Some Britons are leaving, some haven't arrived yet
Why did the Bulgarian property market attract so many Britons? There are lots of theories but no definite answer. Some experts say British estate agents simply identified a need for a cheap and attractive destination, and Bulgaria seemed to be the ideal place. Pessimists suspect that the whole Bulgarian property craze was just a brilliant PR campaign. Most locals believe it was the country's accession to NATO and the EU that ignited the foreign interest, but it actually began in 2002, long before there was any certainty that Bulgaria would join these organisations. Six years later, the question is no longer “why” but “what went wrong”? Clients of both British and Bulgarian estate agents made it very clear they were disappointed with their Bulgarian experience. In 2002 about 5,000 Britons bought property in the country; in 2005 they were about 25,000. Since 2007, many of them have been trying to sell their properties, in some cases for lower than the purchase price.
Are the Brits really leaving Bulgaria? The story of the British property “invasion” is almost incredible. Britain and Bulgaria have never had close economic or political relations. Nevertheless, one morning in 2004, hundreds of Bulgarian villages woke up with at least one British inhabitant. During 2002-2006, thousands of Britons chose to live in Bulgarian villages, lured by low living costs and ridiculously low prices for rural properties. In 2002, a house of 250 sq m with 1,000 sq m of land, located in the Rhodope or 30 km away from the Black Sea, could be purchased for 500 -1,500 euros. Many pensioners found that their budget allowed them to live a much better lifestyle in Bulgaria compared to that in Britain and this made rural properties the biggest attraction on the Bulgarian property market. They either bought houses in good condition for higher prices or, more popularly, cheap ones in need of repair, which they later renovated. When Bulgarian seaside and winter resorts became popular, the wealthier British appeared and began to buy apartments. Some of them expected good rental incomes, others simply intended to buy a bargain, wait a few years and sell for a profit. Approximately 60 percent of buyers used the services of British estate agencies, while the other 40 percent preferred to deal directly with Bulgarian agents.
It seemed that this property romance would last forever. However, in 2007 British purchases were 70 percent less than in 2006. Experts had already foreseen such a scenario and pointed out the reasons:
Cheap? No, thanks
At the beginning of the property boom, the British cited low prices as one of the main reasons for coming to Bulgaria. It was not long before these began to increase. In 2004, Bulgaria featured in the Guinness book of records as the country with the fastest rising real estate prices in the world, with an annual increase rate of 47 percent. From 2004 to 2007, prices jumped by 300-500 percent in most property sectors. The reason for this was purely greed. Sellers knew there was a demand and reacted accordingly. Many Britons were subjected to the unfair practice of dual prices: one for Bulgarians and double for foreigners.
Quality and design
Bulgaria's property boom prompted developers to build hotels in quantity and speedily. Unfortunately, this was at the expense of quality. Leaking roofs and paper-thin walls were just a few of buyers' complaints. Visitors to ski and seaside resorts frequently complained they got lost or could not identify their hotel because they all looked the same.
Lack of adequate mortgage facilities for foreigners
Despite the relatively low property prices, many potential British buyers needed a bank loan. The Bulgarian mortgage market was very young and was slow to develop. Although British mortgage brokers tried to establish relations with local banks, it was difficult for a foreigner to get a loan. Even today, when all Bulgarian credit institutions claim they offer mortgages to foreigners, the reality is they rarely issue them. The mortgage assessors have to check and verify all the documents submitted in order to prove income and ability to keep up repayments. If a bank agrees to go through all the paperwork, the process takes up to four times longer for a foreigner and many applicants give up. Besides this, owners refuse to wait for buyers to get a loan.
In Sunny Beach, Bansko and other top resorts, you can still see advertisements by estate agencies promising a 25 percent annual investment return from hotel apartments. Surprisingly, this misleading information was a ploy initially used by Bulgaria-based British agencies. They made it sound so easy: “Buy an apartment, we will rent it for you and you will get rich”. Most Britons, who bought apartments in resorts, did so on the expectation that their investment would be returned within three to five years by rental income alone. The reality was they got three to five percent annually - if they were lucky. The owners didn't have grounds to protest because, in most cases, the promised 25 percent was not in the purchase contract. Rental income could possibly have been much higher if British and Bulgarian estate agencies had provided adequate “property management services”, including ensuring tenants throughout the season. In most cases, however, this was not achieved.
Some enterprising British estate agents offered, and still offer, an online property sales service. They somehow manage to persuade people to buy properties without even visiting Bulgaria. Clients simply have to choose from the photos and the information they are given, then authorise the agents to conclude the transaction on their behalf. This was how approximately 15,000 Britons bought a house they had only seen on the Internet. For many of them the shock came when they finally saw their purchases. The houses were either in a dilapidated condition and bore no resemblance to the property shown on the photos. Or the quality was fine, but the houses were located in abandoned villages, with no services or resale potential.
Still, are the British really leaving?
The Bulgarian real estate sector has now become more predictable and is safer. It still provides excellent opportunities for those who are ready to invest in a transparent and controlled business climate. Before 2008, the Bulgarian property market was attractive to impulse buyers, adventurers and those who wanted to make a quick profit without much effort. The serious British investor has yet to come, but property owners hope he is on his way.
Initially, “the new Bulgarians” loved the country for its beautiful countryside. After it became a popular destination, developers started building huge concrete hotels on the coast and in the mountains. Agents promised “a beautiful view of the sea or mountains”, but what buyers actually got was a view of the hotel 10 metres away from their properties. Shockingly, holiday homes were even built on protected territory, with the State's silent permission. When Natura 2000 - the European programme for environmental preservation - was enforced, the Supreme Court ruled illegal holiday complexes were to be demolished. Some British, however, had already paid for their properties and nobody had warned them they were located in protected areas. Most of them lost their money.