Russians are no longer just looking at Bulgaria – they are buying real estate there
As in other countries that were once on the verge of joining the EU, the tone is set by the British and Irish, who have accumulated vast experience in real estate transactions in Spain and Portugal and made considerable capital from reselling resort real estate in the Czech Republic.
It is no coincidence, for example, that the first resort complex in Pomorie was popularly called the "Irish Village." Overall, over the past four to five years, the average annual increase in foreign capital in Bulgaria's construction sector has been about 43%. And while in 2001 foreigners invested a total of about €14 million in Bulgarian real estate, by the end of 2004 this figure had grown to €200 million, and by the end of 2005 it exceeded €320 million.
So far, the main players in the Bulgarian market are the British and Irish, who, according to some Bulgarian analysts, account for about 60% of all real estate transactions. Hot on their heels are the Germans, slightly behind are the Dutch and Balts, and there is a significant presence of Romanians (as strange as that may seem to some). Only then come Russians – our compatriots, for instance, who already own property in Novosibirsk, Tomsk, or Ulyanovsk, are eyeing the nearest foreign country. Unsurprisingly, their aggregate share is growing, and therefore discussions about a massive Russian buy-up of Bulgarian real estate no longer seem entirely far-fetched.
The islanders, who have gained the right of first refusal, have set their own rules of the game and their own "points of attraction," and not always located on the seashore. According to Bulgarian statisticians, the British, for example, eagerly buy land and old village houses located 10-15 km from the sea, in ecologically clean areas – in the expectation that the acquisitions can later be profitably used or equally profitably resold. However, for them, and even more so for our citizens, the most attractive (read: profitable and liquid) remains real estate on the sea coast, located in the center of tourist complexes or in close proximity to them.
Consequently, the rise in real estate prices here is the most powerful. According to the National Statistical Institute of Bulgaria, the country's two main resort cities – Varna and Burgas – firmly hold the lead for the highest housing prices in the country: today the average cost per square meter in Varna is about €820, in Burgas – €755. This leadership is not absolute only because of Sofia – €856 per square meter. For comparison: the average price per square meter of housing across the country barely reaches €520. And these, we note, are average prices.
If we are talking about purchasing an apartment in the new luxury complex Royal Garden, being built in the center of Sunny Beach, you will have to calculate at €1,120-1,370 per sq. m. And for a villa at the same resort (three floors, total area 510 sq. m., with the option of using it as a hotel), you will have to pay about €680,000.
Also important in this case is the attention to Bulgaria from regular characters in foreign society news. For example, as soon as a group of British footballers (including players from Chelsea) announced their interest in purchasing apartments in Tsarigradski – the country's largest elite residential complex, located in the Mladost district in eastern Sofia – prices there immediately jumped. And as soon as Eddie Jordan, former owner of the Jordan team in Formula 1, declared his readiness to invest in the development of Burgas, investment proposals began arriving at the city hall in triple the amount. (In Jordan's case, it was about the construction of residential complexes in the Akatsii and Pobeda neighborhoods, a new modern yacht marina in the Sarafovo neighborhood, and a golf club in the Rosenets Park). So the Burgas administration, which at that time was looking for an investor to implement a project for the improvement and development of a three-kilometer stretch of coastline (from the former Adam and Eve beach to the beach in the Sarafovo neighborhood), was even slightly taken aback by such an abundance of attention.
Of course, there is a fly in the ointment in every barrel of honey, including in the vast sphere of relations between the Bulgarian real estate market and foreign buyers and investors. In particular, a serious problem that foreign citizens have to face is the country's insufficiently developed legislative framework.
For example, to purchase land, you need to register a Bulgarian company. This procedure is very lengthy, and the land will be registered as the property of a legal entity (with the right to later re-register to a natural person). This is why the supply of villas, houses, and townhouses in the market is extremely limited.
Another problem is the lack of a mortgage lending market for non-residents. The most favorable conditions when purchasing real estate are considered to be a two- to three-year installment plan offered by the construction company itself. This situation certainly reduces the investment attractiveness of projects, especially those aimed at attracting cheap loans. But positive trends are emerging in this area: some Western construction companies are already working out issues of lending for their projects with friendly banks, and the day is not far off when we can talk about an established mortgage lending market.
Another unpleasant point is the restriction on the length of stay in the country for non-residents. Today, if you own property in Bulgaria, you can apply for a one-year residence permit, but you must spend exactly 181 days in Bulgaria during that year, otherwise you may be stripped of your status and even banned from entering the country. That is why many of our compatriots are in no hurry to apply for a residence permit and limit themselves to multiple-entry visas for themselves and their relatives. It is clear that the laws cannot remain in this form, and a new legal framework is currently being developed that will take all these nuances into account.
Who will get Bulgarian land
The temporary parliamentary commission on amendments to the Constitution of the Republic of Bulgaria approved changes prompted by the country's upcoming accession to the EU and concerning the permission to sell land plots to foreign citizens.
Currently, foreigners have the right to purchase plots as legal entities – that is, to conclude a transaction they must register a company in Bulgaria. According to the amendments, from 2007, citizens of EU member states will have the right to buy real estate, but only if they have permanent residence in Bulgaria (this condition will be lifted from 2014). Citizens of non-EU countries that have signed bilateral agreements with Bulgaria on this issue will also receive the right to acquire land. Also, everyone who inherits plots will receive an unconditional right to own land, regardless of citizenship.
The reaction of Bulgarian society to the upcoming changes was extremely mixed. Most of the country's residents are convinced of the need to change Bulgarian legislation in accordance with EU requirements. However, there are still many dissatisfied: people who already observe the massive advance of foreign capital fear that after the relaxation of legislation, Bulgarians with their limited financial resources will be 'swept away' from the market.