Bulgaria investment

There are a number of reasons why Bulgarian investment property is attractive:

Lower costs of living
For the time being, property can be constructed at a relatively low cost in Bulgaria. The low cost of living means that land, material and labour costs are lower than in most other European countries. Furthermore, the costs of owning a property are also likely to be comparably low, with utilities, tax and service costs all running below European averages.

Low entry level
Property in Bulgaria is far from expensive by European standards. A decent sized property can be owned outright for the same amount of money as a large deposit on a place in the South of Spain.

Easy purchase process
The purchase process in Bulgaria is straightforward and similar to that in the rest of Europe. With the right help it can only take around 3 or 4 days to open a Bulgarian company, this can cost anything from a few hundred Euros, to a couple of thousand. BGPLG can help you with this, or if you choose to do this yourself, we would advise you go via a specialist company or dual-language solicitor. The main purchase process should then be completed within 30 days.

Mortgage lending situation
Its true the mortgage lending market in Bulgaria is in its infancy at the moment, which means that rates are sufficiently high to exclude many potential buyers from the market. This market will almost certainly mature. As the country moves towards the European Union, this market will start to mature, with German, Italian, Greek and Austrian banks likely to take over and open up the market. This will make property ownership more accessible, with the likely effect being upwards pressure on prices.

Capital appreciation
Land values are rising rapidly throughout Bulgaria. In Sofia, prices for finished property have risen from 230 Euros per sq metre in 1999 to anything up to 1250 Euros per square metre in a completed development. While there is nothing to guarantee that this rate of increase will continue, various economic and social factors would tend to indicate that strong performance could be expected. Land prices are averaging around 150 Euros per square metre (up from 20 Euros per square metre a few years ago) and are expected to reach 400 Euros per square metre by 2007.

Growing economy & future EU membership
Economic growth has been running at 4 - 4.5% for the last few years. As the country moves towards membership of the EU, the exceptionally low cost of commodities in the country will start to harmonise with the other nations of Europe. These rising prices are likely to lead to salary increases and the knock on effect of rising property prices in the domestic market. This in turn will lead to higher prices being paid by overseas investors.

Membership of the EU should bring stability and long-term economic, political and social security.

Foreign investment
While the climate for foreign companies investing in Bulgaria is favourable – a situation that the Bulgarian government are keen to ensure continues, an increasing number of foreigners are investing in Bulgarian property. Russians, British, Greeks and Germans are all actively buying, both in the coastal and mountain regions. As the country becomes more accessible in terms of the cost of flights and as the mortgage market opens up, it is probable that more buyers will consider owning holiday property here.

Established end user market
There is already a well-established tourism market in Bulgaria. In some parts of the country it can be very difficult to find accommodation at certain times of year, as demand clearly outstrips supply. So much so, that some developers are prepared to pay health fixed rental yields in return for taking a property of an owner’s hands for the popular tourist months.

This situation is unlikely to change particularly quickly, given that the Bulgarian government is committed to supporting and developing

Tax environment
The tax regime in Bulgaria is currently very favourable towards property ownership, with the following basis for taxation:

Company Setup: 400 – 600 Euros (this is if you go to a normal Bulgarian lawyer with a legalised translator, as opposed to a specialist English-speaking Bulgarian lawyer, which will be a lot more expensive.
Income Tax: 15%
Capital Gains Tax: 15%
Local Tax: 0.5% of the “official” valuation per year (this is much lower than the market value of the property
Notary Tax: 0.1%
Municipality Tax: 2% of purchase or sale price (similar to stamp duty)
VAT: 20% on the building purchase price. Land purchases are exempt from VAT. VAT registered companies can claim back the VAT on a building purchase (a process that takes between 45 and 60 days) but must have an annual turnover of 25,000 Euros or more in order to qualify.