Investing in Real Estate in Bulgaria Is Profitable
It is no surprise that Bulgaria has been an attractive destination for different investors for quite some time now. Business endeavors in the country are profitable and usually experience steady growth.The reasons for this positive environment include the impressive social and economic stability in Bulgaria and its high assessment by many other countries across the globe. The banking system is reliable as well, which is crucial for any business endeavor.
Profits are easily transferable abroad, and bank deposits are guaranteed by law. If this does not spark your interest, nothing will.
How Does the Real Estate Market Benefit from the Economic Development in the Country?
All of the above-mentioned factors are extremely important when it comes to investments in real estate, of course. This is why the country’s real estate market experiences significant growth year after year.
The infrastructure in the biggest cities and resorts has notably improved, and it is only natural for investors to be interested in buying property in Bulgaria. Many large-scale industrial projects have already been completed all over the country, including acres of production facilities, logistics centers, and storage premises.
The capital city, Sofia, the next five biggest cities, as well as the Black Sea, mountain resorts, and towns are the places where investments in real estate are mostly made. Of course, these are the places where you will also be able to make the most of your investment.
Bulgaria’s property market has a lot to offer: the country’s location, fascinating nature, moderate climate, and heritage are all factors worth considering, as they will always attract new individuals and companies ready to invest. Despite its relatively small territory, the country offers great conditions for both a summer and a winter vacation, and the continuously developing road network allows for fast transfers from one end of Bulgaria to the other.
The vast Black Sea coastline offers hundreds of kilometers of sandy beaches. In recent years, many new luxury cottage and apartment complexes were constructed, offering a lot of possibilities for purchasing real estate with guaranteed profit. People are always interested in this type of property, not to mention the returns you would be able to gain from renting it.
Similarly, the ski resorts in Bulgaria have been on the rise. The improved infrastructure and the construction of numerous residential and apartment complexes are the reason why several mountain towns and resorts became attractive for real estate investors.
What It Takes for You to Enter the Country’s Real Estate Market?
Foreigners are not restricted to buy property in Bulgaria. There are, however, certain important details to consider.
First of all, foreign citizens outside of the European Union (EU) and the European Economic Area (EEA) do not receive ownership of the land beneath their property even when they receive full ownership rights of that said property. For them, the only way to acquire land is to set up a form of legal entity in the country first. EU and EEA residents can freely buy land in Bulgaria since 2012.
Next, you need to clarify what your intentions are. There are four basic types of real estate investment scenarios:
- Rental services: Buying property and renting it short-term is a popular activity mostly in the capital city and the resort areas. For example, acquiring a two-bedroom flat in a popular resort and renting it throughout the summer seasons is surely going to bring income your way. At Harmony Suites, we can help you take care of the details in case you are not residing in the country as well. The return rate of this type of investment is quite nice, too;
- Investments with rising value: You can always buy property off-plan or at an early stage of construction, and later, sell it with a hefty profit. This is a riskier endeavor than the previous option, as you need to perform several checks, and you also need to choose the developer wisely. This is where our advice on the matter is particularly important;
- Vacation homes: sometimes investors combine the purpose of their newly acquired property: they use it as a holiday home and rent it for the rest of the season or the entire year;
- Business development: in case of starting a business endeavor in Bulgaria, investors often need to buy land or property to use in their area of operation.
What Are the Bulgarian Real Estate Market Fluctuations?
The housing market in Bulgaria, and the real estate market altogether, has been on the rise in the past five years. As previously mentioned, this is mostly because of the stable economic environment and the low interest rates.
Of course, the steady increase in the prices of newly-built and existing dwellings might be affected by the current coronavirus outbreak. Bulgaria was among the first nations in the EU to declare a state of emergency, and following quarantine is bound to affect the market prices within months.
The interest rates on bank deposits are as close to zero as they have been in the past 10 years. This ultimately leads to people investing in different kinds of property, including purchasing real estate off-plan.
More than 60% of all residential property in 2019 was sold off-plan. This is an option that proved to gain a considerable profit if planned right. This is another scenario in which the right consultant would easily get the job done, and it is where we come in.
New construction projects are slightly decreasing in number, but this could hardly be considered a factor, as the drop is measured at no more than 1,5%.
Between 2000 and 2008, the residential property market saw rapid growth, but the global financial crisis put that to a halt. The market recovered in 2014 and has been growing ever since. By the end of 2019, the real estate supply in the biggest Bulgarian cities could hardly meet the demand.
Rental Yield Is Beneficial for the Investor
The ongoing return on an investment in real estate is moderate to high, depending on the type of property and its location. The usual rental yield in the biggest Bulgarian cities is between 3% and 7%. It is hard to measure in cases when the property is rented for seasonal use only.
The good thing about the rental market is that middle-class people, as well as expats, foreigners, and other smaller groups of people are able to afford higher rents, but they also seek premium properties on exclusive locations. This is why you need to choose wisely when acquiring luxury estates.
If you are after high rental yields, there is a great variety of appropriate real estate offers to choose from. Finding the best real estate consultants and agents is key, and we can certainly help you with that.
Keep in mind that the Bulgarian law is mostly pro-landlord-oriented in case a misunderstanding or other issues arise. Otherwise, no rent controls or specific authority exist in the country.
Taxation and All Related Costs Are Not Going to Empty Your Bank Account
You would be surprised to find out that taxes related to property acquisition, maintenance, or even renting, are more than reasonable. They help investors maximize their profit if they are after a significant income from the real estate they decide to purchase.
Here is a more detailed look:
- Income tax: All income earned by nonresidents is taxed at a fixed rate of 10%. No deductions are allowed;
- Individual taxation: Nonresidents must pay taxes on all income they have earned in Bulgaria. Married couples are taxed separately in case one spouse is Bulgarian and the other is a foreigner;
- Capital gains: Nonresidents need to pay a 10% tax on the capital gain they achieved from selling real estate. There are exempts possible, of course: No tax is owed in case the property is sold more than three years after its initial purchase, or when a nonresident individual sells no more than two real estate properties after owning them for at least five years.
- Rental income: nonresidents receiving income from renting property must pay a 10% tax on that income;
- VAT: All land transaction sales, as well as the leasing of all residential properties, are exempt from value-added tax;
- Real estate tax: It is based on the property value (which is calculated by the local tax authority). The rates are usually between 0.1% and 0.5%.
The constantly improving economic state of the Balkan country is something worth researching. Bulgaria may not be among the wealthiest nations in the EU, but it is steadily making its way up. Let’s not forget that it abandoned communism just three decades ago.
The economy expanded at an increasing pace in the first eight years of the 21st century. At the beginning of 2007, the country joined the EU. Despite the shifts in the political environment in the country, it has been evolving ever since the global financial crisis hit.
Bulgaria has seen notable economic growth in the last years. In 2019 alone, the economy expanded with more than 3%. The annual average growth between 2009 and 2016 was approximately 1.2%.
The budget surplus of the country is also increasing every year, measuring at 2% in 2018 and close to 3% in 2019. Inflation in 2019 was kept below 3%, compared to 2,6% in 2018. Unemployment rates in 2019 measured below 5% - the lowest since democracy was introduced to Bulgaria.
Ultimately, this means that investing in real estate property in Bulgaria is profitable, regardless of whether you intend to hold on to it or immediately start making a profit from renting it out.
Investing In Bulgarian Real Estate Is Profitable
Overall, Bulgaria is a fast-developing country, and, with more than 12 years of experience as a member of the EU, it has shown numerous signs of improvement in all areas of life and business. The social environment is evolving, while the economic landscape is becoming more attractive as you read this material.Of course, the aforementioned coronavirus outbreak is likely to affect the Bulgarian markets to a certain extent, including the real estate scene, but the small Balkan country has already proven to be capable of withstanding crises and recovering from the aftermath remarkably quick.
Rest assured: Investing in real estate in Bulgaria is profitable, especially when you have the right partner to help you make the best choice.
If you have any questions regarding investing in property in Bulgaria, don’t hesitate to reach out to us by clicking on the button below.