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All that Glitters is Not Gold - Where is it possible to buy a property on your credit card? Bulgaria, of course!  With thousands of potential property buyers seduced by Bulgaria’s bargain property prices, the temptation is to think that making a solid return is a no-brainer!  Searching the Internet, dozens of articles and property websites boast about the 100% capital growth that can be achieved on Bulgarian property investments in the space of 12 months. For first time investors with small budgets looking for a step onto the property ladder, this seems like an opportunity almost too good to be true!  The result is that thousands of novice speculators and second homebuyers are flocking to Bulgaria to cash in on the investment opportunities it offers.  But as the saying goes, if it sounds too good to be true, well then, it probably is too good to be true.

Firstly, the past two years have seen a decline in rental yields in many of Europe’s more established property markets.  The UK, Ireland particularly are seeing rental yields drop to under three per cent.  Combined with the over inflated cost of property in these countries, the Western Europe investment market is a tough one to work.  This has resulted in thousands of investors, turning to Europe’s emerging economies, seeking out markets that can work their funds more profitably.  Close behind them follow hundreds of amateur investors and holiday homes buyers ready to buy up the new properties being built by professional developers.

However, foreign interest in new markets alone doesn’t explain Bulgaria’s success. Investors seeking new pastures could in theory take their funds to any of the former Communist countries and many of them do.  The second factor that has attributed to Bulgaria mass appeal is its versatility. Bulgaria is such an attractive investment opportunity because it has something for everybody’s tastes and offers the investor and holiday homebuyer plenty of choice.  Right now dozens of new developments are springing up along the beautiful Black Sea coastline and sun soakers from all over Europe flock to Bulgaria for cheap and affordable beach holidays!  Further inland, Bulgaria’s main ski resorts have become some of the most fashionable in Europe, particularly Borovets and Pamporovo.  Top quality ski chalets, hotels and complexes are being built to facilitate the new influx of European skiers, all at amazingly affordable prices.  A ski chalet in the centre of Bulgaria’s ski resorts can be bought for a quarter of the price of a similar chalet in France or Italy.  Finally, the natural beauty of Bulgaria’s mountain ranges and valleys has made it an appealing location for walking, cycling and adventure holidays.  From the cosmopolitan appeal of the Sofia, the countries capital, to the small villages of the Rhodope Mountains, Bulgaria has something to offer every taste at some of the most affordable prices in Europe.
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Two or three decades ago, Spain was experiencing the type of interest that Bulgaria is receiving now.  With the rise of the foreign holiday as a luxury the masses could afford, Brits began to flock to sun soaked Spain.  Their interest promoted an influx of developers who took advantage of Spain’s popularity with tourists and built affordable holiday homes. This encouraged many of the tourists to invest in their own little piece of paradise, with the advantage of being able to extend their own stay and encourage others in by letting their property. The result over the years was a continuing rise in property prices but also a strengthening tourist economy, a well-developed infrastructure and growing opportunities and financial benefits for native Spaniards.

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Property prices in Spain are now so high that buyers are forced to look for cheaper alternatives.  In turning to Bulgaria, the cycle will begin again.  In fifteen to twenty year’s time, the Bulgarian property market may well be over-priced for second homebuyers and once again the search will begin for new and cheap destinations.  In the mean time Bulgaria will have grown on the strength of its EU membership. It will have pumped millions of euros into improving infrastructure.  Tourism will have generated huge amounts of wealth for the economy and the poverty that characterises the country now may well be very much a thing of the past!

Should all investors and second-home buyers follow Rosie Murray-West’s logic and choose not to invest in Bulgaria because it is ‘tasteless’ to take advantage of the poverty there, Bulgaria may well remain a neglected and overlooked economy, characterised by deprivation and stunted economic growth. .
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So while Bulgaria is proving to be a wise investment option with some properties offering up to 80% capital appreciation in one year, it is still necessary to be very cautious when choosing where to invest.  Property prices are rising significantly but largely in the more established and more desirable tourist hotspots.  Investing along the Black Sea coastline and areas within 10km of the two major ski resorts, Barovets and Pamporovo, is likely to yield a healthy 60-80% capital growth in one year.   Buying a new apartment in these areas can cost as little as €30,000 and is likely to be solid investment, since they can be easily let to the increasing number of tourists coming to experience the delights of Bulgaria.

A quick trawl through the Bulgarian real estate portals and you’re likely to find 100’s of properties under €15,000.   With prices like this, the temptation is to rush in and buy, sometimes without even seeing the property.  But in Bulgaria, all that glitters is not gold! It is wise not to be carried away by the prospect of a property at this price doubling its value in one year.  The problem with many of these properties is that they tend to be located in Bulgaria’s most isolated and rural areas.  These areas are often weak on infrastructure and services and may lag behind the rest of Bulgaria for many years to come. 
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Investing in Bulgaria’s more established locations, such as Varna, Sofia or Barovets, may seem more expensive for the budget investor.  But when you consider the headaches and additional expenses that come with renovating an old property in rural Bulgaria, as well as the language difficulties, your budget buy could prove not to have been such a bargain after all!  Also, these properties could very well be difficult to rent.  Although Bulgaria is growing in popularity with eco-tourists, this tourist sector has not taken off to the same extent as the more traditional ski or sun holiday destinations.  Consequently, the likelihood of property prices rising as dramatically in isolated areas is very slim.  Even if property prices take a huge leap upon Bulgaria’s entry to the EU in 2007, the chances are that they will increase in rural areas by 20-30% at most.

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Again Spain makes a good example. Though Spain saw property prices increase by over 100% on joining the EU, it is still possible even now to find properties in the most isolated, inland areas for as little as €35,000.  These areas are only now gaining the interest of property buyers priced out of Spain’s more desirable locations.

The situation will be similar in Bulgaria.  Tourists will flock to the ski resorts, the Black Sea coast and the more popular mountainous regions.  Consequently, developers will continue to invest in these areas.  New developments will attract more buyers and more tourists and the areas will see continued capital appreciation on investments.  Isolated areas, lacking amenities and services will be overlooked and property prices in these areas will remain significantly lower than the rest of Bulgaria. .
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For intrepid investors willing to take a long-term view on their investment and wait 15 to 20 years to see significant returns, then cheap isolated properties may be worth considering.  But the certainty of a return and the ability to approximate what that return will be is far more likely with properties in the more established Bulgarian destinations.

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