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Country Overview | Key Property Facts

Types of Tenure:
Property in Bulgaria can be bought on a freehold or leasehold basis. 

Forms of Ownership:
Foreigners can own property in Bulgaria but they can not currently own land. This situation will probably as a result of entry to the EU. For the time being foreigners wishing to purchase property (and the land it is on) in Bulgaria need to set up a Bulgarian Company to own the land. This is a relatively simple and inexpensive process.

Restrictions:
At the present time, the Bulgarian national constitution actually prohibits foreign nationals from directly owning land in Bulgaria. With that said, the governmental leaders in Bulgaria are in the process of changing the country's constitution to allow for the direct ownership of land in Bulgaria by foreign individuals. The proposed constitutional changes likely will not be in effect until 2014 or 2015.

Understanding that a foreign national cannot directly own land in that country at the present time, this does not mean that a foreigner cannot own property in Bulgaria "indirectly." In other words, if a person is interested in owning land in Bulgaria, there is an additional step that he or she will need to take in advance of making such a purchase and of assuming such ownership of real property.

Keep in mind that if a foreign national is interested only in purchasing an apartment -- to which no land will be involved, to which any land outside of the apartment unit will be conveyed to the foreign national -- direct ownership is, in fact, permissible.

Property Rights:
Bulgaria scores 30% in the Heritage Foundation’s assessment of the security of its property rights.  The Heritage Foundation states, “Bulgaria's constitution provides for an independent judiciary, but ineffective rule of law limits investor confidence in the ability of the courts to enforce contracts, ownership and shareholders rights, and intellectual property rights. Judicial corruption is a serious problem”.

Mortgage Finance:
Property in Bulgaria can be a very different experience for each person depending on personal circumstances, such as using Bulgarian banks for a loan/mortgage or taking a mortgage out on your UK property.

The structure of Bulgarian mortgages are slightly different to that of the UK with a maximum limit of borrowing being 75% of the property value, and then you are personally assessed for your capabilities on repaying the loan based on certain factors that are very different to the UK.

Most people are offered standard repayment mortgages which you pay the capital and the interest through out the repayment process although repayment and interest only mortgages are now being offered by Bulgarian banks. When considering purchasing property in Bulgaria, be sure to enquire about the interest rates and the currency that you will be borrowing the money in, however it is usually in Euros.

A mortgage can be applied for over the phone and takes 1 - 2 weeks, for the whole mortgage process to go through it usually takes in the region of 3 months.

Bulgaria have now joined the EU, mortgages are obtainable by UK and Irish Nationals, for financing improvements for your property, purchasing your property and other purposes.

Bulgarian Repayment Mortgages

Minimum: €25,000
Minimum Property Value: €36,000
Maximum: Uncapped (75% of Property Value)
Term: Max. 20 years up to age 70
Currency: Euros only Interest Rate:
Approximately 7.00%

A Proof of income is required to be successful in a mortgage application, some factors that can be taken into account when determining a maximum mortgage are pension, investments, savings, rental income and salary.

Example Repayment

Mortgage: €70,000
Period: 20 years
Interest: 7% Monthly
Payments: €551.00 capital and interest per month
Total amount payable: €135,140 including capital, interest, arrangement and survey fees.

Non status/self-certification mortgages are accepted by selected banks usually at a rate of 9.9% - 10.01%, with the correct supporting documents such as pay slips, HM Revenue P60, references and personal bank statements.

Please be aware banks offering non status/self certification mortgages do not take into account any proposed rental income on the property.

Bulgarian mortgages are calculated on your net pay versus your current outgoings and commitments such as any present mortgage repayments, bank loans, credit cards and housing costs. All payments including your new Bulgarian mortgage must not total more than 40% of your net income.

Example: Net monthly income: £2,500

40% of Income: £1,000
Existing monthly mortgage payment: £300
This leaves a balance of £700 for a proposed Bulgarian mortgage payment.
 
It is important to ensure that the relevant documents are available on completion to the bank as the mortgage will only be released for completed apartments once a valid use permission certificate has been issued.

Bulgarian rules state that only Bulgarian nationals are legally allowed to own land although a foreign person may have full rights on an edifice, which means that you may own the title of an edifice without owning the underlying land.

As in the UK, prior to buying overseas property it is strongly advised that you seek legal advice before signing a purchase agreement or placing a deposit on your new overseas Bulgarian home.

To purchase Bulgarian property, you must use an independent solicitor that meets the banks minimum requirements, regarding knowledge of Bulgarian law so that they can act as an agent for service in process. 

Issues & Risks:
Although property prices in Bulgaria have increased quite substantially in the last 24 months they remain artificially low and restricted by the rules of the Constitution that restrict foreign ownership of land and property in Bulgaria. This is one of the fundamental reasons why investors believe there is room for substantial growth in the real estate sector over the medium to long term.

Changes to these rules in the Constitution had to have been made for Bulgaria to join the EU in January 2007 but currently a foreign buyer still has to purchase via a local Bulgarian company if he wants to own the land on which his investment property sits. Realistically it will take until 2014 for the changes to the Constitution of Bulgaria to be passed and for it to be 100% legal and straightforward for a foreign investor or purchaser to own direct freehold title to land and property in Bulgaria.

Bulgarian property offers enormous potential for investors, however, the usual pitfalls of buying property abroad apply in Bulgaria as much as anywhere: there may be no recompense if your developer goes bust, there may be problems with title deeds or in tracing ownership of a Bulgarian property and, if you don’t do sufficient research, you may choose an unsuitable location or pay too much for your property in Bulgaria.

While none of these pitfalls is exclusive to the Balkans region, there are some specific issues to be aware of when you start looking at property for sale in Bulgaria.

Bulgarian property with land
As individuals, foreigners cannot own land in Bulgaria so, if you plan to buy a Bulgarian property with land (i.e. a villa rather than an apartment), you have to set up a limited liability company. This is a commonly encountered requirement and the process is not complicated but it does add costs to buying property in Bulgaria.

Bulgarian property and estate agents´ fees
Among the costs of buying property in Bulgaria is an estate agent’s fee of 3-5% of the purchase price, subject to a minimum of between £350 and £500. When buying off plan Bulgarian property, these fees are usually due when the preliminary contract is signed.

Bulgarian property and prices
Vendors of property for sale in Bulgaria may insist that a price lower than the agreed value is declared on the Title Deed. There may be financial consequences to accepting this condition; if you subsequently sell the Bulgarian property your liability for capital gains tax would be calculated on the ´lower´ price on the Title Deed.

Bulgarian property and vacant possession
Buying property in Bulgaria does not necessarily confer immediate possession on completion. Existing occupiers of Bulgarian property do not usually vacate the premises until one month after completion. This period can be shorter but will need to be negotiated.

Bulgarian property zones and building programmes
If you are buying a building plot only, make sure the area is programmed for building. Similarly, if you are buying property in Bulgaria i.e. a villa, make sure the area is zoned for individually owned properties.

Bulgarian property and communal areas
If buying a new apartment property in Bulgaria, be clear on what communal areas and facilities, e.g. swimming pools and gardens are to be shared by all owners of the complex. Arrangements should be in place for their management and control.

Bulgarian property and the black market
Some vendors of property for sale in Bulgaria may suggest a reduced price if part or the entire original price is paid in Sterling, Euros or Dollars. This is illegal.

The process of buying Bulgarian property is different to house-buying in the UK but that doesn’t make it more problematic. If you start your search for property for sale in Bulgaria by using a reputable and experienced estate agent, do your research and refuse to be rushed, you should find buying property in Bulgaria a whole lot less stressful than it is in the UK.

Regulations:
As you view plots of land in Bulgaria, you will sometimes find that the agent uses terms such as 'regulated' and 'unregulated' land.

If you are viewing unregulated land, then this typically means that the authorities have not marked that area for development. It does not mean that you cannot build there, but you would need to go through a legal process to convert the land to 'regulated' land. Regulated land, therefore, means that the land has been marked for development (e.g. building).

When viewing land it is important to establish whether the land is regulated or not, as this will determine how easily and how quickly you will be able to build a property on it. Some agents will tell you that they can help you to get the land regulated. However, it is always better to get independent advice on how easy a process this will be. Discuss this point with your solicitor to ensure that the whole legal process has been explained to you and you have been given a clear idea of how long this can take.

You will typically hear claims that regulation can take anywhere between one and six months. But there is really no 'official' length of time by which regulation of land can be obtained, and there is also no guarantee, as such, that unregulated land can be regulated.

The safest option for you would be to purchase regulated land. Ensure that you tie a clause in to your contract (with your solicitor's recommendation) that protects your interests on this point.

Industry Associations:

Key Property Markets:

Bankso
Property in Bansko has been popular for a sustained period of time, as the area is the longest established of the country’s three ski locations, with Borovets and Pamporovo completing the trio of resorts. It is also now more capable to compete with its better known and more fashionable counterparts across Europe, owing to 35 million Euros of recent investment.

Property in Bansko is available within the Pirin mountain range, located 160km from the capital of Sofia, offering convenient access to skiing conditions which have led to the city being voted Europe’s most improved ski resort in the Great Skiing and Snowboarding Guide 2006 awards.

Further to contributing substantially to the recent growth of the Bulgarian property market, Bansko has further ambitions - it was one of the bidding cities to host the 2014 Winter Olympics. Summer rental opportunities are set to improve in Bansko in the near future, as a new golf and country club, a spa and a sports complex are all currently under construction.

Kavarna
With only a 30 minute transfer time from Varna international airport and 38km from Romania, the Black Sea town of Kavarna is sure to become a popular playground for the tourist market. The area will benefit from a proposed €15 million development of Bulgaria’s FIA approved Formula 1 racing complex, project managed by British company Berkeley Square Trading Limited. The significant level of inward investment is apparent, with the approval of plans to enhance Kavarna’s port into a new modern marina and yacht club specifically targeted to the luxury clientele.

Two golf courses which have been designed by the world famous Gary Player are currently under construction, one of which will be in the top five largest in the world. The mild climate in Kavarna is conducive to the construction of the golf courses and once they are complete the rental potential of the region will be phenomenal and yields are set to fly.

This modern and contemporary town stands on an ancient site dating back to the second millennium BC, providing the tourist with a rich mix of history, art and culture. Reconstructed roads and infrastructure, well developed services and a fast growing economic and cultural mix is catching the attention of both the Bulgarian and foreign investors.

Kavarna is also one of the biggest agriculture producers in Bulgaria and lends itself to the possibilities of competitive production and attracting new employment, partners, creditors, and investors. A lot of Bulgarian, international and foreign partnership companies, with many branches already in operation, have invested heavily in Kavarna all boosting the areas economic conditions and consumer spending.

Sofia
Sofia has everything a second home buyer could ever need: A city teeming with culture – check. Booming investment hotspot – check. Popular ski resort – check. Quality golf courses – check. Serviced by low cost airlines – check. As an investment property destination Sofia has quite some attributes.

Sofia is not only a historic, fun and exciting city to visit, it is fast becoming one of the most significant locations for sustained international property investor focus as a result of the fact that it is one of the lowest priced capital cities in the EU where the demand for accommodation is actually rising far faster than the supply of quality real estate stock, and where local affordability is strengthening rapidly.

Annually Sofia’s property market is experiencing double digit price appreciation percentages, and some experts are predicting capital growth rates of over 100% in the next five years. These strong levels of demand and growth are being fuelled by sustainable inward foreign direct investment which is increasing, creating an affluent economy in Sofia, providing employment and boosting local affordability patterns quite substantially.

Investors looking for the best areas of the city in which to invest to target not only the increasingly affluent local market but the international professional and tourism markets as well are progressively more drawn to the southern up-market suburbs such as those within easy reach of both the city and the fine skiing available at Mount Vitosha.

With a current population of 1.3 million, Sofia is the administrative, cultural and industrial centre of the country, newly inaugurated into the EU on 1 January 2007, but it gives you a whole lot more, for a whole lot less. According to Mercer Human Resource Consulting’s 2007 Cost of Living Survey, Sofia is Europe’s least expensive city lounging in 108th place, so that’s a good start, but it’s not all about the money.

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