Information about Bulgaria


  



Introduction
Regional Locations
The buying Process
Legal Issues to Consider
Financing a property purchase
Investment Potential




Introduction:

Located in South Eastern Europe, Bulgaria is bordered by Romania, Serbia, Macedonia, Greece and Turkey. Bulgaria gained its independence in 1908 although it fell under Soviet control as a result of being on the losing team in both World Wars. Communist domination ended in1990 as Bulgaria took its first steps towards democracy.

 

Since then Bulgaria has been on a much needed path to inclusion in the European Union which has helped combat escalating unemployment, corruption and inflation through committed economic reform and responsible fiscal planning.  As a result Bulgaria has experienced relatively low inflation and steady economic progress with an average 4% growth since 2000 which has resulted in significant amounts of foreign investment.

 

The total size of Bulgaria is roughly 111,000 square kilometres, and has a population of approximately 8.5 million people.

Regional Locations: 

There are 28 administrative divisions or provinces in Bularia, Blagoevgrad, Burgas, Dobrich, Gabrovo, Khaskovo, Kurdzhali, Kyustendil, Lovech, Montana, Pazardzhik, Pernik, Pleven, Plovdiv, Razgrad, Ruse, Shumen, Silistra, Sliven, Smolyan, Sophia, Sofiya-Grad, Stara Zagora, Turgovishte, Varna, Veliko Turnovo, Vidin, Vratsa, and Yambol.  

The buying Process:


Acquiring property in Bulgaria as a Foreigner can be tricky depending on the type of property or land that you are looking to purchase. Restrictions created by the Bulgarian cabinet stipulate that foreigners will only be able to buy and inherit property in Bulgaria seven years after joining the European Union which will be 2014. However, Europeans can be exempt from the seven year rule if they live permanently in Bulgaria or if they are self employed and have residence in Bulgaria.

The only other way to buy property as a foreign national is to form a Bulgarian registered company with buyer as the sole owner and director, the buyer can of course add other directors for example marital partners.

Setting up a company to buy property in Bulgaria is not uncommon, and there are a number of Estate Agents and Developers who will offer this as part of the package.

The general process will be as follows:


1. When you have found a property that you would like to buy and you have concluded all of your initial enquiries, and your offer has been accepted.
2. You will be required to sign the preliminary contract as well as lodge a deposit usually equivalent to 10% of the purchase price.
3. The title search then begins as your Estate Agent begins to set up a company for you.
4. When the company has been setup and the title for the property has been cleared both parties will be required to sign a contract of purchase. You will then be required to pay the balance of the funds to complete the property purchase transaction.


To register a (PLC) Private Limited Company yourself you will need to:

1. Register and reserve your new company name.
2. You will need to draft the relevant memorandum of articles for the company.
3. You will need to appoint a managing director and board of directors if required.
4. You will then need to deposit at least 70% of the authorised capital into the account and ensure that you receive a deed from the bank confirming your deposit.
5. You will need to register the company at the commercial register and acquire any permits that you may need.
6. You will then need to register the company with the National Statistical Institute within 3 days in order to obtain a BULSTAT number.
7. Your final registrations will be at the National Social Institute (NSI) and the local tax office.

Legal Issues to Consider:

Fees and Taxes

 

Fees and taxes all in are quite high in Bulgaria. Total transaction costs can range from around 24% to 28%, with majority of the cost coming from the 20% VAT, which is payable on old and new build property sales.

 

The Estate agent's commission will be around 3% to 5% and is usually split between the buyer and the seller. Foreigners of course will need to add the cost of forming and administering a Company.

 

Profits from leasing property are subject to municipal tax and are taxed at 10% by the municipality where the property is located.

 

Foreign companies not operating from a permanent institution in Bulgaria are subject to a withholding tax rate of 15% on their gross rental income.

 

Selling a property in Bulgaria is subject to 20% VAT. VAT is usually already included in the selling price but it is always worth checking beforehand. Individuals and corporations who are VAT-registered are entitled to claim the VAT back.

Financing a property purchase:

Financing an overseas property purchase is easy when you deal with professionals...

 

If you are thinking about buying an overseas property, then you also need to be thinking about the best way to finance your purchase. At Sublime Location we work closely with a number of specialised lenders who have all been carefully selected based on trust, experience and reputation.

 

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Investment Potential:

Property prices have continued to rise in the last couple of years despite the markets prediction for a correction. On average residential property prices in Bulgaria have grown by nearly 30% for 2007. Interestingly enough, Bulgaria has been listed and ranked as the fourth most popular destination for Britons buying property abroad.

For a long time its popularity has been attributed to the low costs of the properties themselves. Another contributing aspect lies in the fact that buying property in Bulgaria is actually a fairly simple process if you are buying in a structured development.   

 

The location you invest in will depend to a large extent to the purpose you plan for your property for example is it for pure investment or a combination of holiday and investment? Do you prefer sun, ski or city? In fact all are possible in Bulgaria. For beach resorts look to Sunny Beach and Sozopol currently with places like Biala, Chern-morets and Dyuni starting to see developments. For ski resorts look to Bansko, Pamporovo and Borovets.

Sofia, as the capital of the country, is attracting attention, similar to the way Budapest and Prague attracted investors in the 90's. The good areas to invest in Sofia can be difficult to find and clients can find themselves with a beautiful apartment but in an area that is very short of basic services and where building will continue for the next 10 years. Look to the main areas of City Centre, Boyana and Lozenets for the top of the market with developments along Bulgaria Boulevard and Reduta area for the mid-range.

Remember, Sofia's population has doubled in the past 10 years and unemployment rate in the city is only 3%. Vitosha Mountain is to be developed as an International Ski Resort with AKB Fores to invest 30m Euro to modernize the ski facilities. Next to Presidential Residence and ski lifts, it is only 10 minute drive to city centre.

In the future look to the untapped rural tourism market and also look to the area of developments around Spa towns. Bulgaria is a beautiful country and you will begin to see developments in these market segments shortly. Sandanski is a beautiful spa town with hot springs and is well known for its mild climate and recuperative effects for people with bronchial problems. Sandanski is only 30Km from the Greek border and only a 40 minute drive from Bansko Ski resort.

Bulgaria has also been tipped to become a golfer's paradise thanks to the climate and golf developments that are starting to appear. All in all the Bulgarian Government is committed to improving access to the country. It has already promised an open skies policy from 2007 and will invest 120m Euro in the two Black Sea airports of Varna and Bourgas.

It is interesting to note that the main driver for property price growth is the opening up of the banking market to mortgages over the past two years. This lending to buy homes is very new in Bulgaria and is set be one of the main market drivers in the years to come. This is largely Bulgarians borrowing to buy their own homes.

It shows the market is not dependent on foreign investment as a price driver but, rather is sustainable by the Bulgarians themselves purchasing in the market.

The market has a long way to go before it even gets to half of the EU average. This will support the market and see sustained increases in property prices over the coming years. Remember, Bulgarian property prices are approx 50% less than properties in cities like Prague and Budapest.

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