In the time of the real estate boom from 2006 to 2008 many nationals of UK, the Scandinavian countries and Russia bought vacation homes in Bulgaria. Demand from nationals of Ukraine and Russia continued even after that.

There is no precise statistics about the real properties of foreign nationals in this country, because a few of them - given the constitutional ban on land purchase - would buy real estate through companies.

Following growing interest in Bulgarian resorts abroad a few vacation complexes were built along the southern Black Sea coast in the main, and in skiing resorts. Very often the properties, mostly apartments and not so typically vacation cottages, were bought off plan - at the level of design or at the early stages of construction. In this way the price for acquisition was lowered with buyers providing to investors part of the capital they needed for projects. Deals however were formally certified only after the completion of construction. In 2007-2008 this scheme was commonly used in Sofia and other big towns by both local and foreign buyers.

In data from the National Statistical Institute transactions with real properties in the period 2006-2014 stood at about 10 percent of GDP. Recently the National Revenue Agency has spoken up about losses incurred by the National Revenue resulting from noncompliance with the law and signature of real property deals at the value of the tax assessment, not at the actual sales price that is higher. NRA has said that since the dawn of the real estate boom the National Revenue has been losing 200 million euro annually though the way the loss has been calculated is not clear.

“When the seller owes money to the Revenue and transfers the property at a price different from the market one there is a legal provision to declare the deal null and void”, Rosen Bachvarov of NRA comments. “Though it might seem luring to save 500 euro from notary expenses, the risk is high because in this way one can lose the sum paid for the property.”

If however the tax assessment is higher than the market price - and there are a few such cases reported by brokers in small towns and villages, all due taxes and fees are calculated based on the tax assessment.

Appraisers argue that there are difficulties in trying to calculate a fair market price. Problems include the incomplete and inaccurate Land Register and the Cadastre that has only been completed in part.

In the view of Sergey Mashiach, CEO of one of the leading companies for market appraisals, the NRA step is in the right direction. He however points to a few difficulties related to property appraisal:

 “There are issues with the lack of information about deals that have been actually concluded that is both public and reliable. Appraisal companies use information about deals from the real estate agencies that are included in the respective company groups. Another problem is that the general information about actually concluded deals is not applicable to a given property. In Mladost housing district in Sofia for example, deals are concluded at prices ranging from 500 to 1000 euro per square meter.”  

He specifies that such major differences are due to the state of the property, the exposure, the floor, the size, the technology of construction etc. Mashiach points to another big issue in the sector, namely that appraisals in court are not carried out by appraisal companies but rather by the so-called experts, physical persons registered at the court.

Experts do not have access to reliable market information and are subject to weak control unlike market appraisal agencies who are expected to defend their legal capacity at the Chamber of Appraisers, Sergey Mashiach said in conclusion.

English Daniela Konstantinova