Aide kato shte postvame ot UK sites neshta i az da postna edno
Don’t get burnt in Bulgaria!
20 July 2006
We always knew the so-called Bulgarian coastal hotspots were going to turn out to be very hot indeed for many investors.
So hot, in fact, they were going to get burned!
Now, we're seeing evidence that this is happening on a big scale.
That's the bad news. And we take no satisfaction in saying, 'We told you so.'
The good news, though, is that sections of the mainstream press are waking up to the fact that Bulgarian coastal property is the equivalent of a minefield for many unwary overseas investors. Waking up, then, to the message we've been pushing for many months.
A piece in The Sunday Times just last weekend (July 16), highlighted the shattered expectations of investors and the many inflated claims of agents selling Bulgarian coastal properties, both in the UK and in Bulgaria.
Here's what the piece - headed 'Bulgaria? Beware' - said:
'British buyers on the Black Sea may have to face some hard facts, says Sarah Marks. It was, many thought, too good an opportunity to miss: a beachfront property on Bulgaria's Black Sea coast for £30,000. Not just a holiday home, but a cast-iron investment opportunity. Rental income would cover the running costs and mortgage payments, while soaring property prices would guarantee a hefty profit when the flat was cashed in.
'That, at least, is the prospect that has been dangled before thousands of British buyers by estate agents and developers during the past few years.
'This summer, however, the consequences of Bulgaria's property boom are beginning to sink in. The frenzy of development has delivered a glut of apartments in Sunny Beach, Golden Sands and a string of other Black Sea resorts and is threatening to do the same in the mountain resorts of Bansko, Pamporovo and Borevets.
Has this article affected your opinion of Bulgaria...?
'Many Britons who bought on promises that they would get rental returns of as much as 10% are receiving half that -- if their properties are being let at all, a Sunday Times investigation has revealed.
'Meanwhile, those who had hoped to sell for a profit are finding that the relentless building programme can make it difficult even to get their money back.'
Great!
This is music to our ears and we hope as many readers of the Sunday Times as possible read it and are NOT tempted by the rich promises made in connection with Bulgarian property.
Now, we're not saying ALL Bulgarian beachfront property is a bad investment; if you are ready to invest for the very long term, maybe, just maybe, you can do well.
We're just saying that almost all of it is a bad investment, because it's almost impossible to divorce the hype from the reality, so you can't really arrive at any serious expectations for your investment.
Let's look again at why the rationale for Bulgarian coastal property investment doesn't stack up - it's actually very simple indeed AND it tells us a lot about hyped (especially coastal) property markets in general.
Here are the reasons:
Tourist numbers are rising, sure, but most are taking package holidays and staying in hotels. Packages are cheap compared to flights alone. Add this to the huge supply of rental apartments and we can see why it's a struggle to rent out a new build apartment for even a handful of weeks during the season.
There is no resale market! Everyone's busy selling (and buying) off-plan new builds. So, yes, an equivalent apartment to the one you bought a year ago is now selling at, say, 30% more than yours; but this does NOT make your apartment worth 30% more as well.
Why? Because yours is on the secondary market and no-one wants to buy on the secondary market when there are plenty of brand new, off-plan developments to choose from.
It's almost impossible to do comparables. What might seem 'cheap' to an inexperienced investor is usually cheap by standards not applicable to this market - i.e., it's cheap compared with back home, which means nothing.
Conclusion - it is the agents and developers who are making money out of property in Bulgaria and NOT the average property investor.
Here are some nuggets from a Lewis Report on the subject way back last year - Neil Lewis, by the way, was one of the very first property commentators anywhere to send out warning bells on Bulgaria.
'Right now that the entire Bulgarian coast seems to be for sale!
There's just one thing wrong with this frantic Bulgarian property grab - as far as investors are concerned, I fear it will turn out to be a BIG mistake! ......'
'The problem with Bulgaria is that it falls into the 'new, new thing' category.
'Everyone is looking for the next property market that will provide fabulous returns. As a result, the reality sometimes gets trampled underfoot in the stampede.
'And Bulgaria is such a case.'
'When an investment destination is hyped like this, my advice is BEWARE!'
'What most people fail to understand is that Bulgaria is NOT a single property market. In fact, there are three off-plan markets:
The countryside, which basically amounts to ski resort developments
The Coast
Sofia, the capital
'The trouble is that only one of these really stacks up at all from an investment viewpoint, and a second might make it in the future.
'Sadly, the one sector that really doesn't stack up when you run the numbers is the coast........'
'...The bottom line is that all small-scale investors we have come across cannot sell or let their brand new off-plan properties. There is simply no demand in the secondary market for these new builds.
'And that's because no one wants to buy a property on the secondary market when they can buy a brand new one - and there are lots and lots to choose from, often at attractive sounding discounts.
'So, straight away, if we ask two key investment questions, alarm bells begin to ring. Here are those questions:
Who will I rent to?
Who will I sell to? This is known as an exit strategy.......'
Read the full Lewis Report on the dangers of investing in Bulgaria, click here
OK, so you might ask, apart from blowing our own trumpet a little here about being first with the message, what's our point?
Well, it's this.
While the Sunday Times has obviously got the message - no doubt spurred on to carry out its investigation by disgruntled readers - others have not.
Just the day before the Daily Telegraph carried a piece, also about Bulgaria, but with a whole different slant.
Headlined, 'Ski's the limit in Bansko', it went on to strongly suggest that the ski resort of Bankso could be the next investment spot to take off.
Oh dear! We fear the same kind of hype all over again.
The fact that Bulgaria, which strongly fancied its chances of hosting the Winter Olympics in 2014, was recently eliminated from the list of bidders, says a lot, we believe.
Here's what Neil Lewis had to say about the Bulgarian ski potential:
'The time is not yet right for investing in Bulgarian ski resorts.
'They have a fundamental problem that I cannot see being overcome anytime soon.
'Today's skier typically wants a quick ski holiday - a weekend, perhaps, or a four day break. To be honest, if you're like me, that's quite enough!
'For that reason, skiers want to be able to hop on a plane and arrive at their resort within the shortest possible time.
'How does Bulgaria figure in this regard?
'Flight time from the UK: 3-plus hours, plus 2 to 3 hours transfer time to most resorts. It's too long!
'I think the demand in this sector will only be moderate until transfer times can be brought right down.
'And, as yet, Bulgarian ski resorts have a long way to go to compete with their more developed Alpine competitors.'
