"New Russians" are buying up the French Riviera, the Balearic Islands, and knightly castles in good old England, where prices are measured in millions of dollars. For "middle Russians," such investments are out of reach, so many are stashing their earnings in OFFSHORE and choosing Bulgaria—a country that wasn't even considered abroad during Soviet times. The main reason for the popularity of the former sixteenth republic of the USSR among real estate buyers is affordable prices and prospects for growth.
Arguments for Sofia
Despite the fact that resort properties are actively advertised at exhibitions, according to data from the Bulgarian real estate site Merleg.bg, Sofia ranks first in the number of purchases by our investors, outpacing all Black Sea resorts. As Metrinfo.Ru notes, a pattern holds: the larger the city, the more investors are drawn to it.
According to the international analytical agency Property Secrets, Sofia has all the opportunities for rental business—there are many visitors (mainly workers) who need somewhere to live. There is no large-scale new construction yet—it is included in the master plans. Accordingly, there is a housing shortage, which, according to market laws, increases in price, and according to Property Secrets analysts' spring forecasts, it could rise by 25% by the end of the year.
The ratio between purchase price and rental rates in Sofia is quite favorable. The selection of tenants and all rental operations can be entrusted to a management company. Today they guarantee a six percent rent. The management company's services themselves cost €14 per square meter per year. Thus, even without considering price growth, the purchase of a Sofia apartment will pay off in at most 16 years. The average payback period is 7.5 years.
They Don't Advise Buying Khrushchevkas
And now let's try to choose the actual investment object. As Liliya Stoyanova, director of the agency Stoyanov OOD, said, an apartment in Sofia can still be bought for $800 per square meter. But what kind of apartment is that? During the reign of Todor Zhivkov (1956-1989), in the PRB (People's Republic of Bulgaria) they built the same Khrushchevkas as in our country, using Soviet technology. Such houses, according to Bulgarian grammar, would be called zhivkovkas. The main difference between zhivkovkas and khrushtovits (Khrushchevkas in Bulgarian) is that they consist not of five floors, but of four.
In Bulgaria, no one has renovated them—they waited for them to collapse under the weight of the communist past. Now this is a dilapidated housing stock urgently requiring major repairs, and Liliya Stoyanova does not advise investing money in such apartments. Under favorable circumstances, they will share the fate of our five-story buildings, and if the current boom turns out to be short-lived, they will eventually become crime-ridden slums.
By the way, English investors, who were the first to probe Bulgaria's opportunities, understood this last winter, when apartments in zhivkovkas that they had gleefully bought up showed zero growth for the first time since the beginning of the Bulgarian boom. That's when they dropped them from their books as unnecessary ballast and ceded the lead in developing Bulgaria's expanses to their Russian-speaking colleagues. This, however, does not apply to the center—there the housing stock was more or less maintained, and zhivkovkas in the center are considered almost elite housing.
The English themselves speak more diplomatically about this—true aesthetes and realists (listen to the term "real estate"). So, the head of Chernyk Estate, Sir Isaac Chernyk, believes that purchasing such an apartment is currently only a short- or medium-term investment that does not allow significant profit.
The most unpromising district of the Bulgarian capital is Botunets, located in the northeastern part of the 1.26-million city. The main reason for its unpromising nature is poor transport links: besides the irregular 118 and 119 buses, one can only get there standing up "like a verb" in the overcrowded marshrutka 34.
The Ovcha Kupel district has not fared any better. This "quiet and green quarter with a beautiful view of Vitosha Mountain," as written in advertising brochures, is actually mostly built up with houses from the time of Tsar Boris III, also requiring costly reconstruction.
Investment Threshold: €1,000 per Square Meter
An apartment below a certain threshold will ultimately cost you the loss of invested money. You need to buy something that costs at least €1,000 per square meter, no matter what it is—an apartment in the center of Sofia, a house in Petrich (the birthplace of Vanga and Kirkorov), or a villa in Varna or Burgas from whose window you can see a patch of water surface in clear weather. By the way, in Sofia, such apartments still need to be sought out—the average price is $1,400, and only a few districts can boast a square meter price exceeding the two-thousand mark.
The most promising district, according to Ginka Gesheva from the Minerva company, is the Lozenets quarter in the South Park area. Incidentally, the American embassy is also located in these places. The Sofia Zoo is also located there. The expert names the Belite Berezi (White Birches) quarter as the second most promising for investment.
If you prefer new buildings, it is worth paying attention to the Mladost quarter—one of the most rapidly developing. The quarter is located in the southeast of the central part and, with an area of 1,678 hectares, occupies 10% of the capital's territory. The first houses here were built back in the 60s, but now the area is full of new construction. Old houses are located in the microdistricts Mladost-1 and Mladost-2, and new ones are being built in Mladost-4 and Mladost-1A.
Between new houses and houses not from the first 'youth' (Mladost) the difference is twofold: if in 'Mladost-1' the average apartment costs $194,000, and a square meter is $2,141, then in the microdistrict 'Mladost-1A' the average apartment price is $383,000, but the square meter is somewhat cheaper – $1,673. The reason is not that new buildings are valued less, but that the apartments there are larger, and the larger the area, the cheaper the meter.
The transport accessibility of the district is practically ideal – ten bus lines, two trolleybus lines, and eight minibus routes pass through it. However, those who have visited Sofia know that from the center you can even walk to 'Mladost'.
No less promising is the Borovo quarter, located at the foot of the already mentioned Vitosha Mountain, as well as the Geo Milev quarter. And although part of its buildings consist of 'zhivkovits', apartments in them cost $300,000, and a square meter is $2,500, which for Sofia today is almost the upper price limit.
As for the limit without the word 'almost', in the very center we managed to find an apartment costing $800,000 ($4,000 per sq. m), previously owned by some party functionary. This is the upper limit. The upper limit, that is, if, of course, you don't consider elite housing – for it, there is no upper limit.
Why they are growing
Bulgarian prices have no choice but to rise, if, of course, we all are not hit by the crisis raging across the ocean. Its echoes are reflected in Western European real estate, which has now stopped growing. But Bulgaria has not yet reached Western price peaks. After all, until very recently there were no prerequisites for price increases – even the ubiquitous British we mentioned were afraid to invest in Eastern European countries before they joined European structures. The Bulgarians themselves were not known for having an excess of free funds.
The time of Bulgaria's entry into the European Union coincided with the very moment when the first signs of stagnation appeared on the world market. That's when the British were the first to spot a green patch on the map on the western coast of the Black Sea.
Note that their eyes beheld an undeveloped market, somewhat similar to Crimea – the same deserted sanatoriums with crumbling shell rock cladding, wild littered beaches, and service that repels even the most undemanding client. Then the British recalled the experience of colonial exploitation of half the world and decided that they could bring order to this neglected corner as well.
Now you wouldn't recognize Bulgaria. It is a member of NATO and the European Union. And for Russian-speaking investors, the country has still remained a relative, because there is no such linguistic similarity with any other. Not only did people of the older and middle generations study Russian from the second grade, but Bulgarian itself is quite understandable. This, by the way, is another argument in favor of Bulgaria.
The Bulgarian market remains promising – it still has a long way to go to reach European prices. The only global danger is the world financial crisis, the consequences of which no one dares to predict. The only advice that can be given here is to monitor the situation.
As for our investors from the middle class, Bulgaria is an ideal find for them. With small investments, you can get decent dividends. However, you should not chase cheapness – you can lose the invested money.