stilloffers provides to its buyers.
These properties are usually leased to foreign managers ofmultinational companies or foreign diplomats
at high rentallevels. Then, in few years and after very large capital gainsare expected from the sale of the property. This makes a greatdeal of sense and it is expected to happen, if the Bulgarianeconomy continues to grow at the rate that it is going at now.
The government has taken a small but significant step in helpingto get the properties market moving in that the process ofacquiring all necessary permissions for a new construction hasbeen shortened a great deal. The market is still waiting for thelong expected change to the constitution, that will allowforeign nationals to get land in Bulgaria.
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