Bulgarian Property Investment - Will the Bubble Burst?
Author: K Damian Qualter BA MBA
Can Bulgarian Property Investment Stay on Top?
Many politicians and government officials, as well as, other individuals, believe that Bulgarias accession to the EU and NATO will drive real estate prices up practically overnight. Let me tell you that this will not happen that fast, but it will happen over a longer period of time. The accession to the EU and NATO has both positively affected the development of the Bulgarian property investment market, which gave us a sense of security to Bulgarians and foreign investors alike.
The Bulgarian property investment market has dealt with serious changes in the beginning of the year. The residential property market in the larger cities was dealt with in US dollars. The decline of the dollar against the euro has forced most of the sellers to convert the dollar price values into euro. Whats happening here is that they did that at an exchange rate that was a great deal different from the market which is what drove sales prices up at least 10 per cent.
Although prices have been driven up, this is a really positive thing for the market in the long term. The Bulgarian lev is pegged to the euro, and the average salary there is denominated in leva or in euro, and so it just makes sense to have property investment prices to also be denominated in these two currencies. The commercial market has already experienced that a year ahead, except the reasoning behind it is different.
All of these positive economic and political signals combines in the Bulgarian economy have been the driving force behind both the Bulgarians and foreign nationals in purchasing residential properties with an investment purpose in mind. They can do this because of the excellent potential that the rental market still offers provides to its buyers.
These properties are usually leased to foreign managers of multinational companies or foreign diplomats at high rental levels. Then, in few years and after very large capital gains are expected from the sale of the property. This makes a great deal of sense and it is expected to happen, if the Bulgarian economy continues to grow at the rate that it is going at now.
The government has taken a small but significant step in helping to get the properties market moving in that the process of acquiring all necessary permissions for a new construction has been shortened a great deal. The market is still waiting for the long expected change to the constitution, that will allow foreign nationals to get land in Bulgaria.
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