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Brits still duped by Bulgarian hyperbole

14th December 2006 | back to article listings BACK    print this article PRINT

Many British overseas investors are being conned by persuasive marketing of "soft" investment factors as they prefer to rely on hearsay rather than hard factual evidence, claims a leading property expert.

Reasons for investing in property that are commonly hyped by foreign estate agents and property developers include potential bidding for a major sporting event, perception of the development among locals and feel of the location.

But these "soft" factors are causing many British investors to miss out of the best returns, claims Neil Lewis, head of Property Secrets.

"A case in point is Bulgaria, where in the past year there's a massive oversupply of beach-front property on the Baltic Coast standing empty and un-sellable – yet UK investors continue to buy," he explained.

"In 2005, we warned against investing along the Bulgarian coast and ski resorts. When there's as much hype as seen about Bulgaria, my advice would be to show caution and conduct comprehensive research and due diligence before committing."

The former communist state, due to join the EU on January 1st next year, has been touted as the new Spain for jet-to-let investors over the last few years, but 2006 has brought mixed fortunes.

Although on the whole house prices rose in the third quarter by 19 per cent according to the Knight Frank Global House Price Index, this figure is considerably down on the 32.1 per cent recorded in the same period in 2005.

Furthermore, the highly popular ski resort of Bansko saw prices actually drop by two per cent in the second quarter of this year due to oversupply of property. Those caught up in the ensuing disappointment thus do not have a realistic exit plan as Mr Lewis argues.

"This highlights a real lack of strategy. Investors have made their purchases without due care and attention to [the area's] poor rental and resale markets. This then guarantees a limited and totally inflexible exit strategy."

As with many emerging markets, house prices in Bulgaria can be extremely volatile. While there are certainly gains to be made in the long-term, the most savvy investors will inevitably rely on hard facts such as the area's economy, infrastructure and tourist market to determine where to spend their capital.

Stuart Law, managing director of Assetz said that although "one or two locations" in Bulgaria may well increase by 30 per cent a year, these areas would certainly not be "in the back of nowhere" representing a dream non-committal investment.

This is a press release by Assetz also available at http://press.assetz.co.uk/articles/3167.html. Alternatively, please see our full press release archive.

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