BRITS GONE HOME

At first, they stopped buying. Then it got worse - they started selling. Yes, it seems the British have deserted the Bulgarian property market and the Bulgarians are taking it very personally. The situation is grim all over the country, even in top spots and villages regarded as "British" for years.

DID WE SEE IT COMING?

The widespread myth that it was mainly British buyers that made the Bulgarian property boom happen is far-fetched, but not completely without foundation. At the beginning of the 2000s, they spotted Bulgaria as a potentially profitable investment destination and, more importantly, a cheap place to live. Those first buyers chose mainly rural properties and relocated to villages, where the purchasing power of their pensions was many times greater than in the UK. Then they spread the word about this sometimes sunny country with stunning landscapes and cheap properties, and their compatriots started arriving. Some bought holiday homes they would rarely use, some even purchased online without even having seen their properties, some did come to settle. Others saw an excellent business opportunity and opened real estate agencies themselves. The British economy was strong and the pound was high and, while those who could afford to still invested in France, Italy or Spain, the less wealthy were buying up Bulgaria. Small investors were happy, but to the UK economy it meant a major outflow of capital.

BOOM AND BUST

The credit crunch and the global economic downturn may have been foretold, but they still took both the British and the locals involved in the Bulgarian property boom by surprise. As more people in the UK felt the effects of the crisis they started to ditch some of the luxuries they could no longer afford to keep, like second homes abroad. Such properties were traditionally viewed as an expendable asset that could easily be used to realise the capital needed to make it through tough times. But what happens when too many people have the same survival plan at the same time, especially in a volatile economic situation? A fall in prices is the least of the problem. The real and present danger is oversupply on the secondary market, making it difficult or even impossible to sell and so access that vital capital.

WHEN DISASTER STRIKES

Right now, things are not looking rosy. Most British-owned real estate agencies, especially on the Black Sea and in the major winter resorts, have long since closed down. Bad property management and a sharp drop in tourist numbers means that only about 30 percent of all British holiday homes are rented out. In Bansko – the most popular Bulgarian winter resort for the British – the percentage is even smaller, approximately a quarter of the 2,500 apartments available. Neither at the sea nor in the mountains have buyers received the promised rental incomes. For that, however, they can largely blame their fellow citizens. While Bulgarian brokers "only" promised 10 percent return on rental incomes (more realistic figures were 5 to 7 percent), their British colleagues "guaranteed" up to 25 percent.

The really bad news is that those who, riding the euphoria wave, purchased online without seeing the property first and then ran into difficulties with the developer or the vendor will never get their money back. Nobody can tell what will happen to those who bought off-plan and whose building projects were subsequently halted due to financial or planning difficulties.

In regions known as British colonies, like Avren near Varna, hardly a single property has been sold in the last year, though the mayor recently reported a few new deals with Scottish buyers. The picture is not so bleak everywhere, though. In Veliko Turnovo region, there have been a good number of British-selling-to-Bulgarians deals, with the sellers making at least 30 percent profit.

THE SILVER LINING

Not all parties are losing out. The fire-sale hunters, already invading the market, may do well enough. They are buying up properties from owners who are compelled by banks or other unfortunate circumstances to cash in their overseas investments urgently. Often, these "real estate vultures" acquire excellent properties for 50 percent of their real value, or even less. This summer, a British investment group bought up more than a hundred apartments in a popular winter resort for about 200 euros per sq. m. The sellers were… British, of course.

THE END IN SIGHT?

Now the Bulgarians blame themselves for "scaring the Brits away." Every local property expert will tell you it was the greedy developers who destroyed the property market by creating oversupply and spoiling the natural surroundings. There is much truth in what they say, but even so, the British are selling up in France, Spain, Greece and any other popular investment destination you can think of. The crisis has not spared any market, but could the end be in sight?

THE BRITISH LIGHT AT THE END OF THE BULGARIAN TUNNEL

Just as it seemed the British–Bulgarian property affair was officially over, local real estate agents announced last month that the fugitives are back! Ironically enough, they are now looking for exactly the same type of properties they were interested in when they first set foot in the country: namely, very cheap rural properties in dire need of renovation for an average price of 4–5,000 euros. The latest new/old areas of interest are villages around Elhovo, Pleven and Montana. The profile of the average British client for this type of property, however, has changed. While before they were usually retired couples, now there is quite a good number of young buyers.

Holiday homes are no longer completely out of favour either. They have regained popularity due to their almost ridiculous prices, similar to those at the beginning of the property boom. Recently, brokers reported British citizens were buying up dozens of apartments around Sozopol, in the southern Black Sea area. A large number of deals were concluded in the wider area of Sunny Beach, too, for an average price of 300–350 euros per sq. m. Usually, these buyers are ready to pay up to 25,000 euros for a fully finished apartment.

The Bulgarian property boom has come full circle. New deals are still more the exception rather than the rule and it is too early to be certain but it seems, for the British, that another circle may have begun.