The economic crisis of the last eighteen months has hit property markets across the world, and many UK based owner landlords who were swept up in the vogue for purchasing investment properties have been directly affected by the worldwide downturn.

This boom in overseas property began at the start of the 2000's and many were attracted to former Warsaw pact countries, due to promises of huge returns and capital growth. To a certain extent these premises were based on fact, as there was a demand for quality and affordable new housing in ex- Warsaw pact countries coupled with a rise in income of the local population. A younger generation of people living in these emerging markets were more willing to rent rather than buy, so it appeared that countries such as Poland, Czech Republic, Slovakia and Bulgaria, offered new properties at low prices, whose value would increase exponentially following accession to the EU and the adoption of a single currency.

That was the hope of countless would-be property magnates, yet the reality is transpiring to be quite removed from the ideals promised by developers, sales agents and property sourcing companies.

Bulgaria has turned out to be one of the most problematic areas, and this has been compounded by the fact that it was also one of the countries attracting the most foreign investment in terms of buy to let property purchases - up to almost 130 million Euros from UK investors alone in 2009.

The dream of Bulgaria appeared to be a win-win situation, cheap properties available in Sofia as well as on the Black Sea coast, allowing both more experienced investors the prospect of large profits and first timers the possibility to grab a place in the sun for the price of a mid-range car in the UK.

The boom period stretched from 2004 to 2007, as property sourcing companies and sales agencies pushed the Bulgarian dream to clients throughout the UK and Ireland. These sourcing companies and sales agencies were attracted by more than just the location. The cheap cost of labour and materials in Bulgaria allowed developers to put huge mark ups on their developments, whilst concurrently keeping prices low enough to attract UK buyers in search of a quick bargain.

These huge mark-ups meant that developers could also afford to offer sales commissions of up to 20%, a massive departure from market norms of 4 to 6%. Therefore, the needs and rights of the end consumer got gradually lost due to the opportunity for huge, quick and easy profits. The prospect of these profits drove a huge marketing machine which in no small way helped to convince many that Bulgaria was the place to invest. It also attracted a number of charlatans to the market, and a quick trawl of any Bulgaria property blog will show countless real life cases of buyers whose investment has turned out to be a potential disaster. This was highlighted by a 2009 Watchdog programme on the BBC, titled ''The Bulgarian Dreams'' nightmare.

This marketing machine, and the belief of many buyers that the dream could become a reality, made property in Bulgaria really take off between 2004 and 2007, yet warning signs were becoming apparent as soon as 2005. Because of the demand, developers we able to increase prices, which artificially made it appear that the value was already increasing. In reality, many areas were becoming dangerously oversupplied as early as 2005. Locations on the Black Sea such as Sunny Beach, and also some of the ski resorts around Bansko faired especially badly in this regard, as the construction of properties completely outstripped the demand for holiday rentals in these areas.

Additionally, the Black Sea coast has a relatively short holiday period compared to more exotic locations in the Caribbean, from June to the end of August, so the opportunity for rentals is thus limited. The collapse of the low price airlines means that demand has reduced anyway, so many people are finding it nearly impossible to rent their properties for a decent price if at all, whilst re-sales are almost non-existent.

These difficulties have been further compounded by the existence of untrustworthy local agents and property managers. On a visit to Bulgaria, I have personally been shown ''vacant'' apartments that contained dirty ashtrays, sleeping bags on the floor and dirty plates in the sink. Some unscrupulous agencies use the distance of the UK based owners to rent their properties and simply pocket the cash, as many owners will never know the difference.

However these people are the lucky ones. Many others have invested in developments which have not been completed, been partially completed or been completed but access roads, electricity, water and other essentials have not been completed, rendering their properties inaccessible and uninhabitable.
So what does the future hold for these buyers, for new buyers awaiting developments to be completed and for the Bulgarian property market in general?

The Bulgarian property market is currently in a state of semi-paralysis due to the fact that banks have put a moratorium on lending to foreigners. Mortgage loans only recently became available again for Bulgarian nationals, and it looks to be some time before banks will countenance loans for foreigners. This issue is further exacerbated by the fact that many of the main banks in Bulgaria are Greek owned and controlled, and the economic circumstances there have led to all monies being redirected to Athens.

Therefore many UK buyers and investors have been left in limbo, either with properties they cannot rent or cannot complete on because the promised lending has evaporated.

However the market is not all doom and gloom. Sofia will remain a relatively good investment in the long term, as there will always be demand for new built housing in a capital city. There are big problems with oversupply there, but as the banks are not lending to individuals, they are also not lending to developers, so new developments will not be started in the foreseeable future. Therefore, demand will gradually catch up with supply, which will have an eventual corresponding effect on occupancy levels, rent levels and re-sales prices.

For those with completed properties in the resorts, an effective and affordable management solution is a must. If the property cannot currently be rented or sold, then the next step is to stop unauthorized squatting, and to make sure that the property remains in the best possible condition. For those who have not achieved any rentals, yet are paying an upfront fee for the privilege of having the property advertised, it might be time to cut losses and look for a more affordable service which promises less, but delivers on those promises.

Simon Tweddle (Bulgarian Property Expert)

Simon Tweddle is a property investor who bought his first Bulgaria property in Sunny Beach in 2003. He also owns properties across the CEE region, including Czech Republic and Poland. He is CEO and owner of Sim Property Group, a company providing management services and re-sales advice in Czech Republic, Poland and Bulgaria.

You can ask Simon a question on Bulgarian or Central Eastern European Property here