PROPERTY BULGARIA INFO

Friday, January 26th, 2007

Downtown or out of town: Where to invest in Sofia?

In every capital city throughout Europe it happens downtown.

Defining “it” and “downtown” is simple; it’s where government is located, it’s where big international corporations have their offices, it’s where cultural events such as theatre, opera and ballet performances happen, and it’s where bars, nightclubs and restaurants are located. It is also where real estate prices are the highest.

In Bulgaria, all of the above is true. Sofia, however, saw a move away from downtown in the residential sector because of the pressures of limited space. At first, Lozenets became the place to live. The leafy suburb was and still is a 20-minute walk to the city centre. It boasts parks and tree-lined streets, beautiful squares and the requisite premium on housing prices. In the past 15 years, this residential suburban utopia attracted the attention of developers eager to sell a slice of city paradise to those fortunate few adapting and emerging into a new political system and finding that they had the means and the ability to choose where they lived. The fortunate few eventually became a fortunate many as Bulgaria slowly got to grips with the new social and economic systems and for the new Bulgarian haves the address to have was in Lozenets.

What came to pass is downright ugly. Every land plot free of buildings – and many not free – was snapped up. Existing two-storey houses were torn down and high-rise apartment blocks shot up to keep up with the demand for those with the must-have address. The saddest part is that once a developer acquired a plot of land the questions asked were, how high can I build? How cheaply can I do it? How close can I get to the land boundaries? And, how much sellable space will I have at the end? Thanks in no small part to the flexibility of those in government responsible for providing the answers, we arrive at the crazy situation we see now, spacious expensive apartments with views on all sides of neighbouring buildings and their spacious expensive apartments built so close together that you feel you are an intimate part of your neighbours’ lives. This has now led to the once-beautiful and desirable Lozenets being lambasted by locals and foreigners alike as “soulless” and “overcrowded”.

The developers have moved on from Lozenets, but where to now? The profits from Lozenets need re-investing. Developers needed more land and cheap. It seems they have all tipped up on the outskirts of the city, south of the centre but north of the ring road. They have brought the same set of questions with them and their number has swelled on the short journey.

However there is now a big difference, Lozenets was and is close to the city centre; Manastirski Livadi, Vitosha, Studentski Grad, and Dianabad are most certainly not. The other problem facing the developers is who is going to buy the new constructions? Most Bulgarians own property and the population is declining. Wait! All is not lost! There is a ready-made group of buyers with oodles of cash in the UK and Ireland all of whom want a piece of the Bulgarian property phenomenon and there are plenty of agents keen on the 5 to 10 per cent commissions. Visit any website or read the literature for these new developments; it’s amazing! Quotes direct from the web; “15 mins from city centre”, “close to a ski resort”, “fantastic panoramic views of Vitosha Mountain”, “completed to highest luxury standards” plus “year round rental!” Wow, I have to admit that sounds great! However, 15 mins to the city centre is at 3am when there is no traffic. The truth is that on any working day, it’s a 30 to 60-minute drive, depending on your route. Also omitted is that your fantastic panoramic view of the mountain is going to last as long as it takes them to build the new development in front of you whose brochure is already advertising your view, and this ski resort, calling the existing facilities on Vitosha a “resort” pushes the boundaries of truth.
This isn’t the developers concern; the buyer should check the suitability of the purchase. The first question a buyer should ask is, “who is going to live there?” Personally, I don’t have a clue!

There are hundreds of these apartments being built and all are being sold with the promise of rental returns.

The Bulgarian average salary is approximately E 200 a month, therefore tenants must have an income way above average or be expatriates. A glance at my address book surprisingly tells me that I personally know more than 100 expatriates. With absolute confidence I can say none of them will live in the new areas. Generalising, expatriates fall into roughly two categories. Group 1 have a family often with children. Group 2 are either single or have a partner but no children. Both have accommodation allowances from their company and can choose where to live. Group 1 will most of the time want to live in a house, with a garden and bedroom for each of the children. Group 2 have no need of the house, garden or the maintenance that goes with it, but would like to have the option of walking to work, restaurants and the other distractions mentioned in the first paragraph; all located downtown! Unfortunately the developers didn’t consider this when they left Lozenets with their large profit, easy to erect apartment buildings in tow. A disaster is coming and it’s close. If rumblings in the Irish press are an indicator, already investors are complaining about the absence of tenants and their rental income.

Investors, look at Sofia. There are many apartments available that have not come from the two-for-the-price-of-one school of architecture and exude character and style.

Downtown is easily recognised on a map of Sofia; somewhat obviously it forms the very centre of the city. Although these apartments can become sound investments with rental income, foreign investors have traditionally been wary of them for several reasons. First, many of these apartments are in need of full renovation as many are of pre-war construction and though structurally sound have seen little in the way of care. Layouts are strange with toilet doors opening into kitchens, shoddy DIY and original electrics and plumbing. Secondly, foreign investors have limited time to spend on site and worry about sub-standard workmanship. It can all seem as too much and too expensive of a hassle. It’s worth remembering, however, that you buy a piece of history, a part of Sofia’s soul and restoring it will be hugely satisfying. Once all the work is complete, the value of the property is likely to be way in excess of the combined purchase and renovation. Work is often of an excellent standard and is carried out with competence and speed. As with any professional work, finding the right people is a must but these apartments do genuinely offer the potential for those rental returns promised on the innumerable websites because they obey the three golden laws of property investment – location, location and location.

Bulgaria Property Wise