Buying a property: Could the investment be a money laundering method?

The interest in mortgage lending and real estate investment has not waned in the past few years. Historically low mortgage rates and high inflation have stimulated demand in recent years and it still continues to outpace supply. However, is some of the demand not being stimulated by the forthcoming changeover to the euro in this country. And is the purchase of an apartment being used to launder money?

The ratio of transactions with loans to transactions for residential property without loans is in the proportion of 2/3 to 1/3 for 2023.

Anton Andonov, CEO of a real estate and financial services agency: "1/3 of properties are bought without credit, which is a small part of the market. If we consider what percentage of transactions would potentially be subject to this type of money laundering, it is significantly small."

A large proportion of buyers using their own funds have previously sold another property or worked abroad for an extended period. Notaries carry out a series of checks against declarations of actual owner, origin of funds, and prominent political personality. Under current legislation, notaries are liable for the obligations of the parties to transactions. Since May, a check is also being made with the National Revenue Agency (NRA).

Dimitar Tanev, Chairman of the Notary Chamber of the Republic of Bulgaria: "The NRA check is something quite new. When the notary checks directly, effectively at the moment whether there are unenforceable public liabilities. He is personally jointly and severally liable if he allows the transaction to take place with these types of debts."

However, money laundering is facilitated outside major cities because of unrealistically low tax valuations.

Dimitar Tanev, chairman of the Notary Chamber of the Republic of Bulgaria: "One acre of land is worth within 10-15 BGN to 100 BGN, on average the properties apartments, buildings are transferred at 5-10 thousand BGN, which is the tax valuation. These are not real prices.

However, the real estate market remains most dynamic in big cities.

Anton Andonov, executive director of a real estate and financial services agency: "The reason for the appreciation of property prices to some extent is the increased optimism of market participants by those who are looking because incomes, no matter how insufficient, they are growing slightly more than inflation."

The property sector is not expecting a significant rise in property prices after the adoption of the euro. The experience of the Baltic countries also confirms this - there the adoption of the euro has had no impact on the property market.

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