Overseas Property: Black Sea bonanza

Article by Peter Conradi, *with excerpts, The Sunday Times, 21st August 2005

Bulgaria’s coastline is attracting foreign property investors like bees to honey. PETER CONRADI does the maths, wondering if they’ll profit in the longer term

It begins on the plane from Britain: pick up a copy of the in-flight magazine of Bulgaria Air, and almost every other page carries an ad for the latest Black Sea apartment complex, each apparently more glittering, splendid and — above all — profitable than the last.
Pitch up in Sunny Beach, the brash heart of the coast, and the streets are full of estate agents peddling luxury flats and seaside villas. People go on holiday here, it seems, as much to snap up property bargains as to lie on the sand.

“There must be 40 or 50 agents here now, but very few of them have any experience or know what they are doing,” says Mihail Chobanov, 30, co-founder of Bulgarian Properties, one of the country’s best established agents, whose little office in the resort is already surrounded by several clones. “You get one kiosk selling clothes, the next one selling hamburgers and the one in the middle selling property.”

The Bulgarian property market is booming. Old-style communist resorts that were once the summer playground of Russian, Czech and Polish workers are being demolished and replaced by a Balkan version of the Costa del Sol. In scenes familiar from the Spain of the 1970s and 1980s, virgin coast is filling rapidly with apartment blocks and prices are climbing steadily. The price of land, meanwhile, is going through the roof: plots five or 10 miles inland are being snapped up even if the sea views are so distant that you need a telescope.

Curiously, though, the boom is being driven largely not by people looking for holiday homes for their own use but by investors lured by rock-bottom prices and the hope of rapid returns.

The Bulgarian coast, stretching for more than 100 miles between the Romanian and Turkish borders, certainly has much to offer. Those seeking sun, cheap beer and noisy nightlife will make for Sunny Beach or the slightly leafier Golden Sands — known respectively as Slanchev Bryag and Zlatni Pyasatsi to Bulgarians, they have been rebranded under English names for the British market. Other more upmarket resorts are also springing up in quieter coastal locations. And in the ancient city of Nessebar, about a mile south of Sunny Beach, the Bulgarian coast can boast a world heritage site that was already a Greek colony in the 6th century BC.

Golf, the great motor behind much Spanish property development, is also on its way. Gary Player, the South African veteran, is involved in developing two courses near Kavarna. Others are planned, with a mixture of foreign and Bulgarian backers. There is also talk of exploiting the country’s traditional spas and exotic mud treatments.

The growing interest is reflected in the tourist numbers, especially from the UK. More than 250,000 of us went on holiday to Bulgaria last year — 62% more than in 2003 and more than three times as many as in 2001. The overall number of visitors, at just over 4m, was up 14%.

Many Brits have been combining holidays with a little judicial home-buying, lured to Bulgaria by developers offering low prices and promises of high yields and double-digit growth. Much of the action is off-plan, with some investors already cashing in and selling on flats during the typical 15 months it takes to build them.

Near Kavarna, Bulgarian Properties is offering an even more generous 9% guaranteed annual yield — albeit only for an initial 18 months — on its Saint Nicola Lodge of 18 one-bed and nine two-bed flats. Due to be completed in May 2006, the units — all with sea views — range from £39,200 for a 73sq m one-bed flat (which works out at just over £540 per square metre), up to £88,750 for a 165sq m penthouse with two bedrooms.

It would be foolish, though, to base a long-term strategy on rent guarantees that are limited in time and difficult to enforce if things go wrong. With most purchasers buying to let, everything depends on the ease of finding tenants and how much they are prepared to pay. The holiday business in Bulgaria is largely package tour-based, so this normally means finding an agent dealing with Balkan Holidays or other operators, who will rent your flat for the season.

Unlike Spain, with its mild winters, the Bulgarian season lasts a maximum of 120 days; the beaches that seemed so welcoming in July and August can be dusted with snow in January and February. So just a few weeks empty during the season can cut quite sharply into your return.

But, as Jeremy Leach, 34, an IT specialist from Reading, has discovered, there is certainly money to be made. Since spotting Bulgaria’s potential two years ago, he has invested more than £110,000 in two flats on the coast, a village house in Nikolaevka, 14 miles inland, and some land — and reckons to have doubled his money already.

High economic growth and foreign investment, rising tourist numbers, a stable currency and political system and impending EU membership make for an irresistible combination. A further boost is likely to come from the eventual arrival of low-cost airlines that will bring in individual tourists alongside those on packages.

Once Ryanair and EasyJet get in there, it will be a whole different ball game. There has actually been a flattening off in the supply of developments, while tourist numbers are still going up. It’s like Spain just before it joined the EU.

• Print
• Ask for free advice