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The
Bulgarian Economy is growing steadily - there is a strong
growth in industrial production, employment and credit
has resulted in high GDP growth over the last few years.
The growth in the Bulgarian economy should underpin a
strong property market and lead to increased Bulgaria
property prices.
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Bulgaria
Property prices are relatively low. Property in the better
residential areas of Sofia sells for around €1,000
– 1,200 per square metre (roughly £67 –
£82 per square foot). It is clear that Bulgaria
property is significantly cheaper than many other countries
in the immediate area. By way of comparison, in London,
property in a number of residential areas (such as Knightsbridge,
Kensington and Chelsea) can sell for approximately €16,000
per square metre (£1,000 per square foot).
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Low
Currency risk - The Lev has been attached to the Euro
since its introduction at a fixed rate equivalent to €1
to Lev 1.9558. From 1997 the Lev was attached to the DM
at a rate of 1 Lev to 1 DM.
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The
current cost of domestic borrowing is relatively high.
The rate that ordinary Bulgarians pay for a floating rate
mortgage is in the range of 10 – 12% pa. We believe
that once Bulgaria joins the EU, interest rates should
fall in order to harmonise with rates in the Euro zone.
Lower interest rates should help stimulate the Bulgaria
property market.
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It
is currently possible to achieve high rental yields on
property. Rental yields on residential property are currently
in the range of 10 – 12% of the purchase cost.
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Much
residential property available is unsuitable for letting.
There is currently no mechanism whereby individual leaseholders
can be compelled to contribute towards the cost of repairs
to common parts and exterior of buildings unless their
leases specifically contain provisions to this effect.
Whilst suitable provision is sometimes made in the leases
of recently constructed blocks, blocks constructed in
the communist era, or earlier, rarely have such clauses
in leases. The result is that unless all the owners in
a block agree to repair, nothing may be done. Even in
the best residential areas of Sofia the common parts of
older blocks are frequently unattractive and are, therefore,
difficult to let. Good quality modern blocks of flats
therefore command a premium in the letting market.
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The
Bulgaria property market is relatively unsophisticated.
Whilst there are estate agents in Sofia, they generally
do not have shop fronts displaying Bulgarian properties
that are for sale with prices clearly stated. It is common
practice that estate agents charge fees to both buyer
and seller. This increases costs and hence reduces the
liquidity of the market. With accession to the EU, it
is probable that this situation will change, with a consequent
beneficial impact on the Bulgaria property market. Premier
apartments generally receive fees from the vendor.
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