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The sale of agricultural land in Bulgaria has peaked up in March 2012 after two months of stagnation due to the winter. The areas of Vidin, Stara Zagora, Razgrad and Haskovo are the most attractive for the buyers. In 2011 the number of sales of agricultural land has increased by 10-13% on the average and in same areas has reached 25%. In 126 000 purchases the buyers have acquired 1,185 million decars of land. The secondary market has a share of about 50% of the purchases and the expectations are in this year this share will grow to about 70%. The increase of the rent of agricultural land has been significant.

Dnevnik Daily

A new public institution will be set up in Bulgaria to manage and control amounts from all real estate transactions in an effort to bring them into the light and crack down on money laundering in the industry.

The new Deposit and Consignation Fund will be inaugurated by special legislation hammered out by the Ministry of Justice and the Notary Chamber.

The institution will be a state-owned enterprise and not a bank and will be modelled on a system already operational in France, said Notary Chamber head Dimitar Tanev. Under the scheme, the sellers will receive their money with a short delay but it will ensure transparency and security to all loyal parties as well as central and local authorities.

The system will see buyers transfer the money into the fund where it will spent two or three weeks before it is passed on the seller. The period will be used to check up the resource’ origin and charge all dues of the government and municipalities. It is expected to put an end to sham transactions and block cash payment as money will have to be put into the fund by a bank transfer, Tanev explained.

Market values in the different regions will be determined by experts and updated every three or four months. The price will serve as a reference point for actual property transactions to make sure money laundering and tax evasion is prevented. A difference within 10-15% could be assumed thanks to property improvements but current differences topping out at between 300% and 1000% will be impossible, Tanev said.

The Notary Chamber discussed the proposal with representatives of the European anti-fraud office OLAF, who said the project will indicate the country’s commitment to combat abuse and money laundering.

According to the State Agency for Tourism (DAT), three-four hotels go bankrupt every week in Bulgaria. They are unable to re-pay their mortgages. Many hotels are put for sale but there are no buyers and banks repossess them but it remains unclear if the banks will be able to sell them.

It seems that Bulgaria follows the road of Spain where the state buys the bankrupted hotels and demolishes them, in order to create parks.

According to the statistics, in the first half of the last year, 820 new hotels have opened on the Black Sea coast. As result of the construction boom the number of hotels and holiday properties is much higher than the number of  the tourists.  Many hotels can not sell all their beds and their owners suffer losses. All this makes it impossible for the hoteliers to repay their mortgages and other credits and go bankrupt.

Jack Fagan, Irish Times

AROUND THIS time of year, the newspapers are generally packed with large ads for overseas real estate. That has been going on for over a decade but, in recent years, Bulgaria and other former Eastern Bloc countries have been particularly active in targeting Irish buyers who had a reputation for being big spenders during the Celtic Tiger years.

These overseas property ads are rarely, if ever, seen any more simply because Bulgaria’s real estate boom has turned to bust and Irish and UK buyers are fleeing due to rapidly falling values and the rising number of uncompleted developments.

Other former Eastern Bloc countries are suffering the same fate.

Bulgaria became a particular favourite for many Irish investors because holiday homes were frequently available at half, or even one-third, of the price of similar properties on the Costa del Sol. Attracted by unrealistic promises of exceptional returns, Irish investors had no hesitation in borrowing heavily to buy cheap buy-to-let homes.

Dublin mortgage agents say that, because of the refusal of Irish banks generally to fund property investments in Bulgaria, many purchasers released equity from their homes or Irish-based property investments. Others used hot money in the belief that the Revenue had enough on its plate in tracing second homes and investments in Spain, France, Portugal and other popular destinations without traipsing through the former Eastern Bloc.

“A great deal of the money invested in Bulgaria never appeared on the radar. It would be hard to trace,” says one of Dublin’s largest mortgage lenders.

Tom McGrath, a Dublin solicitor specialising in the overseas residential markets, says that a combination of naivety and greed led many Irish people to buy up to five properties in Bulgaria with the intention of “flipping” them on before they were completed to make a profit.

Any number of estate agents had recommended this as a fool-proof way of making money but the reality was different and they have been left “with properties that they do not want, cannot sell and cannot afford to complete on”.

The market in Bulgaria is over-supplied and pretty well on the floor. Real estate agencies say that at least one-third of the 2,200 foreign-owned holiday flats in Bansko – one of the country’s top ski towns – are on the block again, often at half price.

One media report has suggested that some Black Sea hotel owners have offered their debt-laden businesses for sale for €1 – grim news for tourism, Bulgaria’s top foreign investment sector.

The property market in Bulgaria, like Ireland, has had a hard landing. Construction firms have been laying off workers and, with bank borrowing getting more difficult, many developers are finding it increasingly hard to complete schemes.

McGrath says that promises of guaranteed rent from developers are often unfulfilled and these properties were overvalued in the first instance to take account of this arrangement.

Investment in the property sector, which accounted for 30 to 40 per cent of GNP in the past few years, brought an immediate profit, says local economist Tihomir Bezlov: “Real estate for Bulgaria was like oil and gold for other countries.”

The same could probably be said of Ireland but, unlike Bulgaria, there was never any suspicion here that the industry was being used to launder money from criminal proceeds.

Bulgaria’s authorities have admitted they cannot prove where the money that fed the boom came from. Could some of the proceeds of the Northern Bank robbery in Belfast in 2004 be in the Black Sea? There’s a thought.

Many retailers started leaving the shops in the central parts of Sofia which they have hired and look for new shops in the shopping centers and streets in the outskirts where the rents are lower. Many retailers have terminated their rental contracts for their shops in the central Vitosha Blvd, Solunska, Graf Ignatiev and Rakovski Streets. Most of these retailers sell mobile phones, clothes and shoes. In the last years there has been a boom the sale of mobile phones but now sales have drastically dropped and many shops have closed. At the moment the rent of a shop on Vitosha Blvd is unacceptably high – between 70 and 100 Euros per sq m – while in the shopping centers it varies between 30 and 70 Euros per sq m. It is expected that due to the lack of tenants the rents of retail space in the central parts of Sofia will drop.