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News 03 April 2006
Bulgaria tops property investment hotspots
The latest Property Investment Tracker from Assetz has found that Bulgaria
is leading the way as an overseas hotspot.
While experts have been predicting for a number of years that Bulgaria will
emerge as a leading choice for investors, Stuart Law, managing director
of Assetz, has indicated that the new research firmly positions the country
at the top of the chart.
With yields rising to 12 per cent and capital gains remaining impressive
at 36 per cent, it is thought the total return on cash invested was 116
per cent last year.
This phenomenal statistic has pushed Bulgaria above Cyprus in the chart
for total returns on cash invested, backing up the popular claim that Bulgaria
is now comparable to Spain in
the 1980s. For those looking for capital gains and those entering into the
buy-to-let market, there is clearly huge potential.
Furthermore, while deposit levels are in the region of 30 per cent, they
are largely accessible to investors because property prices in the country
remain low, despite the speed of the growth. A typical two-bedroom apartment,
for instance, will set you back only £80,000, which is partly why
there has been such a staggering influx of foreign investors in recent years.
The Assetz research suggests that the steep incline in house price increases
will level off to some extent before the year's end, but market growth is
expected to remain high. The ski resorts of Bansko
and Borovets continue
to draw a huge amount of interest from property seekers, with significant
construction projects now underway to accommodate the demand.
While Cyprus has dropped down into second place, it remains popular with
property investors because of deposit levels as low as 15 per cent. Swiss
and Franc mortgages are also available at a rate of just 3.25 per cent,
which also aids the borrowing process.
According to the new research, capital growth will remain steady at 15 per
cent, in addition to solid rental yields of eight per cent. While someway
behind Bulgaria, an 84 per cent return on cash invested in Cyprus is certainly
not a figure that can be ignored.
"Overseas markets are still offering excellent opportunities for investors,
with Bulgaria and Cyprus now overtaking some of the more established destinations
in terms of total return on cash invested," said Mr Law.
"However, investors should remember that high return is often associated
with higher risk. Established locations such as France are still holding
up extremely well against the competition, offering a total 68 per cent
return on cash invested with an excellent holiday rentals market. With the
low deposits requirement of just 15 per cent in France, the total return
on cash is still exceptional at 68 per cent," he added.
This backs up a recent article for 999 Today by property developer Trisha
Mason, who stressed that the stability and predictability of the French
market makes it an ideal choice for investors looking for a safe bet.
Certainly not a safe bet at the moment, according to the latest Property
Investment Tracker, is South Africa, where growth has slowed from 24.6 per
cent to 15.8 per cent. With rising mortgage rates, Assetz remains concerned
that the market is approaching a period of instability.
For future reference, Turkey may well be a sensible option, with legislation
at the end of the year likely to allow mortgages for foreign investors.
It is a move which is expected to boost house prices across the country
and investors are advised to keep an eye on developments.
It is clearly Bulgaria that has stolen pole position, however, and Mr Law
has said it is particularly wise to invest around the ski resorts.
"Cheap Bulgarian ski
destinations are certainly in as much demand as quality resorts in the France
Alps. However, for sunny destinations combined with quality investment returns
I prefer the South of France and Southern Cyprus to the coastal resorts
in Bulgaria," he observed.
Bank on Bansko
Once a haven of cheap but risky second home deals Bulgaria
is definitely about to go upmarket. Since 2003 thousands of Britons have
bought holiday homes from as little as £15,000.
But these purchases have not been without problems – such as disputes
over who owns land, worries over new developments blocking views and destroying
privacy and shoddy work during construction.
But now estate agents Lemon Tree Villas - best known for selling trouble
free properties in Spain are moving in to clean up Bulgaria’s act.
The agent works with British developers and conducts scrupulous checks on
land ownership and future plans in the area to prevent any nasty surprises
after clients have bought.
“There are too many developments that haven’t been finished
because builders have run into financial difficulties, or lie unsold because
they have been built in the wrong location” says Mark Schubert of
Lemon Tree Villas. His apartments in the ski
resort of Bansko start at £26,700 and investors can expect to
see returns of 20% over the next year.
Bansko has long been regarded as the ski capital of the Balkans, with 64km
of ski runs and a bid for the 2014 Winter Olympics. Now a new golf course,
designed by Ian Woosnam, is almost ready along with an equestrian centre,
and hiking and mountain biking trails.
Hard nosed investors purchase buy to let properties in Sofia, but its fortune
lies in early E.U. membership. Analysts such as Knight Frank say property
prices in Bansko have risen 25 to 30 per cent in the past two years.
“We predict another 15 to 20 per cent this year” says the firm’s
international research chief, Nicholas Barnes.
Bulgarian experts are welcoming the interest shown by British agents and
builders “choose an established developer” says Mark Schubert
who runs www.lemontreevillas.com a Bulgarian property sales and information
web site.
However, there are still some issues. At the bottom end of the market, maverick
estate agents are still in existence, sometimes using high pressure timeshare
sales techniques from the Spanish Costas – the old adage of “caveat
emptor” is still worth taking note
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