In my earlier blog on Constanta, the major Romanian container port on the Black Sea (with a thriving ‘local based’ tourist resort on its door step) I stressed the fact that I believe that the true property investment opportunity is always in the nearby city and never on the coast…

… unless you happen to be a local land owner or developer…

However, my experience of the Spanish coast and watching investors catch a cold by buying holiday homes dressed up as investments, led me to write why I believe the real money is to be made in the local city – which you can read by clicking here.

So, a part of my reason for visiting Varna was to see if my experience of Spain was going to repeat on the Bulgarian coast and also to see if Varna represented a model of how Constanta might become, as well as potentially offering investment opportunities of its own.

I also wanted to visit the Black Sea coast to see if our dire warnings on the likely fall in holiday property prices was likely to happen.

Well, the first thing I can report is that whilst property is being sold to Brits up and down the coast, there was no evidence of anyone claiming the property to be an ‘investment’.

This by itself is encouraging, because if the purpose of buying a Bulgarian holiday home is to own a cheap summer holiday home (and not with the expectation of making money) then it is unlikely that the holiday home buyers will be disappointed.

The risk is that as an investment the holiday homes simply will not pay off.

What I saw was extensive selling of property – but not too much buying. I saw a large number of new blocks in Golden Sands that have now been completed and a large number of for sale signs litter the blocks. Many of the for sale signs appear to have been erected by developers and agents.

At the same time, the national tourist board is expecting a large number of Bulgarian hotels to go bust – essentially, any hotel outside a major resort that is not able to significantly reduce its rack rates will not attract sufficient holiday makers.

This actually highlights the real problem with the Black Sea coast – from the investment angle – and that is that it is just a 3 to 4 month season and in some locations it is near impossible to rent out an apartment.

The winter can be very cold and the wind can be bitter (slightly to the north the sea has been known to freeze over – which gives you an idea of the kind of winter climate in this area).

Equally, the resorts to the south of Varna – Sunny Beach especially – has seen huge amounts of development and in fact too much over-development.

The local view is that resorts to the north of Varna will ride out the storm better because fewer holiday apartments have been built because the land is hilly with cliffs – and this significantly restricts construction.

Perhaps the worst ‘holiday investments’ of all will be large new developments inland.

However, as I said before, if Brits and Irish are buying these as summer holiday homes – then they will not be disappointed and will have no reason to sell at cut down prices.

The risk is that some buyers are expecting to make a profit and these people will face – at best - a long term hold of an under performing asset and at worse they’ll sell in a hurry at cut down prices and lose money.

We’ve covered the Bulgarian coast and its likely problems here if you want to read more.

However, my main interest was in Varna.

Yes, the town is prosperous. It has many beautiful buildings in the centre and is a leafy city with an air of confidence.

It also has a booming population – which is thought to be around 500.000 people which may swell in the summer season to (possibly) 1m.

The key though, is that until recently, the population was thought to be slightly about 300.000 – which placed it as Bulgaria’s 3rd biggest city.

However, the way in which city populations are counted (ie those people who register their permanent address in the city) has become a less and less reliable measure of actual population.

Why?

Every Bulgarian citizen carries an ID card – just as I carry a Spanish ID card because I am a permanent resident in Spain.

However, because of the relaxation of control and also the right to travel in the EU, the need or urgency to re-register your ID card when ever you move to a city is sharply reduced.

For instance, students on three year courses do not bother to re-register their address in their student town – but maintain their address at their parent’s home.

Equally, in Varna, many students stay on in the city after finishing their studies. Whether they take a permanent or temporary job doesn’t really matter – because most 1st jobs outside university are pretty temporary anyway (ie you either decide you don’t like the work, decide to study some more or get promoted and move to another location).

So, this habit of not re-registering continues.

And, as this habit expands and the population becomes more mobile (in search of better jobs, better places to live etc) so the official population statistics become less reliable.

Hence, based on the broad pedestrian boulevards of Varna and the teeming night life on the city beach, the town was full when I visited it.

Varna has also clearly benefited from a 4 to 5 year boom in the nearby coastal regions which, whilst foreigner investors may catch a cold or two, has clearly left wealth and prosperity with the Varna based land owners and property developers.

Now, it is pretty clear to me that these newly wealthy are spending their money on homes in Varna and buying new cars from some of the fancy show rooms on the edge of town.

Thus, Varna now has a thriving service sector and the city centre renovation is well underway.

It is reasonable to think that Varna will continue to grow and so will offer great opportunities for investors. But remember I am talking about the city of Varna – not the coastal region!

I also heard that the local mayor has announced a two year construction ban in Varna to allow the infrastructure developments to catch up!

Whether this is a sign of overdevelopment, an indication that city property isn’t selling or a sign that development laws and rules have been flouted – or all three – I don’t know.

However, such a temporary ban can only tighten supply of property – and if the new population numbers are true, then this will drive up city prices.

Varna’s population growth also makes it the clear second city in Bulgaria and propels it ahead of Plovdiv (which is so close to Sofia that it is losing population to the high salaries of Sofia).

Varna’s coastal appeal also means it has clear benefits (lifestyle etc…) over Sofia, but I would expect that its salaries will only be marginally less than those in Sofia and so, its property prices will be marginally less too.

Hence, Varna has now leap frogged Plovdiv into Bulgaria's second city and from here its future looks prosperous.

Unfortunately, I forgot to sip a cappuccino in the pedestrianised centre – so I can’t make the coffee comparisons (see previous blog - wake up and smell the coffee) – but I’m sure we can find someone willing to carry out this onerous task?

Cheers
Neil

Ps. Next I’m off to Sofia to see if the property investment environment is ripe or if the 15% foreign commission agents have ruined the market for real investors…