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The Tailored Home Property Buying Guide to Bulgaria

Overview
TailoredHome.co.uk’s Property Buying Guide to Bulgaria can help you find the best property investment destinationsin Bulgaria. Bulgarian Property has been on investors’ radar for several years, offering inexpensive homes in a wide range of city, coastal and mountain locations.

Property Buying Guide to Bulgaria

As property in other parts of Europe became too expensive for some potential buyers, Bulgaria was one of the first Eastern European countries to benefit from an influx of foreign investors’ investment money. Those first buyers have found the value of their property in Bulgaria has increased significantly but in general, house prices there are still cheap relative to the UK and other European countries.

Most of the focus has been on the beach resorts of the country’s Black Sea coast and in its numerous winter sports venues. Long popular with tourists in mainland Europe, the rise of low-cost air travel has opened up these previously obscure destinations to UK buyers, who now make up a significant number of those investing in Bulgaria.

Bulgaria joined the European Union in January 2007 and hopes to adopt the Euro from 2010. Sofia is one the EU’s least expensive capitals and has a thriving rental market which, along with strong price growth in recent years, has made the city an investment hotspot.

Accession to the EU has necessitated changes in Bulgarian law in respect of property ownership and immigration of citizens of other EU nations. The rights to buy, own and sell freehold land are now granted to EU citizens resident in Bulgaria. If you’re looking for a home there, TailoredHome.co.uk’s property finders offer a full range of advice and information about buying a home in Bulgaria.

Property hotspots

Sofia
Sofia remains one of the EU’s cheapest capital cities despite some significant property price appreciation in recent years. Bulgaria’s commercial and political heart has attracted foreign investment from many international companies thanks to some favourable tax breaks. It’s also the gateway to the country’s winter resorts.

The expanding expat workforce and increasingly affluent local population all require housing, a shortage of which has led to the price rises and a strong rental market, with many of the cities districts and suburbs undergoing regeneration and redevelopment.

Black Sea coast
Though relatively new to visitors from the UK, Bulgaria’s Black Sea resorts have long been a popular getaway destination for European holidaymakers. Resorts such as Sunny Beach and nearby Nessebar enjoy high summer temperatures to rival those in southern Europe’s holiday hotspots, though property is still more modestly priced than in some of the Mediterranean’s comparable towns. Further north, Golden Sands is one of a number of resorts strung out on the coast from Varna. The beaches on this coastline are great and the standard of facilities good in many areas.

Though sometimes compared to the Spanish costas, the Black Sea coast has a relatively short season and a “low-budget” feel that limit the potential rental returns for investors. However, a wide European audience continues to enjoy the region’s balmy summers, easily accessible by road and international airports at Varna and Bourgas.

Bansko
Located in the Pirin Mountain range around two hours’ drive south from Sofia, Bansko is perhaps Bulgaria’s best-known ski resort, offering some excellent facilities to suit many winter sports tourists. Though eventually overlooked in favour of Sochi in Russia, Bansko was one of the centres in Bulgaria’s 2014 Winter Olympics bid, demonstrating its ambitions on the international stage.

Furthermore, the construction of a spa and sports complex as well as a new golf and country club to augment the existing 18-hole course designed by Ian Woosnam will extend the tourist season, which is good news for investors relying on rental returns from their property in Bansko.

Tourism
The low cost of living makes Bulgaria a popular holiday destination for many budget-conscience holidaymakers, notably from Greece, Romania and Germany, though there is significant traffic from the UK, Russia and Scandinavia too. The summer season on the Black Sea coast is relatively short compared to some Mediterranean resorts. Facilities in the coastal and ski resorts are being improved to meet the standards offered in other European destinations.

2005 – 7.3 million visitors
2006 – 7.5 million visitors
2007 – 7.7 million visitors

Climate

Location Summer (Jun-Sep) Min/Max Winter (Dec-Feb) Min/Max
Sofia 15ºC/26ºC -5ºC/2ºC
Sunny Beach (Black Sea Coast) 16ºC/30ºC -2ºC/6ºC
Bansko 14ºC/19ºC -5ºC/1ºC

Fast facts

Currency
Lev (BGN). GBP1.00=BGN2.45 (Oct 2008) - Bulgaria is planning to adopt the euro as soon as 2010 (dependent on meeting certain economic criteria) and property prices are most commonly given in euros already. GBP1.00=EUR1.25 (Oct 2008).

Population
7.3 million (2008 estimate)

Time zone
GMT 2

Visas
90-day visitor visa free of charge (allowing one visit of up to 90 days in one six-month period); work permits, usually arranged by employer, are normally granted if the job cannot be done by a Bulgarian worker; residential visas are available to certain investors and retirees.

The regulations for UK and other EU citizens will change in the next few years, following Bulgaria’s accession to the EU.

Buying process

Ownership restrictions
Since Bulgaria joined the EU in January 2007, EU citizens have been allowed to buy freehold land there without restriction as long as they are continuously resident in Bulgaria. If they are not continuously resident, they are restricted (like other overseas buyers) to buying only structures (e.g. apartments and condos), not land. The restrictions on EU nationals are set to be lifted in 2014.

These limitations on individuals are commonly and legally sidestepped by the buyer forming a Bulgarian company which then buys the land.

Financial
It is helpful to open a Bulgarian bank account as early as possible in the buying process. A number of Bulgarian banks offer suitable accounts for foreigners and it is worth shopping around for the best rates and services (e.g. an internet banking facility). You may require help with translation as English is not widely spoken.

Mortgage availability
A Loan-to-Value (LTV) of 70% to 80% is typically available for loans from UK lenders and local lenders in Bulgaria.

With local lenders, the amount advanced is based on the buyer’s net pay. Total commitments, including existing mortgage payments, loans and housing payments, will be limited to 40% of the borrower’s net pay.

Legal
The property buying process in Bulgaria is quite straightforward, though it is prudent to have all necessary documents translated into English so you know what you’re signing:
When the buyer’s offer has been accepted by the vendor, the buyer’s lawyer prepares a Preliminary Contract setting out the details of the transfer of property, to be signed by both buyer and vendor.
The buyer pays a 10% deposit. At this stage, if the buyer pulls out of the purchase, the deposit is forfeited. If the vendor pulls out, the buyer is compensated with twice the amount of the deposit.
When all the legal checks have been performed, a Final Contract is prepared and signed by both parties.
The buyer also signs a Notary Act, confirming his agreement to the purchase.
At this point, the remainder of the purchase price is paid to the vendor and all outstanding fees and taxes are paid to the relevant parties. The Title Deed is then transferred to the buyer’s name (individual or company).

Transaction costs
The costs involved in purchasing a home in Bulgaria are:
VAT – 20% of the price of the property. Check whether the published property price is inclusive or exclusive of VAT. Can be reclaimed by the buyer if registered for VAT.
Municipal Tax – 2% of the purchase price, payable to the municipality where the property is located.
Notary fees – BGN15 (GBP6.00) to BGN3,000 (GBP1,225), dependent on the value of the property
Registration fee – 0.1% of the purchase price or tax valuation, whichever is higher
Agent’s fee – Normally split equally between vendor and buyer so that the buyer pays 1.25% to 1.5% of the purchase price. In some circumstances, the buyer pays the whole agent’s fee.
Establishing a Bulgarian Limited Company – If the buyer needs to establish a company in order to purchase the property, set-up costs are around BGN250 (GBP100), plus a minimum requirement of BGN3,500 (£1,425) share capital to be deposited.

Also allow costs for UK lawyers’ fees, mortgage arrangement fees, survey fees, translation fees and foreign exchange transfer charges.

Emigration
Accession to the EU in 2007 means that Bulgaria is currently in a transition period regarding the rights of other EU citizens to freely live and work in the country.

Those hoping to get a residence visa for Bulgaria will normally first apply for a “Type D” visa (long-stay visa), then apply for residence within 12 months. The requirements for both the Type D and residence visa are the same, so obtaining the first should mean the second is a formality. A decision will be made about the application within around seven days.

Residence visas are renewable every 12 months, which is usually a formality but requires the visa holder to have been in Bulgaria for at least six months and a day with the 12-month period.

Permanent residence can be applied for after five years’ residence in Bulgaria.

Retirees can apply for residence if they can provide evidence of their eligibility for retirement income, proof of their Bulgarian bank account and a Bulgarian address.