British buyers on the
It was, many thought, too good an opportunity to miss: a beachfront property on
That, at least, is the prospect that has been dangled before thousands of British buyers by estate agents and developers during the past few years.
This summer, however, the consequences of
Many Britons who bought on promises that they would get rental returns of as much as 10% are receiving half that — if their properties are being let at all, a Sunday Times investigation has revealed. Meanwhile, those who had hoped to sell for a profit are finding that the relentless building programme can make it difficult even to get their money back.
Karina Mackenzie, 28, a school teacher from
Like its competitors, Mareli Properties, the agency through which they bought, was upbeat about the flat’s rental prospects. “There were a lot of promises given to us by agents that we would get a high rental income,” says Mackenzie. “I was told we could expect 70% occupancy in the summer months.”
The reality has proved very different. After months of advertising on the internet and putting up posters at work, she has had few inquiries and no confirmed bookings. Not that she could rent it out, even if she wanted to: when the Mackenzies visited
Her visit left her feeling deeply pessimistic. “I don’t think the rental side will ever come to anything,” she says. “I think we’ll be lucky to cover our costs.
During a viewing trip to
One flat has been rented out for two weeks and the other for six weeks — far less than he was led to believe when he bought. If bookings don’t improve, he intends to sell. “I am very disappointed about the rents,” he says. “I was told by the managing director of the company all the properties came with guaranteed income and that these were no exception.”
Despite such problems, developers and agents — many of them based in
Posing as a buyer, a Sunday Times reporter was assured by several agents that the rental season in Bulgaria lasts from May until October, occupancy rates are high, returns of 10% are realistic and a two-bed apartment will command £485 a week. New golf developments or planned marinas were often mentioned as sources of further uplift.
Simon Jenkin, a sales agent for Bulgarian Dreams, was especially upbeat when promoting a new development at Balchik, 15 minutes from
A salesman from Manchester-based Bulgaria Revealed, who identified himself only as Adam, said: “You’re normally looking at 8%-10% rental return, so say you buy an apartment for €100,000 (£69,000), you’ll get €10,000 (£6,900) a year income.”
Worryingly, the reporter found many agents were talking up the investment case in the full knowledge that buyers are borrowing money to fund their purchase and may be relying on rental income to pay their monthly debts.
Barrasford and Bird, which has released what it calls a “self-certification, off-plan, true, buy-to-let mortgage in
Research by The Sunday Times suggests that for most people, net returns are more likely to be in the 3%-4% range at best, that six to eight weeks’ rental is optimistic, that £277 is a realistic rate for a two-bed apartment and that just a few people, with truly exceptional properties, will achieve 12 weeks’ rent. With local interest rates of about 7%, this means that far from being self-supporting, some Bulgarian properties can start costing their buyers money from the start.
Lauren White of MacAnthony Realty International assured our reporter that a two-bedroom apartment at
“You can rent the property out for the summer months without a problem,” White said, adding that the firm “normally achieved 95% occupancy”.
Anil Shah, 46, an IT consultant from Harrow, who bought a one-bedroom apartment at
When he completed, he discovered that the rental income was not, in fact, guaranteed. The letting agent recommended by MacAnthony has so far found Shah just one week’s booking. Like other buyers, he has resorted to advertising his apartment on the internet at his own cost.
Shah says numerous complaints have led nowhere. “There’s very little you can do about it,” he says. “It’s not in their (the agent’s) interest to do anything. They’ve got their commission.”
Nor are the problems restricted to the coastline. In recent months, agents have been vigorously promoting the investment potential of
Many industry experts are sceptical, however, that the building of golf courses will be enough to turn mountain towns into genuine all-year resorts, while those who’ve bought in the capital also face problems finding tenants.
Fraser Young, 33, who owns a company exporting telecommunications equipment, paid £50,000 for a one-bed flat in the Monastery, a residential complex 10 minutes’ drive from central Sofia, last year, after being impressed by Barrasford and Bird’s sales pitch at a London property show.
Although the apartment was finished in December, Laguna, the rental agency promoted by Barrasford and Bird, has failed to find a single tenant for him — nor, he believes, has it done so for any of the others who have bought. After months of complaints, Laguna wrote to the 40 owners admitting “the rental market for residential apartments is very competitive and dominated by the supply over the demand”. Laguna confirmed last week that it had not placed any tenants in the Monastery.
Robin Barrasford, managing director of Barrasford and Bird, admitted there had been problems with Laguna in
MacAnthony has denied it misled clients, pointing out that it is developers and letting companies rather than estate agents who ultimately give guarantees. “When we opened on
Bulgarian Dreams also backed its salesmen’s views, while Steve McCann, administration manager at Bulgaria Revealed, said its agents were “merely passing on the information we received from the developer”. He maintained that, based on what the developers had said, “10% is a realistic return over the next few years”.
Experts such as Patrick Berger, who analyses emerging European property markets for CA-IB, an Austrian bank, are sceptical. “Eighty per cent of people are buying in
Many buyers interviewed by The Sunday Times claimed they were not worried about rents in
“Investors look at two factors: the rental income and the yield,” he said. “If the rental income is not there to justify the value, prices will fall, possibly some way below the level at which people are now buying.”
Galina Mihaylova, a Bulgarian property consultant who has watched the boom since its early days, has met a number of unhappy clients. At present, she is helping one British investor sell a ski apartment in a new building in Bansko for £713 per sq m; she says that agents are still asking £969 for comparable off-plan flats. A second owner in the same block is hoping to sell three properties for the same price he paid for them two years ago.
“People who are hoping to make a quick profit are going to be very disappointed,” says Mihaylova, who runs Sash Solutions in
With thousands more apartments ready for sale and rental next year, the situation is not likely to improve. Last month, Orlin Vladikov, head of the National Real Property Association in
Ivo Marinov, director of Mareli, is still optimistic. He says apartments in the Apollon complex should achieve 70% occupancy next year and claims he is talking to big tour operators interested in placing holidaymakers in the development.
Mackenzie is not convinced, however. “The market is overheated,” she says. “The agents are on a money-maker and the more flats they sell, the more difficult the rental situation becomes.” For hundreds of other investors, the sand may turn out to be the only thing “golden” in
Source: Sunday Times