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Last Updated: Jan 21, 2017




After almost five years of stagnation, Bulgaria’s house prices are now rising rapidly, thanks to falling interest rates and stable economy. The recovery is led by the country’s capital, Sofia, with double-digit house price rises.

The nationwide house price index rose by 8.82% (9.79% inflation-adjusted) during the year to Q3 2016, a sharp improvement from a rise of just 2.04%y-o-y a year earlier and the highest annual increase since Q4 2008, according to the National Statistical Institute (NSI). During the latest quarter, house prices increased 1.59% (1.29% inflation-adjusted) in Q3 2016.
  • Prices of new dwellingsrose7.9% (8.6% inflation-adjusted) y-o-y in Q3 2016, after annual rises of 4.9% in Q2 2016, 5.8% in Q1 2016, 4.5% in Q4 2015, and 3.8% in Q3 2015. During the latest quarter, prices of new dwellings increased 3.8% (3.3% inflation-adjusted) in Q3 2016.
  • Prices of existing dwellings surged 9.3% (10% inflation-adjusted) y-o-y in Q3 2016, a sharp improvement from a meager growth of 0.9% in Q3 2015.

The almost zero interest rates on bank deposits have encouraged people to invest in real estate, and also encouraged purchases of pre-construction residential property.

“2016 has been a very dynamic year for Bulgarian real estate market and for the first time in many years the trend has been entirely positive,” said PolinaStoykova, the Executive Director of Bulgarian Properties.

“Of course there is always a risk when making a purchase in early stages of construction, but people are more willing to take this risk because currently demand is higher than the supply,” Stoykova noted.

From 2000 to 2008, Bulgaria had a house price boom, with residential property prices surging around 300%. The bubble burst at the end of 2008:
  • In 2009, Bulgaria’s average dwelling price plummeted by 25.72% (-25.64% inflation-adjusted);
  • In 2010, the average dwelling price fell by 4.96% (-8.05% inflation-adjusted);
  • In 2011, the average dwelling price fell by 5.8% (-8.75% inflation-adjusted);
  • In 2012, the average dwelling price fell by 1.32% (-6.16% inflation-adjusted);
  • In 2013, the average dwelling price fell 1.19% (unchanged when adjusted for inflation);
  • In 2014, the average dwelling price increased 2.78% (3.65% inflation-adjusted);
  • In 2015, the average dwelling price increased 4% (4.23% inflation-adjusted).

Bulgaria’s property market is expected to remain strong in 2017. Demand for properties in the major cities continues to grow, and supply is increasingly limited by low levels of new construction.

Bulgaria’s economy expanded by 3% in 2015, an improvement from annual growth rates of 1.5% in 2014, 1.3% in 2013, and 0.2% in 2012, and the highest expansion since 2008, mainly due to higher net exports and public investment, according to the International Monetary Fund (IMF). The economy is expected to expand by another 2.8% in 2017, according to the IMF.

Bulgaria house pricesEuropean Union citizens can now purchase properties in Bulgaria, including land.  The 5-year moratorium on land purchases, set as a condition in the Accession Treaty between Republic of Bulgaria and The European Union, was lifted in January 1, 2012.

Previously, foreigners could purchase land only in the name of a legal entity and were not allowed to own a property. The lifting of the ban now gives European citizens the right to own property as individuals.

Analysis of Bulgaria Residential Property Market »


RENTAL YIELDS
Last Updated: Aug 29, 2017



Sofia has moderately good gross rental yields - i.e., the rental return on a property if fully rented out, before all expenses. Yields in the centre are around 6.0 %. Yields a little further out are similar.

Doctor’s Garden, Ivan Vazov, Iztok and Lozenets are among the most sought after addresses in the centre. Embassies, museums and universities are located here. These areas also have many parks and green spaces, making them popular with expats.

In the southern part of Sofia in Vitosha Mountain (or in the vicinity) are prestigious suburban neighborhoods like Boyana and Dragalevtsi. Though new developments being built here are increasing the stock of rental apartments, we find better yields here on the very smallest apartments, with yields stretching up to 6.4%. Two years ago we found that the very biggest apartments commanded exceptional yields at 8.4%. We weren´t able to gather enough data the last two years, but that may be worth investigating.

We aren´t able to provide yields in Bulgaria’s beach and ski areas, because rents in these areas are highly seasonal.

Transaction costs in Bulgaria are moderate, and more or less evenly split between buyer and seller.  See our Round trip transaction costs on residertial property purchases in Bulgaria and Transaction costs in Bulgaria on residential property compared to the rest of Europe

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Dec 05, 2016



Rental Income: Gross rent earned by nonresidents is taxed at a flat rate of 10%, withheld at source. Deductions are not allowed for nonresidents.

Capital Gains: The sale of real estate by nonresidents in Bulgaria is subject to 10% withholding tax on the net gains received.

Inheritance Inheritance of direct descendants is not taxed. For all other beneficiaries, the inheritance tax rates vary, depending on the relationship between the donor and the heir.

Residents: Residents' worldwide income is taxed at a flat rate of 10%.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Dec 06, 2016



Total roundtrip transaction costs are around 5.30% to 10.60% of the property value. The buyer pays for transfer tax (0.10% to 3%), notary fee (0.10% to 1.50%), and 0.10% registration fee.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: Jan 01, 1970


The laws are pro-landlord

Bulgarian law is pro-landlord.

Rent: There are no rent controls, so rents and terms and conditions can be freely negotiated between the parties. Any method of rent increase can be agreed upon, including indexation, and periodic progressive increases.

Tenant Eviction: Bulgaria’s weakness is the inefficiency of the court system, which can, in practice, make it difficult to evict a tenant. Usually it is the landlord who initiates litigation. But the length of proceedings often dissuades them. It takes an average of 660 days to evict a tenant.

Read Buying Guide  »



ECONOMIC GROWTH
Last Updated: Jan 21, 2017


Economic growth, budget surplus

Bulgaria sofia residential apartmentsBulgaria is one of Europe’s poorest countries, with a GDP of more than US$7,000 per capita in 2016, based on data from the International Monetary Fund (IMF). The country is also one of Europe’s most corrupt. Bulgaria’s transition from communism was not easy. Things only really started to improve when Bulgaria’s last Tsar Simeon II became the democratically elected prime minister from 2001 to 2005. His government pushed market reforms intended to ease accession to the EU.

Bulgaria enjoyed an economic boom from 2000 to 2008, with the economy expanding by an average of 5.6% per year. But in the June 2005 elections, the Bulgarian Socialist Party (BSP), successor to the Bulgarian Communist Party, led by Sergei Stanishev won most seats in parliament. After weeks of wrangling the main parties signed a coalition deal under which he became prime minister, but largely bound him to continue previous policies (partly constrained by EU membership conditions).

Bulgaria joined the European Union in January 2007. In the coalition's second term Bulgaria lost millions of euros of EU financial aid due to allegations of widespread political corruption. In the July 2009 elections, the center-right party, Citizens for European Development of Bulgaria (GERB) led by BoykoBorisov, soundly defeated the BSP.

In October 2011 presidential elections, Rosen Plevneliev of the GERB emerged victorious. Then in May 29, 2013, Prime Minister PlamenOresharki of the BSP came to power after anti-austerity protests forced out former Premier BoykoBorissov’s GERB party and triggered a snap vote.

Bulgaria gdp inflationOresharki faces strong opposition, the key issue being the appointment of controversial media mogul DelyanPeevski as head of the state security agency DANS. Then in July 2014, Oresharki stepped down from office, paving the way for a snap election in October 2014. BoykoBorissov returned to premiership as his GERB party forms coalition with fellow centre-right Reformist Bloc.

The economy is expected to expand by 2.8% in 2017, according to the IMF - one of the fastest growth rates in the European Union. In Q3 2016, Bulgaria’s economy grew by 3.4% from a year earlier, according to the NSI, and grew by 3% in 2015, an improvement from annual growth rates of 1.5% in 2014, 1.3% in 2013, and 0.2% in 2012, according to the International Monetary Fund (IMF).

The budget surplus was 1.6% of GDP this year, the country’s first budget surplus since 2008. In 2015, the country’s consolidated budget deficit fell to 2.9% of GDP, down from 3.7% of GDP in 2014.

Deflation of 1.6% is expected this year.

Unemployment stood at 7.9% in November 2016, down from 9.9% a year earlier, according to the NSI. Unemployment is expected to be 7.1% in 2017, according to the European Commission.







  • Pro-landlord rental market
  • Yields not great
  • High transaction costs
  • Moderate rental income tax
  • Corruption & crime woes
RESIDENTIAL PROPERTY FACTS
Price (sq.m): €1,300 For a 120 sq. m. property, usually an apartment.
Rental Yield: 6.24% For a 120 sq. m. property, usually an apartment.
Rent/month: €811 For a 120 sq. m. property.
Income Tax: 10.00% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 7.95% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: 10.00% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Pro-Landlord Rating is based on a detailed study of each country’s law and practice.

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