Buyer's Guide

THE MARKETPLACE

Property prices in Bulgaria are very low, and particularly attractive for buyers from the UK. Consequently, the property market in Bulgaria is very buoyant and has recently grown significantly . For example, properties prices rose by 24% in 2004, and for the first half of 2005 they rose by 31%. Many who looked, but ‘missed the boat’ in Spain are now buying properties here. The real growth areas are around the Black sea coastline and near the ski resorts. However, some buyers have now started to look at undeveloped areas or at properties further inland where the prices are even lower.

It is impossible to predict how the market will develop in the future. However, more and more ‘Brits’ are buying land and properties in Bulgaria. This trend is set to continue with the rising number of pensioners predicted. The ‘package-holiday market’ has ‘spawned’ a growing breed of people with higher expectations, who now want to retire to sunnier climes. Also, new buyers are emerging from Eastern Europe, and many Bulgarians who have traditionally had 2 old properties , are getting into this new marketplace to sell at prices that they didn’t experience under the communist regime. However, new properties and ‘off plan’ developments now offer a superb investment, and cater specifically for the British and other Europeans.

These trends, together with the expected joining of the EEC in 2007, and the Bulgarian Government’s commitment to develop the infrastructure of the coastline all augurs well for future of those wanting to buy a property in these areas. Many and various leisure facilities are under construction and many more are planned.

Buying a property abroad is a major undertaking. It requires serious consideration and a great deal of care. It is different to buying a house in the UK, and involves more risks. The culture of Bulgaria is very different. The laws need to be understood, and of course all of the contracts are written in Bulgarian. These need to be translated so that the buyer understands exactly what they are ‘committing-to’ when they sign. The process also has it’s differences – Placing a deposit is binding on both sides, and the exchange of deeds has to take place in front of a Government appointed notary. With our help, this experience can be rewarding both emotionally and financially.

Points to assist those who wish to buy a place in this sun blessed country:

1. Really Understand Your Requirements

Different people have different needs. Some buyers want a holiday home. Others want a property to rent-out, and some are looking for a retirement home. These each have different requirements. The buyer looking for a property to rent-out, will want to maximise his/her financial returns, and therefore will need a location that is attractive to tourists. The buyer wanting to retire may want somewhere more quiet, but with access to the tourist areas. Other buyers may not like too much sun, and should probably buy further north The key point is that you should really understand your requirements.

2. Determine The Preferred Location

The one universal rule for the property market is Location, Location, Location. This is for both the likely increase in value of property, and the feel-good factor about where you want to be. It is good to research the locations, take some time to stay where you feel you would like to buy (maybe initially for holidays), and make arrangements to visit the area of your choice with a reputable UK company. Always choose an independent company who can offer a large selection of new and resale properties throughout the chosen region, and who are not ‘tied’ to one particular developer. This will ensure you have a wide freedom of choice in the area that you prefer.

3. Don’t Rush Into A Purchase

When you come to Bulgaria, You will be ‘pestered’ at the airport by people selling properties. You will also find that virtually every bar and restaurant has someone who claims to know of a bargain house or apartment that is exactly what you are looking for. Do not take risks with such people, and avoid short-cuts. Ensure that you are conducting your search with a bonafide UK company that will support you throughout the process, ensuring that you get good legal advice and fiscal support, and making sure that all documents and contracts are clearly explained in the English Language. There are many pitfalls to be avoided.

4. Be Clear About What Type Of Property You Require

Properties in Bulgaria are different to properties in the UK. Traditional Bulgarian houses are very picturesque. They have ground floor walls of stone, and a protruding upper floor with wooden walls. However the older properties have external toilets and tend to need extensive renovation. Bulgaria enjoys a long warm-hot summer, but the lifestyle is very different to eg. Spain. The winters are cold and so it is necessary to have a good heating system. However, since the summers are hot, having access to a swimming pool is a much greater priority than in the UK. New properties are built to higher standards and European requirements. They usually offer better investment opportunities for these reasons.

Older properties can have more land, but often need structural changes. There are sometimes, long waiting times for new properties. Apartments offer low maintenance, and are ideal for renting out since they are usually nearer the sea. Houses come with land and are suitable for permanent living. Buyers should be clear about their needs & requirements eg. Number of bedrooms required, necessity of a ground-floor toilet, garden for pets etc. They should then visit the locations that they prefer, and view a selection of properties, until they are clear about what is the right property to meet their needs.

5. Appoint A Lawyer

All non-residents who purchase houses with land in Bulgaria, need to set-up a company to own the land. This is a simple and inexpensive process, but needs to be completed by a Bulgarian lawyer with good English language skills . Any contract queries etc. can then be resolved quickly and he/she will have the right qualifications and appropriate knowledge for such circumstances. It is not recommended to appoint an UK solicitor, since most do not know the Bulgarian laws or understand the process. The lawyer will also check the existing ownership of the property. Older properties in Bulgaria often have more than one owner. It is important to ensure that the rightful owner is selling, and that the necessary checks are completed.

6. Be Very Sure Before You Place A Deposit

Once you have found the property of your choice, in order to secure it you should place a deposit. Normally, an initial holding deposit of up to 3000 euros (approx. £2,000) is acceptable to ‘hold a property while the full deposit is arranged. For a new property the full deposit required is usually 33%. The 2 final stage payments will be 33% and 34%. The timing of the stage payments will be determined by the initial stage of the build at the point of sale. Whereas properties sold off-plan may take 12 months to complete, properties that are already 75% completed when they are bought have only 3 months left, and the remaining stage payments have to be made in that time. The payments will vary a little with different builders, but the final payment will only be made when the deeds are exchanged. For resale properties, the full deposit is usually 10% of the purchase price. This has to be paid within 10 days. The balance 90% is paid on final completion when the deeds are exchanged at the Notary’s office. In all instances, once the deposit is placed, it will not be refunded if the purchaser ‘backs-out’ of the deal for any reason. It is therefore important that the buyer is sure about the purchase, and has money available to pay for the property in line with the agreed schedule. Purchasers must ensure that they have the right level of finance in place.

7. Carefully Consider The Mortgage Options

For most buyers who require a mortgage, there is currently not much choice in Bulgaria. There are mortgages available, but the process is bureaucratic and the interest rates are high (9% or more at time of going to press). There are also a few ‘Buy To Let’ mortgages. These tend to be for a very limited number of properties, and the prices of the properties often reflect this. The payback time-scales will depend on the age of the purchasers, and are normally between 5 - 20 years. The other main factor to consider when deciding which mortgage to take is the euro/pound exchange rate and how this will change in the future. Since nobody knows how it will fluctuate, the safest choice is to take out a UK second mortgage if your income is based in the UK. This needs careful consideration, and if you are in doubt, you should seek advice from an impartial financial adviser. Proof of income is required to obtain a Bulgarian mortgage.

8. Power Of Attorney

Once you have paid your holding deposit, and signed the preliminary contract, you should open a bank account with the help of your agent. Arrange a simple Power of Attorney with someone you trust (lawyer or agent) etc. to operate it. The Power has to be signed in Bulgaria. The process costs nothing and takes about 40 mins to complete. This will save you money (mainly VAT) because you will be able to pay bills by cash from your account. Ensure that you always obtain a fixed price for any work to be done by your lawyers.

9. Arrange Appropriate Insurance

Once you have purchased your property in Bulgaria, ensure that you quickly arrange appropriate insurance for the buildings and the contents. This can be arranged by your lawyer or fiscal representative with a Bulgarian insurance company. Otherwise, a UK insurance company that specialises in insuring overseas properties could be used. One factor, that often gets overlooked by those planning to rent-out their properties is the need for public liability insurance. It is recommended that this is taken out, even if the property is only to be rented out to family and friends. The ‘peace of mind’ that the insurance provides is well worth the small cost to be paid. This cost should be recouped from the rental income generated.

Please note that all information provided by Maxi Homes Abroad represents the best knowledge available to us at time of writing. We provide as much useful information as possible to our clients but cannot be held responsible for circumstances which are beyond our control.