VARNA PROPERTY : Report no.1
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This short report was written in Varna from an internet cafe, after speaking with location property agents. Tomorrow, I plan to visit one or two properties and file a second report. Today was about getting a general sense of the market.

The starting point in looking at the Bulgarian property market is to understand the huge discrepancy between Bulgarian and UK salaries. The Bulgarian currency, the Lev trades at Lv.2.85 = GBP1.00. Lv.12,000 (GBPx,xxx) is probably above the salary of the average Bulgarian. By comparison, the average Brit has a salary of GBPxx,xxx, which is x.x times as great.

I was told this morning by a local agent, that the average Bulgarian would probably not consider paying more than Lv.300 a month (that's about GBP.100 monthly to rent a property. That's an annual amount of Lv.3600, would enable one to buy a property at Lv.72,000 and get a 5% return. This amount is equivalent to about Eur.36,000 or GBP.25,000. Few propeties are priced below this level near the major cities (Sofia, Varna), and those above this, are priced for more well-to-do Bulgarians, and for foreigners.

Having said this, the market in Varna is hot, and prices are up 40-50% or more in the past 12 months. In asking what was available amongst new properties, I was told that most well located new properties in Varna within walking distance of the center city would cost between Eur.800 to Eur.1000 per square meter. Thus, a 2BR flat of 90 sq.m might cost about Eur.80,000 or more. This is about twice what the average Bulgarian can afford. (Note: a premium for highend properties is not surprising. We find this in all countries. But if the premium becomes too great, then the investor is relying on flows of international capital, which can be highly volatile.)

Rents have not risen nearly as fast as property prices; and neither have incomes. Even in a relatively prosperous city like Varna, there are few that can afford these higher prices. I was told by one of the two agents that a year ago, property agents were telling their clients that a yield of 10% could be achieved on a new residential property. In the current market, this would be an unrealistic expectation, and something like 8-8.5% might be possible BEFORE management charges and voids. But prices are still pushing higher, so even these yields may be about to slip lower as strong demand for new "highend" properties pushes prices even further out of reach for most Bulgarians.

There seems to be a wide discrepancy in charges, depending upon the agent.

EasyBG, which has a UK parent ( http://www.PropertiesinBulgaria.com ),
said that they were offering a one year guarantee on the rental returns of 5%, against an "expected" return of 10%, but this is before their management charge which is a rather enormous 22%. And the guaranatee is only for a single year.

Terra (web address to be confirmed: http://www.terra.bg ?) was talking about a more standard 10% charge. Terra is a newer and smaller firm which appears to give greater attention to its individual clients.

There are other costs which I will need to pin down more precisely, but in summary form, they include:

- VAT: which is normally included in the purchase price. but do ask, because this could be up to 20% of the purchase price

- Buying agent's commission: between 1.5% and 3.5%, depending on the agent and the price of the property. Something like 2% might be normal for the properties of interest to foreigners.

- Legal and transfer tax: This will be related to the price, and the transfer tax is defined by law. Expect to pay 2.0-3.1%, but do some chexcking first.

- Company set-up cost: ?? Maybe Eur.500-600 initially, and maybe Eur.50-100 per annum.

This last item is rather important. At the moment, only Bulgarians are allowed to own property (Land, that is). The usual way around this, is for the foreigner who want to buy the freehold land under an apartment or house, is to set up a Bulgarian company, which then purchases the property. However, it seems that local property taxes are higher for corporations than they are for individuals. I had some difficulty in following the explanation for this, but it is also true that Bulgarian citizens, irregardless of where they live, are accustomed to obtaining discounts (often as high as 50%) for Hotel rooms. At two hotels I visited, two separate rates were posted, one for foreigners and one for Bulgarians.

Another explanation for the difference in tax costs, was that local property taxes are based upon the purchase price recorded in the land registry. Apparently, many Bulgarians agree a lower price for official property registration purposes, and make a separate cash payment to the seller which brings to full price up to market levels. Foreigners are normally less likely to take the risk of doing this, since if they sell their capital gain (which carries a capital gains tax of about 20%)

We are Terra Links Ltd is 100 % Bulgarian real estate agency, based in Varna at address: 5 Pushkin str.
Our agency is a well-known and respected company providing all types of activities referring to real estates except for construction. Our clients and partners consist of proprietors, investors, buyers and tenants of all types of real estates.

Our services comprise:

• Mediation for buying and selling as well as rental of all types of properties – residential, commercial, industrial, vocational, parcels, land etc. on the territory of the Black Sea region
* Management of corporate and personal real estates.
* Consultancy, advice and recommendations on all matters concerning real estates
* Assistance for obtaining bank credits for home purchase.
* Registration of firms, legal and accounting services to our clients

Terra Links Ltd. has a well-developed partners’ network of companies active in the field of construction and refurbishment, architecture, interior design and furnishing, garden design and maintenance.

We always like to pay special attention to our clients. It's not because of obligation. We are really involved and concerned with their needs, preferences and tastes. Above all we are highly reliable.

If you decide to choose Varna and its neighbourhood or some other spot along the Black sea coast for property investment or business start-up or just holiday, please do contact us. We'll do our best to meet your inquiry or search.
At least you'll get a piece of information, a piece of advice or some idea.

Seem to be quiet a few lurkers on this thread.

Why not post something, and let us know what you
are looking for...

BULDOM is a dynamic company operating within the following fields:

- real estates sale and rent brokerage;
- legal consultations in real estate transactions;
- real estate market studies and analyses;
- mediation in front of banks for mortgage credits and renovation works in estates;
- registration of companies, legal and accounting services;
- legal permits for newly constructed buildings and change of land use;
- estates management;
- civil engineering, renovations and refurbishment;
- interior design and architecture.

BULDOM specializes in management and transactions with foreign and local investors.

BULDOM studies in depth the processes and development on the real estates market. We are proud to have as clients many foreign companies operating on the territory of Bulgaria.

BULDOM policy is to rely on an established professional team with individual and custom-sized approach to each client. Our team is dynamic, formed of young, professionally trained ambitious people, who are ready to provide to our clients a detailed, yet focused, representative market analysis to reflect their interest and needs. Our clients may then rely of expert brokerage and expect a smooth and reliable transaction. Our internal company training guarantees that any member of the team has wide linguistic knowledge combined with in-depth knowledge of Bulgarian legislation in the field and basic knowledge of foreign legislation in real estate deals. Our company is thus able to provide to its clients not only advices, but as well consultations to guide their decision taking process for such an important deal as a real estate purchase.

BULDOM has not only a team of employees, but as well an associated group of consultants in economic, legal, architectural and design activities, who are hired in accordance with our clients’ interests.

Link www.buldom.com