Buying a £35,000 property in a beautiful Bulgarian spa town is probably the best thing that company director Robert Jenkin ever did. The spacious house has four bedrooms, two bathrooms and two kitchens, and is close to lush, dense forest. And an hour’s massage in one of the spas costs just £10.

As director of London-based property company Bulgarian Dreams, Jenkin has come to know the country well ever since he met and married his Bulgarian wife Maria a few years ago. “You hear very mixed reports about Bulgaria, and to be honest, the worst bit is close to the airport with its huge concrete housing blocks. There is also evident poverty, although people aren’t destitute,“ he says.

“But so much of the country is very beautiful. There are only eight and half million people, much of the country is covered in forest and you can walk for hours. There are many festivals, and everything is so cheap – a family of four can eat out for under £6, so you can dine out every night,” says Jenkin.

Jenkin set up his company to help British investors buy properties in Bulgaria, gain a wonderful holiday home and a steady rental income. And as stories of the difficulties of Bulgarian law circulate, Jenkin admits that he did do it the hard way: “Buying an older property presents more difficulties, but ownership rules are very well defined in Bulgaria – unlike in Croatia, where people might have been displaced and come back to claim a property.”

Jenkin used a Bulgarian notary, and says that notaries and interpreters are easy to find through the Bulgarian embassy in London – and for investors who do not want to fly out to be present when the property is signed over, a solicitor can be given power of attorney. And when the company sells new and off-plan properties on the beautiful Black Sea coast, the process is made much simpler, he adds.

Many British investors buy these new properties, says Jenkins, and adds: “They are easier to maintain, well located, and have good rental potential. Additionally, apartments that are part of managed schemes are secure and well-maintained – even the rent is looked after for you, so it can be a totally ‘hands-off’ investment.”

Go East
So why should British homebuyers be interested in Bulgaria? As house prices in France and Spain continue to soar, and Eastern Bloc countries join the European Union, former Communist Bloc countries have seen huge property price rises.

“There has been a lot of EU and company investment, and these countries are having to become more western fast,” says Simon Hill, chief executive at property development and investment company Letterstone. “Yet prices in Prague are a third of those in Paris, and investors are just realising that Croatia has a beautiful coastline.”

While prices are rising fast, observers say there are more rises to come. “The market in Bulgaria is about three years behind the first-wave countries such as the Czech Republic and Hungary, and look set to go the same way as these markets,” says Jenkins. “Prices are already two to three times what they were a few years ago, and this will continue to rise in the run-up to EU membership.”

Take advice
Bulgaria is set to join the EU in 2007, and mortgage specialists Conti Financial Services are among those who have just launched a Bulgarian mortgage scheme. Yet Bulgarian law can be complicated, says Conti senior partner Simon Conn: non-Bulgarians cannot own land in their own name, for instance, so outsiders need to do so through a company. Working with specialists makes sense, recommed Conn. “We can offer the assistance of specialists in Bulgaria who can help our clients and who have taken time to choose the right working partners in the country.” But, you need to do your homework first, insists Conn.

For buying abroad is fraught with problems, he argues, especially in Croatia, where “properties are handed down through members of the family who simply sign a piece of paper between each other, and the real owner of the property may have been dead for hundreds of years. People here rush to pay cash, and then may have to face a shepherd claiming to be the true owner.” Taking proper advice is essential, he urges.

Others agree. At City Trading Post, which helps investors buy a stake in Eastern European property, director Paul Hutton recounts stories of ransom strips, where property owners have been held to ransom over access by owners of neighbouring land. “You need to do your due diligence, but many investors believe it’s worth it as property prices have increased enormously across the entire Eastern Bloc.”

So how does it work? Conti’s Bulgarian mortgage, funded by Piraeus Bank and created by Bulgarian Dreams, is offered at a minimum of €40,000. The euro-only loan is available for up to a 17-year term and is available to borrowers up to the age of 70 at a rate of around 7.5 per cent. The loan is not particularly competitive, but tied to the EURIBOR (the European equivalent of the LIBOR – the rate at which banks lend money to each other); projections suggest the rate will fall to 6.5 per cent, driven by convergence with the eurozone.

Conn points out that Poland’s new EU membership status gave the country a massive boost, which means that prices are set to rise. Variable rates on repayment-only mortgages are now as low as 3.2 per cent, says Conn.

“Lenders are naturally concerned about the legal issues and rights of title,” adds John Crabtree, MD at Blevins Franks Mortgage Services, “so you might find you cannot borrow as much as you want – in some cases, you can only secure 50 per cent of the value.”

As Eastern European countries become more accessible, they are increasingly attractive to Britons wanting to buy abroad, say experts. Prices have soared in Hungary and the Czech Republic, and British investors are now looking as far afield as Slovakia and Russia, where prices are also catching up fast. Buying in the Eastern Bloc can be extremely profitable, say experts, if you take expert advice and see these properties as a long-term investment.

Key facts on property - buying in Bulgaria
No land ownership for foreigners in Bulgaria, although building ownership is allowed, i.e. equivalent of leasehold ownership
Foreigners wishing to own land can do so through a company
Bulgarian company incorporation costs less than £600.
Bulgaria’s ownership policy will be harmonised with the EU in the future

Case study
Teacher Brian Hollett had successfully let his Italian property for years, but when he came to buy a second one he found that prices had risen too much. He looked instead to Eastern Europe, travelling to Bulgaria and Hungary.

Having remortgaged his Saffron Walden home for £120,000, Brian was able to buy a flat in Budapest for £75,000. “It’s so central it’s like buying somewhere in Westminster,” says Brian, 56, “and while prices were already rising, they’ve risen much further this year.”

Taking advice from Bulgarian Dreams, Brian has now put down deposits on properties in Sofia and on the Bulgarian coast, buying off-plan and making stage payments. “It’s always a risk, which is why more people don’t do it,” he confides, “but as long as you do your research properly, the investment will pay off. I’m confident that it’s worth the risk, and when the properties in Bulgaria are complete I will be able to let them from England, just as I do with my property in Italy.” That will fund his retirement nicely, and leave Brian a choice of holiday homes whenever he chooses to venture abroad.

About Bulgaria
Centrally located in Eastern Europe, with a 354 km coastline along the Black Sea rising to mountain ranges; Bulgaria is a varied country. Its seawater is very clean, not tidal and is bordered by long sandy beaches. The temperature of the Black Sea in summertime is actually warmer than the Mediterranean.

The country has had its EU membership ratified and expects to become a full EU member on 1 January 2007.

Direct flights from the UK take 2.5 hours to Sofia, and chartered flights are available to the coast. No budget flights currently go to Bulgaria although companies are realistically expected to stake a claim from 2007 to 2008.

Current real economic growth: 4.4 per cent (2003 estimate)
Inflation rate: 5.9 per cent (2002 estimate)
GDP per capita (PPP): US$7,600 (2003 est.)
Pop. below poverty line: 13.4 per cent
Export industries: clothing, footwear, iron and steel, machinery and equipment, food stuffs

Source: Bulgarian Dreams