As news broke of Bulgaria's impending membership of the European Union, World of Property editor Paul Beasley spoke to Christophe Gater of Bulgarian property consultancy New Estate about the impact EU membership will have on the Balkan country's property market.

Paul Beasley: In what ways will EU membership for Bulgaria be positive news for property developers, potential investors and Bulgaria itself?

Christophe Gater: This has been the sign that many large developers have been waiting for before they commit enormous resources to the Bulgarian market. Similarly, the ears of many fund managers would have pricked up today as this green light to the EU immediately reduces the risk of the market without immediately increasing its prices and other barriers to entry.

Those who already own properties can only expect even higher levels of capital gains over the forthcoming accession period, which I suspect will be catalysed by a small boom in the number of buyers eager to conclude before 'its in'.
All municipalities can apply for EU funding by submitting professional proposals, if you have bought in an area with a shrewd mayor then it could well be time for you to see a bit of those EU contributions back! Rural areas will be the largest single beneficiary from EU contributions as they have been less attractive to large developers and thus have largely been left to private buyers only.

Naturally, it is not up to the local residences, foreign or domestic, to improve the condition of public areas or provide solutions to rural decline, however these EU grants will priorities all local infrastructure, especially roads and village amenities all of which are set to dramatically improve.

Paul Beasley: You say, quite correctly, that there will probably be a short-term push on property prices, but as Bulgarian resort property can now be considered a fairly mature market is it too late to invest and enjoy the biggest gains once enjoyed?

Christophe Gater: The biggest gains were made by the first movers, the pioneers and big risk takers. The days of phenomenally easy profits have gone, but then again so has the risk that came hand in hand. This market is now perfectly ripe for the individual investors, ideally balanced between risk, cost and reward. We are rapidly approach the peak of this market, but still very clearly on the upward side, the best time to invest was yesterday and the next best time is certainly tomorrow. If you have capital available to you it is not complicate to invest wisely, take professional advice and pay off your mortgage or buy that sports car you always wanted in five years time.  

Paul Beasley: Talking of speed, do you expect property prices to accelerate in the short term now that EU membership in 2007 is more certain?

Christophe Gater: As readers may know, there are two key avenues in this market: 1) resale villas from private individuals; and 2) off-plan apartments. I suspect that there will be a small boom in the levels of interest across the board and thus the number of viewing trips to Bulgaria will increase, knowing the reactions of private Bulgarian vendors I believe this could result in price rises for villas and other resale property, particularly the less expensive rural properties.

With regards to the ski and beach apartments offered by the developers, I am confident there won't be any hikes in price, taking the market as a whole the prices of new developments are more professionally structured and won't shift overnight according to news such as this.

Paul Beasley: What pattern of price growth do you now expect on the coast, in the mountain resorts and in the big cities?

Christophe Gater: Across the market as a whole the EU accession signals a time of change for the Bulgarian people. The standard of life will improve considerably, most notably for those in the vast rural areas where standards are that much lower. As the common man will be able to afford more, the market will stabilise and become less dependent on foreign direct investment (overseas property buyers). In fact, it my belief that the average Bulgarian will be buying holiday homes and apartments in tandem with the foreign buyers thus providing a more stable 'home grown' demand; not just for ski studios and beach apartments, but proper homes for families and not just holidaymakers. This domestic buying power will not only act as the sustainable driving force for the Bulgarian property market, but it will also improve the range and choice of building types and designs, etcetera.

It is tough to say where prices will increase most; my best guess is to suggest areas just outside of the biggest cities as these will be destined for family homes or designated as new commercial zones, either way highly profitable. Cities like Varna will become all year round cities, not just active during the summer as there will be considerably more service industry activity. Investment from multinationals will now target such urban areas inside the EU where labour is still at its cheapest. This will result in more offices in Bulgaria's cities, more modern, smart city buildings, shopping centres and new homes for the employees, not old communist blocks.

Paul Beasley: Your answer reveals a country where massive change is expected, and indeed needed, if Bulgarians are to secure greater prosperity. In this respect, it is no surprise that the EU has imposed conditions on its membership: a reduction in crime and corruption, better food safety standards and proper use of EU funds. In what ways can these conditions be expected to encourage or be detrimental to the growth of Bulgaria's property market?

Christophe Gater: One of the most crucial conditions of entry focuses on changes in the law. Whilst this will not directly relate to the property industry at a level that would concern the buyer, it will affect the developers and the rules and regulations they will have to follow. Whilst the laws that govern property are already subject to the European courts, the new changes will only improve the legal system and the support it will offer foreign buyers. 

Paul Beasley: Compared to the capital cities of countries that joined the EU in 2004, Sofia's property market is yet to really take off. So, does Sofia now become a stronger candidate for investment?
 
Christophe Gater: Yes, definitely. It will be the first beneficiary of funds from the EU and will quickly see its effects. It is becoming an increasingly important European capital and apartments are still only 45,000 euros. The buy-to-let market is a little shaky, possibly another two years until it is more sustainable. But, like property in all modern European capitals, don't you wish you bought that old derelict tea warehouse on the Thames in 1980 for two bob and a milk token? If that thought has crossed your mind then Sofia is definitely worth considering for a second chance at making a fortune.

Paul Beasley: From a British perspective, if anything is now holding Bulgaria's property market back it's the absence of direct no-frills flights from the UK. Will EU membership makes Easyjet/Ryanair flights to Bulgaria a certainty within 12 months?

Christophe Gater: There won't be any legislation stopping them. I am sure there will be many more low cost / budget airlines flying to Bulgaria, but I can't say if these two players will move in the next 12 months. I sincerely hope they do. 

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Bargain priced Bulgarian property
Sofia gears up for property investment boom
Bulgaria's Black Sea Coast excites Brits

Article first published on 27 September 2006