Sell Property in Sofia

Bulgaria is among the countries, from which UK foreign-currency brokers are reporting a staggering amount of money being converted back into sterling.

Most transactions back to sterling in recent months come from Spain, Bulgaria, France and the USA, according to data of Currency Index, as cited by The Telegraph Weekly.

“With Bulgaria property investors who bought in the boom years, before the credit crunch in 2008 have had their fingers burnt. Even though Bulgaria is outside the eurozone, most property transactions are in euros,” the article comments.

British expats, holiday homeowners and pensioners, living in Bulgaria, are selling up and come home in droves – or at least sending foreign money back to the UK.

Experts, interviewed by The Telegraph Weekly, say the reasons for the return are myriad, the most important being the inability to fund their lifestyle given the depreciation of sterling from its heights of EUR 1.50/GBP 1 to less than EUR 1.20/GBP 1.

Many pensioners who settled for a life in the sun have seen the purchasing power of their UK pensions plummet as the pound weakened and the cost of living soared in their new homes, making it too difficult for many to afford to stay.

In the past 12 months, currency broker HiFX has seen the amount of euros converted back into sterling rocket by 155%, despite the euro weakening recently.

During the past three years, there’s been a 25% increase, year on year, in funds being sent back to the UK, according to Smart Currency Exchange.

The money coming back to the UK from the eurozone in just the last three months of 2011 went up 41%, according to World First, compared with the end of 2010.

It has also seen double the amount of Australian dollars being changed into pounds over the same period, as expats cash in on the best exchange rates in nearly 27 years.

Owning a second home abroad was once the preserve of the super-wealthy, but in the past decade a heady combination of TV property shows and cheap mortgages has convinced an estimated half a million Britons to buy their own place in the sun.

The value of UK-owned foreign property investments peaked at GBP 58 B in 2008, up from GBP 10 B in 2000.

Now however British owners of second homes overseas, including Bulgaria, are elling up due to falling rental income and the sliding value of their overseas properties.

The ongoing crisis in neighbouring Greece is of growing concern to both political leaders and the Bulgarian public alike, however with all the potential risks come certain benefits for the poorest EU nation.

Greek banks currently own 36% of Bulgaria’s banking market. These institutions support Bulgarian commerce and industry from the highest level right down to individual overdrafts and credit cards. The greatest immediate fear is that capital will be withdrawn as a fist defence safeguard and either retained or simply pulled back to the motherland. Either way the businesses of major employers and lives of individuals could be adversely effected. Without such a withdrawal the next threat would come from these banks increasing interest rates across a third of Bulgaria’s lending, which would not only chronically impact Bulgarian industry by way of business loans but also home owners with mortgages too.

Whilst the above represents a worst case scenario, it is much more likely that in the event of this crisis worsening without progressive resolve, Greek subsidiary banks will be sold, merged or acquired. This will cause mass restructuring and considerable opportunity within Bulgaria for either alternative foreign direct investment or indeed domestic investment to fill the vacant Greek shoes.

Few will disagree that Bulgaria is currently reaping the benefits of the Greek crisis, with more than 2,000 Greek companies having relocated to Bulgaria in past 2 years and an expected 800 more to come. It is unknown how many millions of Euros have been deposited in private bank accounts in Bulgaria by Greek citizens, however the mass opening of deposit accounts along the southern border areas has been widely reported by many Bulgarian bank high street branches. The trend is clear; many believe their cash is at risk in Greek banks, in Greece or elsewhere, thus the short trip across the border to ‘safe haven’ Bulgaria is seen as a better bet.

Whilst Brussels will always insist on assessing any economy on its own merits, the reality is that Balkan countries are grouped and regarded collectively by most when it comes to economics. Throughout Bulgaria’s accession to the EU and its perpetual comparison with Romania is testament to this. The theory remains, in the Balkans luck and misfortune on an international scale are often shared thus the fate of your neighbour cannot be dismissed or ignored.

To make brief comparison between Greece and Bulgaria it is easy to see why the torrent of capital is currently a one way flow, even the Bulgarian Finance Minister, Simeon Dyankov, stated that Bulgarians will be more wealthy than Greeks within 5-6 years.

• Greece’s economy is estimated to shirk by an average of- 5.5% by the end of 2011, Bulgaria would have grown by +2%.
• Greek deficit is currently at 9%, three times the limit for any Eurozone economy, Bulgaria’s is ten times less at 0.9%.
• Greece’s unemployment is at 18.4% expecting to rise to 25% by Q2 2012. Bulgaria’s unemployment sits at 10.2% in Q3 2011, expect to marginally decrease in 2012.
• Moody’s credit ratings: Greece Ca, Bulgaria Aa3.

Bulgaria’s growth has been much reduced from the boom years of 2004-2008, however in this financial climate 2% proves impressive stability and puts it amongst the fastest growing European nations. Mostly export driven and boosted by a successful tourism sector, Bulgaria managed to stabilise its economic results, reduce its deficit and increase its Moody’s credit rating in 2011 (the only European country to do so).

The real question for many is when will Bulgaria join the Euro currency and move beyond simply having the Lev pegged to the Euro. Unfortunately, it seems that despite its originals and impacts having very little to do with Bulgaria, the crisis of its neighbour and the rest of PIGS (Portugal, Ireland, Greece and Spain) will mostly likely set back currency membership by 2-3 years at best, although it is commonly accepted that it will certainly not derail the process.

The article is prepared by Christophe Gater on of the director of the leading Bulgarian estate agency New Estate Bulgaria.

IKEA store in Sofia Bulgaria

The famous Swedish furniture chain IKEA opened its first store in Sofia. The IKEA operation in Bulgaria will be managed by the Creek franchisee of IKEA and the store in Sofia is said to be one of the 10 store to be opened throughout Bulgaria over the next 5 years. It is widely expected that the IKEA model and products will have a significant influence on the Bulgarian furniture market and will bring a new level of competition , which will benefit the final customer.

From the prospective of the property owners in Sofia , the IKEA arrival has broadly speaking two major consequences:

-offer bigger choice for furnishing

 A quick look at the items on display at IKEA and their prices bring us to the conclusion that unfortunately the prices are a bit higher than the same products in other European countries, the style is modern and appealing to the Bulgarians and the quality is really good.  In one words despite the relatively high for theBulgarian standard prices, furnishing a buy to let property with IKEA furniture would be a good idea.

 -increase the value of the rent, respectivel properties around the IKEA store

IKEA is situated in the south part of Sofia by the newly opened part of the Sofia ring road. The ring road provides an easy access to the Sofia business park in Mladost 4,  Dragalevci, Simeonovo and blv Bulgaria districts of Sofia. These are the areas that are to benefit from the IKEA 200 workers who would need accommodation.

According to New Estate, the leading Bulgarian estate agent the demand for apartemnts for rent in the two complexes managed by them- Vitosha Park near the Simeonovo and City Gardens in Dragalevci, has already increased and the properties for rent are now likely to be let out in 2 weeks rather than 4-6 weeks before the IKEA opening.  The rents are also expected to go up by 5-10% but this trend is still to be confirmed.

It is thought a combination of factors have contributed to the quicker than expected growth; as well as the predicted impact of an aggressive marketing strategy backed by extra investment, the surprising element has been the repeated closure of small competitors who have left the property management market altogether. In many cases long standing landlords of multiple Sofia properties have had to revisit the marketplace for the first time in several years, which has been a catalyst for NewEstate Bulgaria’s opportunity to attract a ‘new business’ in this sector.

NewEstate continues to see the current opportunity in the middle market for new properties renting to young professionals. With less than half the number of ‘expats’ residing in Sofia by comparison to three years ago, the luxury market remains in decline with fewer tenants willing to pay high prices for the top end properties.