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House Hunting in ... Bulgaria

MARKET OVERVIEW

The housing market is still reeling from the global crisis. During its bubble period from 2000 to 2008, home prices grew 300 percent, partly in anticipation of the country's joining the European Union in 2007, said Stanislav Petrov, the sales manager for Select Properties Bulgaria, an agency based in the coastal city of Bourgas.

During that period, particularly from 2004 to 2008, British investors largely drove the market for speculative purposes, buying unfinished homes from floor plans, anticipating price gains from such factors as road construction or city incorporation, Mr. Darakchiev said.

"
The British went crazy in the Bulgarian market, because they thought it would be a second Spain,"
he said. "
Apparently, there was a property market boom in Spain in the mid-'90s, when the sun seekers wanted to have a second home to escape to. And many people made a lot of money speculating, and they wanted to do the same thing in Bulgaria."


However, in 2008, those buyers disappeared, leaving many real estate agents empty-handed, said Zhelyazko Georgiev, a manager and co-owner of Best Bg Properties Ltd., based in Sofia, the capital.

"
The market went into downfall after 2008 due to the heavy financial crisis in the United Kingdom and Western Europe,"
Mr. Georgiev said. "
The sales decreased by about 80 percent, and many real estate agents could not survive this."


Although the market hasn't yet rebounded, Russian buyers have now replaced British ones, Mr. Petrov said. Property prices are almost 40 percent lower than they were at their peak in the third quarter of 2008, when they were 725 euros per square meter, he said. But the market is now a safer investment.

"
The major advantage for the buyers now in the period after 2008 is that they can see finished apartments and houses before they buy,"
Mr. Georgiev said.

WHO BUYS IN BULGARIA

Foreign buyers made up 15 percent of the market in the second quarter, up from 8 percent in 2009, according to Mr. Petrov. Russians, accounting for about 80 percent of that group, are typically looking for a one-bedroom apartment costing 25,000 to 30,000 euros, which they can use for vacations and rent out the remainder of the year, Mr. Darakchiev said. (Although the official currency is the lev, most transactions are conducted in euros.)

British buyers during the boom were typically interested in homes on the Black Sea coast, chalets at ski resorts in Bulgaria's mountains, and even new homes in the countryside, agents said. Currently, in addition to coastal properties, many foreign buyers are attracted to the foothills of Vitosha Mountain, Mr. Petrov said. The villa featured here carries an expensive price tag for Bulgaria, which has very few homes priced in the millions of dollars. A new home in the "
luxury"
category would typically sell for 200,000 to 300,000 euros, Mr. Darakchiev said. For that reason, the villa has been on the market for a year and is priced so far above its replacement cost of about 0,000 — the amount it would now cost to build — that it may not sell at its current price, he said.

"
But the owners are not desperate to sell,"
Mr. Darakchiev said. "
If someone shows up and is willing to give them the money they want, they will sell it, but otherwise, they won't. They don't need the money."


BUYING BASICS

There are no restrictions on apartment purchases, but homes with land are another matter. Although buyers from European Union countries have no constraints, other foreign would-be buyers must form a company, Mr. Georgiev said.

"
Setting up a company is fast, cheap and easy, and does not cause any complications afterward,"
he said, "
so it is not a major obstacle."


The real estate agent can handle such issues, but a lawyer is recommended as an extra precaution, agents said. "
The fees for lawyers can vary greatly depending on the deal and the lawyer,"
Mr. Georgiev said. "
A standard fee for checking the papers for a property and concluding the deal is about 200 to 300 euros."


Sellers typically pay the real estate agent's fee, which is normally 3 to 10 percent, agents said. The buyer pays the notary to handle the sale, stamp duty and municipal local tax, which typically total about 4.5 percent of the home's sales price, Mr. Georgiev said.

Most foreign buyers pay in cash, though mortgages are available with interest rates of 8 to 10 percent, he said.