Property in Bulgaria a buy to let success

According to the November issue of Quest Bulgaria, the specialist English monthly magazine about Bulgaria and Bulgarian property, tourist numbers are increasing by 22% a year and property prices have increased by as much as 30% in the past three years.

 

The boom is having a knock-on effect on the buy-to-let market. A three bed-roomed coastal villa now enjoys an average rental price of £550 per week giving a gross income of £5,500 a year if it is rented out for a ten-week period. A rural three-bed-room villa fetches an average £350 a week; a city or coastal apartment £250.

 

“There is a genuine demand in Bulgaria for good rental properties in the right location,” says Chris Goodall, managing director of Quest Bulgaria. “But buyers need to be realistic about the rental returns they want and can achieve.

 

“In the past, over estimation of potential rentals has led to a vast discrepancy in prices leaving some properties standing empty. But those who have done their homework and work towards a realistic 5% return are sitting comfortably.

 

“As buyers recognise the reality of the rental market there has been a move away from cheap property towards proper levels of investment with upmarket, well located properties. Those who buy front line properties right on the beach, apartments right next to the ski gondola or a quality detached rural home with easy access are the ones obtaining good rental prices with higher occupancy. They’ll also be the ones obtaining the best resales over the next few years.”

 

Buyers are spreading their risks too. One agent has reported that one in every 12 purchases in the second quarter of 2006 was for more than one apartment – a 107% increase on the previous quarter.

 

And Richard Slater from Pride Property Management in Varna says: “In the past, people just set any old price they came up with and hoped for the best. Now owners are much more savvy on rental price and consequently get more bookings. Tourists are looking for quality properties to rent and high quality three-bed-roomed villas with a pool are booked pretty solid. Apartments in resorts have not done as well as they cannot compete with the tour agents.”

 

With travel and tour operators looking for more lucrative markets now that Spain has dipped, their ability to charter cheap flights and negotiate rock bottom prices with Bulgarian hotel and apartment owners has had its effect on the rental market.

 

On top of this there has been significant hype from some of the estate agents and the start of ‘guaranteed rental return’ packages. “But a cursory study of the tourism market in the country should alert anyone to be suspicious of a claimed 10% guaranteed rental yield when a more realistic 5% is more the mark,” said Mr Goodall.

 

“Buyers are recognising that Bulgaria has a price bracket that can be supported and, as a consequence rental prices are evening out,” he added.

 

With tourism in Bulgaria growing at the fastest rate in Europe, along with cheap flights and the fact tour operators no longer profit from established destinations, self-catering holidays in Bulgaria are beginning to appear in High Street travel agents.

 

Said Mr Goodall: The key is always ‘location, location, location; quality, quality, quality’. You’ll probably be buying a Bulgarian property at less than 25% of an equivalent in the UK, so take a medium term view and you’ll achieve rental returns right now of at least 5%, capital growth of 20%….and a beautiful home.”

In  a note of caution an investment expert has hit out at the "massive amounts of misinformation" about the supposed huge gains being made in the Bulgarian property market.

A major Bulgarian property developer reported yesterday that its pretax profits stood at £38,000, a marked increase from last year's £273,000 loss, prompting some commentators to exalt the investment potential of the eastern European state.

However, Stuart Law, managing director of Assetz, claimed that the good news for Bulgarian Property Developments is only a snapshot of the market as a whole and does not mean that private investors' finances will mirror that of local development firms.