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March 2006, 10/03/2006

Dear Valued Stara Planina Properties Client,

We are pleased to present the March issue of our newsletter. We continue to feature one of the regions in Bulgaria with Veliko Turnovo being the featured region today. We would be grateful to receive any feedback on topics of interest for you to be covered in the future.

Veliko Turnovo - Heart of Bulgaria

The city of Veliko Turnovo (the ancient capital of Bulgaria) is regally set on four hills by the banks of the Yantra River. In essence the city is located in the centre of Bulgaria and slightly north. It is within 3 hours drive from Sofia and Varna (the main airports in Bulgaria). There is an airport just 10 km north of Veliko Turnovo that once operated for internal passenger traffic but was closed some 15 years ago. Hopefully as numbers of visitors to the region continue to grow it will re-open to passengers.

Whilst most people are looking to buy in the villages there is a significant number of people buying within the city and in particular in the old town around Varusha, in the quarters near Tsarevets hill and along Gurko Street. Most of the properties for sale in the centre are in need of some renovation but they do offer you a something special in terms of setting. This apartment is a good example.

Between the old town of Veliko Turnovo and Arbanassi just below the Tsaravets castle there is a quiet area of town called Assenova Mahala. This is a protected architectural site and also has many properties for sale of great character. One example of the traditional buildings offering modern living is the award winning Long House development.

A number of new developments are being built in the city centre but unfortunately there are not enough to cater for the demand. Prices in the city start from 40,000 euros upwards and in terms of price per meter square for a new development you are looking at about 500–600 euros per square meter for an off-plan shell. Expect to pay a further 100–200 euros per square meter to fit it out. There are a number of opportunities to buy off-plan properties further out from the historical centre in the so-called living quarters where prices start from as little as 300 euros but we find most clients are more concerned with being close to the centre and where the setting is most appealing.

Out from town prices in the villages start from a much lower base than in the city and are markedly cheaper than comparative properties along the coast, in the ski regions or close to Sofia (it is worth noting that other regions such as Rousse are still cheaper than Veliko Turnovo).

Around Veliko Turnovo buyers are typically paying about 20,000 euros for their property and then spending a further 15,000–20,000 euros having them done up. Obviously these figures can vary and you can still pick up some property for as little as 7,000 euros. Prices tend to be slightly higher the closer you are to Veliko Turnovo. Most people are buying in villages which form a small circuit around Veliko Turnovo such as Kapinovo, Mindia, Pchelishte, Ressen and Hotnitsa. There are some charming old houses with sound structure and preserved original features needing some renovation like this eighty-year old property and this stone-base house as well as ready to move in houses located in tranquil villages. At the top end is this modern fully furnished house located just 7 km from the city with patio and swimming pool.

Elena area is situated 40 km south-east of Veliko Turnovo. It is very picturesque area with unspoilt countryside. Like Veliko Turnovo it is a popular tourist and outdoor activity destination. The main town of Elena preserved its Revival appearance with 130 historical buildings grouped in several ensembles. The prices near Elena are comparable to those close to Veliko Turnovo but one can find bargains in secluded locations such as this 8,600-euro wooden house.

Slightly to the west of Veliko Turnovo there is a small grouping of villages around the town of Dryanovo attracting the buyers with fantastic south- facing views over the Stara Planina Mountains. The small ski resort of Uzana is located within an hour drive from Dryanovo offering additional attraction to the lovers of the winter sports. One can find some of the most unique properties in the little hamlets not far from Dryanovo such as this escape-from-it-all property set within an acre of gardens. Other options range include this mountain house which needs updating and this top-quality new three-bedroom house offering all the modern facilities and wonderful views over the mountains.

The countryside to the north of Veliko Turnovo is not so hilly but has good access and excellent deals if you are not set on mountain views. Good examples of property there are this solid house under 8,000 pounds and this ready to move-in house for just 32,000 euros.

As a region Veliko Turnovo has much to offer for people looking for a taste of the real Bulgaria. It also caters for all sorts of budgets and lifestyle needs. Not for little reason has it charmed all our visitors whether they have bought with us or not. This is unlikely to ever change.

UK vs. Bulgarian Mortgages for Buying in Bulgaria

(This article was kindly presented by Mr Steven Andrews, Director of Bulgarian Home Loans Ltd)

Over the last 18 months we have been inundated with requests from people wishing to raise capital in order to purchase in Bulgaria. In the early days the only option was to raise money in the UK via either a re mortgage, secured loan or personal loan. Then Piraeus Bank entered the fray with the first mortgage available to foreigners buying in Bulgaria followed by DSK bank later in the year. The DSK mortgage was far easier to obtain and approximately 90% of applicants get accepted. We are currently in negotiations with a host of new lenders in order to provide lending options for people buying in Bulgaria. So with more and more options becoming available Stara Planina Properties have asked us to provide a little information as to the pros and cons of UK versus Bulgarian mortgages.

Option 1 – Re mortgage in UK and buy property in Bulgaria in cash. If clients are not tied to their existing lender they could release equity from their UK home. This would be a simple process and a vast majority of clients could expect to release at least 85% of the valuation of their property. There are over 8,000 different mortgages available in UK. The benefits of borrowing in UK would be: Cheaper interest rate - typically could expect rates of between 4.5%-5.5% which is cheaper than the typical 7% rate available in Bulgaria; Upfront and completion fees are generally a little lower than for a Bulgarian mortgage; The advice would be provided by an Financial Services Authority regulated adviser and, hence, the client would have a come back against bad advice; The process is a little quicker and they could get all the money in advance of the staged payments being required and this would reduce the stress of hitting stage payment and completion deadlines.

However, there are also negatives. You would need to consult an accountant to make sure that the interest payments for the amount you have borrowed to buy in Bulgaria are tax deductible against any rents you may receive in Bulgaria. Also you will have put your own main residence at a greater risk of repossession, if you did not get the expected rents from the Bulgarian property and could not afford to keep up payments on your UK mortgage you may risk repossession.

Option 2 – Ignore the UK and secure mortgage against Bulgarian property.In this case clients decide that they do not want to risk the homestead for a little property speculation in Bulgaria. The money they would raise in Bulgaria will be more expensive than capital raising in the UK but this would be a fair trade for peace of mind.

The main advantage of getting a Bulgarian mortgage is that the mortgage is secured against the Bulgarian property and if clients cannot afford the mortgage it is only the Bulgarian property that would get repossessed and this would have no effect upon their UK residence. This is a favoured option of many aggressive property investors who are prepared to take a risk but also want to manage any downside. If the mortgage is paid from your Bulgarian bank account and if this account is also the one where some rent is paid it becomes much easier to correctly work out the net profit from letting a property in Bulgaria. When taking out a Bulgarian mortgage you also have other independent companies such as ourselves and the legal representatives of the lender who check that you are buying the property with the full purchase price on notary deeds.

One negative is there are no regulatory authorities who monitor the international mortgages and hence you could be at risk of receiving bad advice from inexperienced or plain fraudulent advisers. We ensure that all advisers work to the same best advice guide lines required for UK financial advice.

As property prices are still relatively low in Bulgaria many people can still afford to buy in cash (lucky them!), however, if you are wanting to build a portfolio this is not often the best option. Using finance to buy property is called gearing. Just like the gears on a bike you are using your little deposit (small cog) and then the larger funds from a lender (large cog) to be able to make your money go relatively further. It is this that made many buy to let millionaires in the UK. When gearing is used alongside a property market that is experiencing rapid price rises the result can be the creation of substantial wealth. Imagine you had EUR 100,000 to spend, you could buy a single property in cash or you could buy three properties using mortgage finance.

If the market then increased at 20% per annum (optimistic but could potentially happen). If you bought in cash after 3 years you would have a single property worth EUR 172,800 and hence you would have made EUR 72,800 plus any rental income. Alternatively if you used gearing then after 3 years you would have EUR 518,400 worth of property minus EUR 210,000 of mortgages. Obviously this is a riskier strategy but it must be said that over past 8 years it has worked very well for nearly everyone who has adopted it.

The main thing is to understand exactly why you are investing in Bulgaria, have a plan, do not believe everything you are told and do not be greedy.

Bulgarians Outpace EU in Home Ownership

The European Quality of Life Survey reported recently that Bulgarians have highest levels of home ownership in Europe. More than four out of five Bulgarians own their own home without a mortgage although considerable part of the population is affected by the ongoing economic transitions and have comparatively low incomes.

Two thirds of Bulgarians have reported difficulties in making ends meet, according to the survey carried out by the Dublin-based European Foundation for the Improvement of Living and Working Conditions. Despite this just 5% of the interviewees have difficulties in footing utility bills, which is close to the average levels in the EU countries.

Bulgarians also rate the quality of housing and the local environment higher than in the other EU candidate countries Romania and Turkey, experts from the surveying body explained.

IBAN Switch Introduced in Bulgaria's Banks

The International Bank Account Number (IBAN) standard will become effective in Bulgaria as of 5 June 2006.

The international standard for numbering bank accounts, which is already adopted by the UK and other forty one countries, has been introduced in Bulgaria’s banks since 1st March. The new bank account numbers include 22 symbols (both letters and figures) instead of ten. The IBAN always starts with a two-digit country code (BG for Bulgaria) which is followed by a two-digit control part, the beneficiary bank’s code and the beneficiary's domestic account number.

Usage of the IBAN reduces the number of delays and errors in the international payments because the bank sending the payment is able to check the correctness of the account number (IBAN) entered by the client before the payment is sent out of the bank. Thus using the IBAN allows for quicker transfers and future reduction of service fees related to international payments.

From 1st March until 5th June the Bulgarian banks will inform their clients about the introduction of the IBAN standard free of charge. To all clients of Stara Planina Properties, we would be pleased to inform them of their new IBAN details.

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