September 7, 2006
Bulgarian property withers as France holds strong
Bulgaria’s property market is suffering a stark reversal of fortunes as its growth for the third quarter tumbles while old investment favourite France provides a strong and stable housing market.
New research from Assetz shows that the eastern European country’s market has not fulfilled its early promise as total returns have plummeted from 104 per cent to 44 per cent due to increased rental competition.
Annual house price growth has slowed considerably in the former communist country from 36 per cent to 17.8 per cent while the popular Bansko ski region reporting price falls of 2.1 per cent. Bulgaria as a whole only grew by 1.6 per cent in the second quarter.
It is believed that mushrooming supply of properties is to blame for the slowdown, leading to fierce competition for rentals as the demand for letting has not matched the furious growth in home construction.
Stuart Law, managing director of Assetz said, “Bulgaria is facing a period of readjustment after a huge initial foreign investment. While longer-term investors are still set to benefit over the next five to ten years, as low cost property continues to attract holiday home buyers, there are no longer instant returns to be made in the short term.”
He added that the oversupply of properties is being aggravated by stories of dishonest local management agencies, some of which are reported to be letting properties and keeping the cash.
By contrast, France has performed well in the third quarter with a consistent rental market and capital gains of 9.1 per cent, giving a total of 6.2 per cent return on cash invested.
The familiarity of France and its strong domestic tourist market make it attractive to buy-to-let investors whereas those buying properties in Bulgaria rely more on holidaymakers looking for cheap flights and bargain accommodation. The country’s stable market has been key to its success as property investors know that they are sure to get a long-term return on their investment.
Posted on: Bulgaria
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