Bulgaria bucks trend

Bulgaria’s property investment has proven to be the country’s economic driver, with a record-breaking turnover of €11.36bn in 2007. Many local and international property experts predicted the year’s increase to reach up to 30 percent but, by September the market had actually risen by 32 percent and many major cities, such as Sofia, are already recording impressive growth this year.

James Gonzalez, market analyst at Obelisk, commented: “The huge property price rise has been largely attributed to a good mortgage market, high annual property revenues and Bulgaria’s independence from the world financial crisis. The US sub-prime crisis hasn’t hurt the Bulgarian financial market as there’s no cross-border banking, and consumer borrowing is continuing to grow at a steady rate.”

UK property investors, who accounted for 40 percent of all Bulgarian property investment in 2007, followed closely by Russian investors at 38 percent, have played a primary role in maintaining excellent market conditions, while further strengthening the country’s financial stability and adding to the robust appeal for Bulgaria property investment.
Nikolin Gavrailov, President of the Bulgarian Entrepreneurial Chamber in Building, reports the turnover for the construction industry as €5.6m and adds: “The (previous) lack of modern apartments, retail, and administrative buildings caused the construction boom. The investment growth in tourism, production and the need for modern infrastructure also stimulated construction. Construction sector growth is expected to be between 12 percent and 16 percent year-on-year until 2010.”

Alongside such strong growth in property investment, the Bulgarian economy has experienced sustained growth with The Economist forecasting a consistent 6.4 percent GDP (gross domestic product) increase year-on-year. Bulgarian emigrant workers are also investing back into the country, particularly in the retail and housing sectors, which provides a further boost. According to preliminary figures from the World Bank, remittances from Bulgarians working abroad will have amounted to €1.26bn in 2007. However, the Bulgarian National Bank has stated the actual figure to be closer to €2bn or seven percent of GDP.

Mr Gonzalez continued: “In a bid to ensure a consistent flow of foreign direct investment (FDI), the Bulgarian government has made bold changes to the Bulgarian tax system. The new system will mean that both income and corporate tax will be charged at a highly competitive 10 percent. This new flat rate applies to all workers, investors and companies regardless of income or profit values, making Bulgaria an extremely tax efficient place to relocate or invest in.”