Bulgaria property news and articles

In these days of low interest rates, many more people take out a mortgage in order to buy a property abroad. If the property is viewed simply as an investment, a mortgage allows you to increase your benefit from the capital growth of property by leveraging the property investment. If you buy a house for €200,000 and it increases in value by €50,000, it has yielded a 25 per cent return on your investment. If you had only put in €50,000 of your own money and borrowed the other €150,000, then the increase in value represents a return of 100 percent on your investment. As long as the rate of increase in the value of the property is more than the mortgage rate or costs, you have gained. In recent years, property in the most popular areas of Bulgaria has risen in value by much more than the mortgage rate.

The key questions are whether that will continue and, if so, for how long?

If you decide to take out a mortgage you can, in most cases, either mortgage (or extend the mortgage on) your existing UK property, or apply for a mortgage through a Bulgarian bank. At present there are few banks outside Bulgaria that will give you a mortgage on a Bulgarian property. However, given that Bulgaria has joined the EU, and given the recent explosion in the Bulgarian property market, it is likely that direct lending by overseas credit institutions will become a feature of the market.

Taking Out a Mortgage on Your UK Property

There is fierce competition to lend money and there are some excellent deals to be done whether you choose to borrow at a variable rate, at a fixed rate or in one of the hybrid schemes now on offer. Read the Sunday papers or the specialist mortgage press to see what is on offer, or consult a mortgage broker. Perhaps most useful are mortgage brokers who can discuss the possibilities in both the UK and Bulgaria.

It is outside the scope of this book to go into detail about procedures for obtaining a UK mortgage, but these are the main advantages and disadvantages of mortgaging a UK property to buy a Bulgarian property.

Advantages

• The loan will probably be very cheap to set up.
You will probably already have a mortgage. If you stay with the same lender there will be no legal fees or land registry fees for the additional loan. There may not even be an arrangement fee. If you go to a new lender, many special deals involve the lender paying all fees involved. 1 The loan repayments will be in pounds sterling.
the funds to repay the mortgage are coming from your sterling earnings, and the amount you have to pay will not be affected by fluctuations in change rates between the pound and the euro or Bulgarian lev. Equally, earning falls in value, then your debt as a percentage of the value of the Bulagrian property decreases. Your property in Bulgaria will be worth more in sterling terms, but your m0rtgage will remain the same.
•  You will be familiar with dealing with British mortgages, and all correspondence and documentation will be in English.

Disadvantages

•  You will pay UK interest rates, which at the time of writing are higher than euro rates but lower than Bulgarian lev rates.
Make sure you compare the overall cost of the two mortgages. Crude rates (which in any case may not be comparable as they are calculated differently in the two countries) do not tell the whole tale.

What is the total monthly cost of each mortgage including life insurance and all extras?

What is the total amount required to repay the loan including all fees and charges?

•  If the pound increases in value against the Bulgarian lev or the euro, a mortgage in leva or euros would become cheaper to pay off.

Your loan of €60,000 (now worth about £40,000 at £1 = €1.50) would cost only about £30,000 to pay off if the euro rose 20 percent.
•  Many people do not like the idea of mortgaging their main home – a debt they may only just have cleared after 25 years of paying off an earlier mortgage.
•  Some academics argue, in economic terms, that debts incurred to buy assets should be secured against the asset bought and assets in one country should be funded by borrowing in that country.

All in all, a UK mortgage is generally the better option for people who need to borrow relatively small sums and who will be repaying it out of UK income. If you are borrowing money from outside Bulgaria in a different currency, you need to consider the exchange rate risks.
For transferring funds from one country to another, you might also consider using a currency broker, who may be able to offer you better rates of exchange than your bank.

Building  Swimming Pool in your Bulgarian property

Swimming pools are popular in Bulgaria, providing relief from the long, hot summers and increasing the desirability of your Bulgarian property for letting. Before you decide to invest in one, however, it might be worth checking out if there is one nearby that you can use instead. Many restaurant complexes in Bulgaria have a pool and the admission price is often very low (and in some instances free).

You do not need planning permission to build a swimming pool in Bulgaria if it is less than 100 cubic metres in volume. This is a fair-sized swimming pool and should be adequate for most domestic requirements. You will still have to ensure that the pool is not built within three metres of your neighbour’s boundary. You should also check that you have sufficient water and electrical supplies to operate the pool effectively. You are probably better off building close to the house in Bulgaria so the pool forms a continuous part of the property and allows you to keep an eye on any children using it. Other issues that might influence your choice of location include whether the pool would be overlooked by neighbours, whether there are any trees nearby that might shed leaves into the pool, the possibility of ensuring shade at some point in the day as the sun crosses the sky, and exposure to wind.

There are two principal options for building swimming pools in Bulgaria. The most expensive is concrete, which can take up to three months to construct but offers more choices in terms of design and layout. Concrete will allow any shape of pool that you wish. The concrete structure is typically finished with tiles. Concrete pools should last up to 50 years and the structure requires less maintenance than other pools.  A 50-cubic-metre pool measuring 8m by 4m by 1.5m deep, including all the labour, excavation, materials and surrounding paving stones, would cost on average 35,500 leva (£16,200). If you want a heated pool, the price may be 20 per cent higher than that.

Alternatively,you can have a prefabricated fibreglass structure or a vinyl liner-based pool. These will cost half the price of a concrete pool and can be installed much faster. They are less durable, however, requiring more frequent repair.
You should probably avoid using the general builder who might be doing works on your house, and should approach a specialist company instead.

One of the biggest hassles in owning a pool in Bulgaria is the regular cleaning and testing of the chemical levels. If you are resident at your property then you should be able to do this yourself, but if you are away – even for a couple of days then you ill need to find someone else to take care of it. You could ask a friend or neighbour but you are strongly advised to use the services of a professional pool maintenance company. If the chemical levels are not kept carefully controlled the pool can stagnate very quickly, which may mean emptying and refilling it. Your best bet for maintaining the pool is to use the same company that installed it, so make sure at the start that they offer these services and how much they charge. Maintenance by a company will cost 145-290 leva (£70-140) per month, excluding materials. This should involve two visits a week to clean the pool and add chemicals. You will also need to close the pool down over the winter and reopen it in the spring, each costing about 115 leva (£50).

Building Septic Tanks for old properties in Bulgaria

It is not common for rural properties in Bulgaria to be connected to a central sewage system so most houses in Bulgaria currently rely on a cesspit or soak-away – very few actually have a septic tank. You should consider having one installed in order to get rid of your waste water and sewage and eliminate the smell that can result from using a cesspit or soak-away.

A septic tank imported from western Europe will cost at least 8,650 leva (£3,930). Locally produced tanks are half the price, but the general consensus is that it is best to opt for a western European tank. By law you must ensure that it lies three metres away from any boundaries and at least three metres away from any buildings. These parameters can make it quite difficult to find an appropriate place to install a tank.

If you use a septic tank, take care to read the instructions for use carefully, because there are often restrictions on what can pass through it, such as detergents and sanitary towels.

Installing Heating Systems in your Bulgarian home

Bulgarian weather is quite extreme. Summer temperatures can reach as high as 4o°C while winter cold snaps can be as low as -20°C. This means that any heating or cooling system you have must be able to cater for these extremes. Most modern buildings in Bulgaria are fairly well insulated, but the situation with older Bulgarian properties is not so good. Many of them have only a single layer of brick and plaster; the use of cavity walls is unheard of. What most people now use as insulation are flat panels of polystyrene that are usually attached to the outside of buildings before final plastering. This is not so common elsewhere in Europe but is quite cheap and effective nonetheless. So before deciding on your heating system, give some thought to having your Bulgarian property well insulated, especially if it is old. The initial outlay will soon be recouped through cheaper heating bills.

When finally deciding on which heating system to use, there are a number of issues to take into account, the most important being initial costs, running costs and ease of use. The cheapest system to run (but costing more to install) is a wood-burning boiler, but the burner must be well stocked with fuel at least twice a day. The most practical system is one that runs on electricity, but this can be expensive to run. You should allow at least  14,000 leva (£6,400) for a medium-quality heating system for an average three-bedroom house in Bulgaria.

If you are not going to use your Bulgarian property during winter, then simple wall-mounted electric radiators might be the best solution. They are relatively cheap to buy and easy to install.

Seriously consider installing air-conditioning for the summer months. Most systems give you the option of heating the air in the winter as well as providing cooled air during summer. Air-conditioning is the most expensive system to install and run, however.

As mentioned previously, the cost of building works in Bulgaria is higher than people initially expect, and prices are set to increase further. What follows is a breakdown of some of the current costs to carry out works in the VelikoTurnovo region. You will find that in other regions, such as Sofia and along the coast, prices will be higher. These prices have been provided by Best Bulgarian Properties Ltd.

To build a new house in Bulgaria from scratch costs from 660 leva (£300) to 865 leva (£405) per square metre. This includes the structure, windows and doors, heating system, bathroom and kitchens, and all wall and floor finishes. A typical three-bedroom house with open-plan lounge/diner/kitchen and family bathroom, 180 square metres, would therefore cost 119,500-155,850 leva (£58,400-74,000). To this must be added the cost of buying the plot, and design costs amounting to between 3,500 leva (£1,650) and 5,200 leva (£2,500). The cost of demolishing a pre-existing house (around 5,750 leva or £2,700) and the project management company’s fee are other possible costs.

Most people buying in Bulgaria, however, will be undertaking smaller works such as installing a new kitchen and retiling the floors. Here are some of the typical costs of such works (including labour and materials), again with reference to the VelikoTurnovo region.

•  The cost of laying medium-quality wall and floor tiles is 50 leva (£22) per square metre.

•  To paint walls with two or three coats of white paint is about 2,890 leva (£1,350) for a two-bedroom apartment of 100 square metres.

•  A new kitchen will cost 5,750-11,500 leva (£2,800-5,700), including all of the appliances.

•  A new bathroom with all the fittings including sink, toilet, bath, tiles, boiler, electrics and plumbing costs 2,000-3,500 leva (£900-1,700).

•  The price of installing doors and windows is 215 leva (£100) per square metre. An average door or window would therefore cost around 350 leva (£170).

•  To build a fireplace, expect to pay 2,600 leva (£1,200).

•  Probably the most important part of the house to keep in good repair is the roof.The cost of repairing a roof, including removal of all the tiles, fixing wooden structures, inserting insulation and laying new tiles, is typically at least 5,750 leva (£2,800). If you need to completely rebuild the roof, expect to pay double this amount.

Bulgarians have a long tradition of using stone in building and you will find many wonderful dry-stone walls defining the borders of many rural properties. These skills survive in the villages and it is never difficult to find workers if you need a new wall built. Avoid going for the cheaper option of breeze-block construction, with plaster and paint; it requires more frequent maintenance and does not look attractive. The average price per linear metre for a dry-stone wall is 215 leva (£100).Typical dimensions would be 1.6m height and 0.50m depth, with concrete foundations of at least 0.50m. To build a stone wall around an average-sized garden of 1,000 square metres (30m by 33m) should cost you in the region of 26,000 leva (£12,500).

If you only need a few small jobs to be completed around the house, another way of estimating the costs is to calculate them by time. Semi-skilled labour costs about 23 leva (£11) per day, so if you require three workers for five days of work expect to be charged about 350 leva (£170).These are the costs you should incur if you engage the workers directly – if the workers are engaged through a foreman or contractor, then expect to pay more.

Bulgarian properties for sale

Perhaps you have bought a plot of land in Bulgaria without a dwelling on it or the property requires so much work as to make Bulgarian property renovation impracticable. In this instance a new build property will often be a better solution than messing with an existing building – and sometimes cheaper. If this scenario might apply, try to take the decision early – possibly by inviting a qualified Bulgarian surveyor, or at least some experienced Bulgarian builders, to assess the structure – rather than after a month of hacking out rotten supporting beams!

A new build should put paid to any structural uncertainties that may have accompanied the old Bulgarian property that you bought, and you will often find that during the course of the building works you increase your dedicated budget anyway as new ideas (and problems) occur. Building a house in Bulgaria from scratch will also confer the flexibility to specify exactly what you want (within certain regulatory guidelines). The process of building from new may take more time, however, and necessitate more expert input. The initial stage of a new build is the design.

The lead expert in this process is normally an architect, but architectural plans will need to be accompanied by a structural engineer’s plans plus further designs prepared by relevant experts detailing the water, sewage, electrical, heating and ventilation systems. Your Bulgarian property agent should be able to advise you about local architects, or failing this a Bulgarian project management company should be able to help. The fees payable to have the plans prepared by a design team vary around the country and have increased considerably in recent years.

Fees in the Veliko Turnovo area in 2007 averaged in the region of 23-35 leva (£8-12) per square metre for the preparation of all the plans, but fees in Sofia and Varna may be as much as double that. It is sometimes difficult to find a design team to prepare plans for small projects such as a simple extension, and you may have to pay a minimum fee that is somewhat larger than you anticipated on the basis of size. Alternatively, you might prefer to have an architect prepare the plans in the UK before submitting them to a local architect for approval.

The architect will prepare detailed plans in accordance with the restrictions outlined in the PUP or visa for building. On completion of all elements of the design (including electrics, water, structural design and so on), an application along with all plans are submitted to the local authority for planning permission. Approval must also be sought from the electricity and water companies (you may also require authorisation from other bodies, such as the fire brigade, depending on the activities you intend to carry out), if everything is approved you will receive a ‘Permission to Build’, which Permits the specified works only and expires after five years. The architect, structural engineer and certain other members of the team are required by law to sign off the works, and at the end of the works the local municipality has to
sign off the project before issuing a ‘Permission for Use’.

Most people build single-dwelling units of perhaps 200 square metres and five metres high, but some investors are building much larger structures. If the structure is over 1,000 square metres, or 10 metres high, then you are required by law to engage the services of a licensed supervision company. Their role is to ensure that the building is being built to the required standards, and their fees vary, averaging around two per cent of the build cost. If you are required to use one of these firms you are advised to still employ a Bulgarian project management company to supervise your building works, because the independent supervision company does not look out for the interests of the investor but simply ensures the works are legal and done to the required standards with the right materials.