Hardly a week goes by without news emerging from Bulgaria about another planned investment project as the country looks to enhance its reputation in advance of EU accession.

In addition to large-scale property investment, officials are also working hard to stamp out corruption and to combat some of the other legal concerns that have been Bulgaria’s perennial weakness in years gone by.

It was reported in the Sofia Echo today that health minister Radoslav Gaidarski is now in the process of producing an anti-corruption strategy for healthcare institutions. This forms part of the country’s overall desire to rid itself of the problems that have plagued it in the past, with prime minister Sergei Stanishev fixed on the idea of modernisation at every level.

The new strategy for the healthcare institutions is in direct response to the European Commission’s monitoring report on May 16th, it is reported.

Bulgaria was criticised for levels of corruption in both healthcare and education, but the rapidity of the response in beginning this anti-corruption strategy is testament to the resolution to meet any conditions specified by the EU.

The issue of EU accession is important for Bulgaria for a whole host of reasons, but it is also particularly significant for property investors who expect the occasion to coincide with notable house price growth in the country.

A suitable parallel can be drawn with Spain and it is a comparison that is particularly apt because of Bulgaria’s blossoming reputation as a tourist haven.

The US Department of State recalls that Spain’s accession to the European Community in January 1986 required it to open up its economy. It also had to modernise its industrial base and improve its general infrastructure. Another key issue was that it had to revise economic legislation to conform to EU guidelines.

As a result of all of these amendments Spain was able to increase gross domestic product (GDP) growth, reduce public debt to GDP ratio, significantly reduce unemployment from 23 per cent to 15 per cent and reduce inflation to less than three per cent.

The vast majority of these factors are also applicable to Bulgaria 20 years later and so it is no surprise that experts have been drawing comparisons between the two countries. Property prices in Spain soared after it joined the EU and it is a fortune that many foresee for Bulgaria too.

Questions certainly remain regarding improvements to infrastructure but there is no doubt that the authorities are answering them in the right way. The Associated Press reports that the government has now invited five bidders to place binding offers for the construction of a €160 million bridge across the Danube River, which will link the Bulgarian port of Vidin to the Romanian city of Calafat by both road and rail.

Another example of the progress that is being made, this provides reassurance to investors that the commitment to modernisation and expansion is strong. Bulgaria already has a thriving ski industry thanks to Bansko while the Black Sea resorts mean it is particularly popular in the summer.

As Bulgaria continues to prepare thoroughly for EU accession, optimism is high that it is developing into one of Europe’s most dynamic locations for property investment.

The main developers in Bulgaria continue to be local firms that have now gained significant experience in project development. But today, more and more international companies are also turning their gaze to the local commercial property market in search of a higher yield from their investments.

The German ECE Projektmanagement and the Hungarian TriGranit Development Corporation, which have already registered local companies, are among the latest preparing the launch of their projects.

Modern malls in the larger cities of the country, such as Sofia, Plovdiv, Varna, Bourgas, Stara Zagora and Rousse, as well as logistics centres and warehouse facilities, are serious niches for new investments.

In line with the Special Purpose Vehicles Act adopted in 2004, the first 10 REITs (real estate investment trusts) are now a fact.

In June 2005, Immoeast Immobilien Anlagen AG, a subsidiary of the Viennese stock-listed Immofinanz, which is responsible for Central and Eastern Europe, bought a 20-per cent share of the stock in noted Bulgarian real estate company TBI-BAC for 47 million euro. The company operates under the name Prime Property BG REIT.

Immoeast’s CEO, Dr Karl Petrikovics, explained this move, claiming that Bulgaria will become the next big “boom” market, a prediction that many market analysts share.

Despite the small volume of the managed funds, they are expected to contribute to greater transparency in the real estate market. These companies have diversified portfolios; some of them focus on the purchase of agricultural land, others are mainly orientated towards commercial property.

Regardless of the existing potential in many cities throughout the country, the capital Sofia still remains a priority city for the development of new schemes.

With its population of over 1.2 million people and the many foreign companies that constantly create new jobs and, therefore, need modern offices, the city can to a great extent be regarded as a country in itself.

It is a place where the standard of living, the purchasing power and the hunger for modern commercial buildings are much higher than in other Bulgarian cities.

* The Europe Real Estate Yearbook is printed in the Netherlands and is a product of the efforts of real estate researchers from many European countries. More information on the publishers can be found on www.europe-re.com.

With property investment television programmes dominating the listings, it is inevitable that real estate is beginning to attract more and more potential investors.

Most of these programmes are also becoming increasingly adventurous in terms of the places they cover, which is having a direct result on the investment patterns of UK residents.

In a report for Antara News, for instance, journalist David Burrows says that many investors are beginning to turn away from France and Spain in search of better value. He suggests that Bulgaria is a prime example, in that prices in the country are still exceptionally low but experts are predicting something of a boom before long.

“The EU may be balking at Bulgaria’s failure to rein in organised crime but second-home hunters seem to have no worries,” pointed out Mr Burrows.

The Sofia Echo has today reported that the coastal resort of Sozopol is seeing the highest demand for real estate at the moment. Referring to a report in 24 Chassa, the publication points out that the seaside resorts of Tsarevo and Ahtopol are also experiencing high demand, with slightly cheaper prices in both of these areas.

Bulgaria does have an advantage over many of its near neighbours in that it offers a hugely diverse selection of opportunities for property investors. There is great potential around the Black Sea regions but there has also been staggering growth in Bansko, with investors taking advantage of the rising number of holidaymakers heading over for cheap ski breaks each year.

While it may seem a small point, Bulgarian property is also benefiting from the fact that many investors are simply looking for a change and there is a certain kudos associated with buying a property somewhere slightly out of the ordinary.

When added to the fact that experts are predicting that prices will soar in Bulgaria in the next few years, it is inevitable that the country’s popularity is continuing to climb.

There is clear evidence of this already, as noted in the report by Mr Burrows. Rupert Lee-Browne, from currency exchange specialists Caxton FX, said that 50 per cent more of his clients were moving money to the country when compared to last year.

He went on to say that a huge amount of money was being invested in upgrading infrastructure while there was a 40 per cent increase in hotel occupancy rates during the ski season.

The ski season is in fact becoming central to many investment projects, not least because properties in these areas are still cheaper than in the ski resorts. Borovets, Pamporovo and Bansko are all popular with buy-to-let investors as they all offer rentals in the summer as well as the winter.

While occupancy levels are clearly down in the summer and rents are lower, capital appreciation is perhaps the greatest consideration and expected EU accession in the next year should play a huge role in giving a free rein to this potential.

Real estate agents in Bulgaria expect a price decrease once mortgage apartments are offered for sale.

Prices might decrease by as much as 20 per cent, Darik Radio reported.

National Real Property Association (NRPA) head Orlin Vladikov said the highest number of apartments in 2005 was sold in Sofia. A mortgage loan was used in 32 per cent of all purchases, Vladikov said.

By the end of this year or in the beginning of 2007 a secondary property market will emerge in Bulgaria. Returning a mortgage loan usually becomes problematic after the third year of the agreement, said Vladikov.

Vladikov said an increase was registered in the price of agriculture plots. Most of the deals in this sector were concluded without a change in the original function of the terrain. The status of agriculture plots changed only in one fifth of all sales, said he.

The European focus is very much on Bulgaria at the moment and few will be watching more intently than those in the property investment business.

In the last few years, Bulgaria has developed at an impressive rate and the fact that the country is currently being considered for EU membership is testament to this.

At the same time, Bulgaria’s problems with law and order have been well documented and it is an area that threatens to delay both EU accession and the growth of the property market.

Nonetheless, Franco Frattini, vice president of the EC responsible for justice, freedom and security, says that he is impressed with the “enormous progress” that has already been made, reports the Sofia News Agency.

Mr Frattini is reportedly positive about the judiciary agenda that has been proposed by Bulgarian chief prosecutor Boris Velchev and he has stressed that Brussels has a duty to support in the consolidation of institutional reforms.

Growth in the Bulgarian property market has been impressive even without EU accession and the country is already making strides in terms of its attractiveness to tourists and investors.

To its advantage, Bulgaria is able to appeal on a number of fronts, thanks to its rapidly improving ski resorts, the popular Black sea regions and a burgeoning business capital in the form of Sofia.

The ski resorts have enjoyed a particularly strong period, with Bansko drawing in high levels of investment to cater for the rising number of visitors last year. Bidding for the 2014 Winter Olympics, Bulgaria is also managing to successfully market itself as an alternative to the likes of France. The next ski season is likely to see further improvements, with property developments ongoing in and around the most popular tourist areas.

It is an area that is likely to appeal to buy-to-let investors as Bansko’s soaring popularity will inevitably lead to a rise in the demand for good rented accommodation.

Yet again, tackling corruption could prove critical to the success of Bulgaria as a premier holiday destination as lingering doubts over law and order do not inspire confidence in those planning to travel from abroad.

Bulgaria is clearly making progress, as typified by the fact that a senior official has been arrested on bribery charges. Krassimir Nedelchev was deputy head of the State Agriculture Fund and his arrest has been seen as evidence that the government will not tolerate financial mismanagement.

There is a real sense of momentum in Bulgaria and a collective resolution to prepare correctly for EU membership. Once the basic problems within the country are addressed, the country truly is in an exceptional position in terms of its attractiveness to investors and excitement in the property industry is continuing to build

The month of April brought news that the prices of real estate in Bulgaria continued their increase in the first quarter of 2006.

Housing prices in Bulgaria rose in Q1 by 4.7 per cent from the level recorded in the last quarter of the previous year, the National Statistics Institute (NSI) said on April 25.

The NSI data covers the prices of sealed apartment purchases reported by Bulgarian real estate brokers in the country’s 28 regional centres.

The average apartment price in the first quarter of 2006 was 806.1 leva (411 euro) a sq m, up from 769.7 leva (383 euro) in the previous quarter.

Apartment prices in the capital Sofia were the highest at 1313.7 leva a sq m, or 2.2 per cent up from the last quarter of 2005.

Varna, a major Black Sea port and holiday destination, was second with apartment prices of 1237.8 leva a square metre, up three per cent from the end of 2005. Bourgas, another Black Sea port and resort city, came third with average housing prices of 1198.3 leva a sq m, up 1.4 per cent.

The sharpest rise in housing prices in the first quarter, 51.5 per cent, was registered in the Danube town of Vidin. The town was recently struck by floods due to the rising level of the river, which would probably negate some of the positive change in the next months of this year.

Lovech in central Bulgaria saw a 19.5 per cent rise in average housing prices and the Danube city of Rousse posted a 15.3 per cent growth in apartment prices.

Statistical data of the real estate company Address, one of the largest in Bulgaria, showed a drop in the prices of vacation apartments at the southern Black Sea coast around the city of Bourgas. This comes as no surprise, for brokers have long been forecasting segmentation in the prices of holiday property along the entire Bulgarian Black Sea coast.

The Address data showed that in March 2006 there was a general drop in the prices of those properties which in July 2005 were in the lowest price group. There was a serious increase in the cost of luxury apartments in the region in early March 2006.

The resort of Primorsko was the only place where luxury prices dropped and the other ones were on the rise.

Bulgaria’s accession to the European Union will have an impact on the players in the real estate market in this country. Luchezar Bogdanov from the independent analytical company Industry Watch made this forecast on April 26.

He was addressing a discussion entitled Scenarios for Bulgaria’s EU membership and their impact on public finance, investment environment and economic growth.

Foreign investors in real estate in Bulgaria are currently divided into two groups – the first invest in property with purely speculative motives, while the second group consists of those who wish to keep their property or reside on it.

In contrast to other South East European countries, in Bulgaria the number of foreigners in the first group is significantly larger, which, according to Bogdanov, is the first signal for a forthcoming change. As soon as these investors find that speculation will no longer bring them serious profits, they will immediately switch to other markets, Bogdanov said.

He believes that those who plan to reside in Bulgaria should know when the country will join the EU. Also important for them will be to know where a precautionary clause will be imposed on the country in the justice and home affairs field.

A large portion of the domestic demand for property in Bulgaria is covered by money from Bulgarian emigrants. Bogdanov pointed out an example with the town of Sliven in southern Bulgaria, where, according to a survey, about 85 per cent of the newly built apartments are being bought by Bulgarians working and residing abroad.

If Bulgaria is integrated in the EU as fast as possible and with no precautionary clauses, easier migration to member states with higher incomes could be expected, which would enable the influx of more investment money in Bulgaria from emigrants, Bogdanov said. Such a development, in his view, will give another boost to the growth of the real estate market and the entire economy.

By Ivan Vatahov

Property investment in Bulgaria has in recent years been something of a slow and steady affair, with many investors appreciating the potential for capital growth but holding out for further encouragement.

It is a situation that is gradually being transformed, however, with a number of key factors now uniting to position the country as one of the most exciting investment hotspots in Europe.

A quick look at the house price growth in the first quarter of 2006 gives an idea of the increasingly tempting nature of the property market in Bulgaria.

The Sofia Echo has reported that house prices increased by 4.7 per cent in the first quarter when compared to the last quarter of 2005. Citing figures from the National Statistics Institute, the publication states that the average apartment price in the first quarter reached €411 per square metre, which was up from €383 in the previous quarter.

With the average apartment costing €670 per square metre, the capital city of Sofia was leading the way, with the popular Black Sea town of Varna not far behind at €632.

As is still typical of Bulgaria, some areas saw anomalously high growth in the first quarter, with the Danube town of Vidin seeing house prices soar by 51.5 per cent.

Vidin was one of the unfortunate towns that endured significant damage from the recent floods, however, and it is inevitable that the market will suffer somewhat from this destruction.

Aside from purely financial motivation for purchasing a property, Brits are increasingly coming to appreciate that Bulgaria offers some of the most stunning landscapes in Europe. For this reason alone, the country is attracting holiday home buyers from the UK and elsewhere, with the attractive Black Sea regions and the burgeoning ski resorts competing for the attention of the investors.

Bulgaria is one of the bidders for the 2014 Winter Games, which is perhaps evidence in itself of the country’s ambition for its ski slopes, but visitors to the likes of Bansko and Borovets have already seen how far the country has come.

In the ski season that has just come to an end, the number of skiers visiting Bansko increased by 35 per cent, reports the Sofia News Agency. With hope and anticipation rising in relation to the Winter Games, Bansko is also set to benefit from 1,000 new beds within hotel rooms and apartments.

Bringing the Winter Games to Bulgaria is perhaps second only to achieving EU accession in terms of the potential impact on property investment. Both factors will lead to a huge rise in the number of holiday makers visiting the country and it is a development that will clearly boost rental demand for the overseas buy-to-let investors.

The Wall Street Journal and London-based newspaper The Independent have published articles praising property market opportunities in Bulgaria.

In an April 18 report in The Independent, which describes Bulgaria as a “beautiful country”, writer Robert Nurden says that property investment in the country falls into four main categories.

The first is in the capital city, Sofia, which is “growing economically and geographically faster than any other former East European capital”. The property boom has now hit the centre, with locals themselves pitching into the market, always a good sign, the report says.

“With the country on the threshold of EU membership – and entry into the euro itself likely in about three years’ time – an international and transitory population in this ‘engine of the country’s growth’ is inevitable. This means a huge demand for good rented accommodation.”The Independent says that an average, two-bedroom, newly built apartment in the centre sells for between 69 000 pounds and 87 000 pounds (195 245 to 246 190 leva), and values are “rising almost by the day”. The rent from such an apartment would be up to 700 pounds a month, according to Robert Jenkin of estate agents Bulgarian Dreams.

“‘These are fantastic investment opportunities in a city that is becoming more cosmopolitan and whose economy is stable and performing well,’” he is quoted as saying.

The mountains provide opportunity number two, The Independent states.

The report praises the infrastructure at Bansko, and says that in the past two years, it has added on a large number of apartment blocks geared to the winter season. In Bansko, a typical two-bedroom, newly built apartment costs 71 000 pounds, “with the mouth-watering prospect of a rise in values of about 20 per cent a year”.

“The Black Sea, with its sunshine, cheap beer and great food, beckons investors too. Locations such as Sunny Beach may be set to become the new Costa del Sol.” The report says that there are signs that Bulgaria is throwing off its bottom-end-of-the-market image and moving towards building more luxurious properties. The Government has introduced legislation aimed at protecting the coast from the worst gourmandises of the Spanish costas, the report says.

The article quotes estate agent Iliana Yordanova of Home Cottage Bulgaria: “‘But the really canny investment, and one open to those on a low budget, is to buy land. Plots are unbelievably cheap’”.

She continues: “‘If you are prepared to look at undeveloped areas, either by the coast or inland, you can pick up good agricultural land for as a little as eight euro a square metre. The town of Kavarna would command prices of 70 euro a square metre, and Balchik 58 euro. But I have heard of a plot going for three euro a square metre inland’”. On April 19, The Wall Street Journal reported that real estate investors are continuing to flock to Central and Eastern Europe, to the point where there is not enough buying opportunities to go around.

“As countries join the European Union, they are viewed as more stable, making investors more likely to jump in with their money,” the WSJ report says.