John is from Cardiff. Three years ago he bought a small apartment in Bansko for 65 800 euro. When the global financial crisis struck, property prices went down, interest went up and John started amassing debt to his bank.

Last year, the bills became too much and he decided to sell his Bulgarian investment. The apartment went on sale in March 2009, with an asking price of 57 500 euro, but found no buyer.

Two weeks ago, John finally managed to sell his apartment for 37 000 euro, incurring a loss of 44 per cent on his initial investment.

The case is real. The holiday properties market in Bulgaria is full of sellers like John, who bought properties in Bansko for prices of about 1400 to 1500 euro a sq m and are now selling for about 700 to 800 euro a sq m.

The credit crunch is one of the reasons for the outflow of British property buyers. The other is the disappointment in the investment. Most Brits bought apartments and houses in Bulgaria expecting easy returns after Bulgaria entered the European Union. Banks generously funded the purchase of a second home in Slunchev Bryag (Sunny Beach) or Bansko, while property consultants promised annual returns of 10 per cent.

None of that came to pass. "They found out that miracles do not happen and that you cannot become rich thanks to someone else. You can only make yourself rich. The Brits that bought apartments in Bulgaria wanted someone else to make them rich, but this doesn't happen in life – nowhere and never. If they didn't become rich in Britain, they won't become rich in Bulgaria," said one property developer who sold several developments on the Black Sea coast to British buyers, but asked not to be named.

Capital's investigation showed that most British-owned holiday property is either empty or being used only three to four weeks a year. Their owners have been accumulating debt because of maintenance costs. The only happy property owners are those who bought village houses that they use all-year.

Among the reasons for disappointment is the bitter experience of many buyers who became easy prey for fraudulent or bankrupt Bulgarian developers, which has helped the negative image that Bulgaria has in British media. UK newspapers, which three or four years ago advertised Bulgaria as the next investment hot spot after Spain and the Baltic countries, are now advising their readers not to buy property here.

'A house for the cost of a car'
This headline is from an article that The Sunday Times ran in October 2004. It told the story of a 37-year-old Liverpudlian who made her Balkan dream come true, buying a huge house in Ustrem, a village near the town of Elhovo in southeastern Bulgaria, for just 5000 pounds sterling. For the price of a four-year-old Ford Mondeo, she got a "solid house, complete with vines, fruit trees and a 1200 sq m garden". Another argument in favour of such an investment was the fact that "a beer in a bar costs 17p, a three-course meal for two washed down with a reasonable bottle of Bulgarian wine, about £9."

Stories like this one also helped to inflate the property bubble in Bulgaria between 2003 and 2007. For many Brits, Bulgaria was the dream of a second home come true, as seen by the names of the companies they had to register to buy property in Bulgaria. The trade register is full of companies with names like Second Home, My Dream, Dream Home Invest, Bulgarian Dream Property, Dream Land, Overseas Dream Properties, Dream Destiny – all owned by British nationals and registered to buy property.

"All you had to do is explain that Bulgaria was two hours away by plane and that it was to join the EU; as soon as you showed them the natural beauty and the nice climate and then told them that they could have a house for 5000 pounds, that was enough," says Yulian Georgiev, owner and managing director of Homes in Bulgaria, the first company that began targeting British buyers for Bulgarian properties in 2002.

In those early years, the most popular sale were village houses with a yard in the mountains and close to the seaside. A year or two later, the new fashion of holiday properties in resorts took hold. In Slunchev Bryag and mountain resorts like Bansko, Pamporovo and Borovets, properties under development were being bought by Brits off-plan. Most of them never even came to Bulgaria to see the apartment they were buying. The deals were being brokered by Bulgarian and British property consultants that handled all the paperwork and the new property owners would sign their preliminary contracts in London, Manchester or Cardiff.

Many Brits fell victim to fraud. "You cannot sell an apartment in Ravda with a view of the sea knowing that the 500 sq m between you and the sea were owned by someone else and would be built up within six months," Georgiev said.

Another case that drew even the attention of a British television crew, was in Bansko. "In front of the building, there was about 1000 sq m with a wonderful view of the ski lift and the mountains. The investor claimed that he owned the land and would leave it as a green space. In the time that passed between the signing of the preliminary contract and turning it over to the new owners, a building two storeys higher than the first property had already been developed there," Georgiev said.

Burst bubble
The global financial crisis put an end to British hopes for easy returns. Few are those that made a profit from the resale of a property in the past two years. Most have suffered heavy losses because the value of their properties has drastically decreased.

At the peak of the property bubble, apartments with a view of the sea reached up to 2500 euro a sq m and the average price of a village house with a yard was 30 000 euro. Now prices have more than halved. Apartments in Slunchev Bryag can be had for 400 euro a sq m and the average price of village houses is between 14 000 and 15 000 euro.

"There are many resales at half the price at which the properties were bought. Most Brits are not selling, but some have incurred such debts that they have no choice," said Polina Stoikova, operational director of Bulgarian Properties, one of the largest property consultancy firms working with British buyers, which has more than 10 000 deals with Britons.

According to Georgiev, Bulgaria never drew the middle and high-scale British investors. "This is part of the drama of the Bulgarian market. In the first years of the boom, we had many first-time buyers, who often could not afford a home in Britain but did in Bulgaria, because it only cost them a two-month salary. That is why as soon as the investment amounts went past 70 000 pounds, the interest died out," he said.

Proof of the changed trend is the decline in the number of intermediaries and property websites, Georgiev said. "The few agencies around are mostly being sought not by buyers, but worried owners who have found a problem with their property. There are some cases where owners that paid in full are yet to receive their property title," he said.

Empty apartments...
Empty apartments are everywhere. Most newly-built apartments in the developments near the Radomir golf course and in Bansko are unfurnished, which means that they are not being used, Capital has established.

In the recently-completed Four Seasons complex, the same one that was stormed six months ago by unhappy Brits who were denied access to their property by the developer, we found only one guard who said that the only Brit had left the previous day.

The guard said that the problem has been solved and the British owners were given access to their apartments. Except that there is still no road to the complex and to get there, the owners need to drive through the neighbouring meadow.

"They are being used two-three months a year. Maybe the Britons investing in Bulgaria are being misled by British and Bulgarian firms telling them 'buy an apartment, we will use it throughout the year and pay you 10-12 per cent rent', but it's not happening. I don't know why, but many apartments are not used the entire year," Bansko mayor Alexander Kravarov told Capital.

The mayor of Chepelare, whose demesne includes some of the developments around Pamporovo, said: "Maybe one third of the apartments are in use, the rest are not. Some [owners] might not even know where their apartments are."

It is no different at the seaside. One property developer, with more than 3000 sales to Britons in Slunchev Bryag, told Capital that about 60 to 70 per cent of the apartments in his developments were empty for most of the summer season. He asked not to be named because he was still working with British customers, but said that the blame for the dashed dreams was with the Britons themselves, who trusted property brokers.

"If a property yields enough to pay for the mortgage, trust me that no investor will sell that. If my properties could yield 10 per cent returns every year, I would not be selling them to the Brits. It's a basic truth," the developer said.

...accumulating debt
We checked how much renting out an apartment in Slunchev Bryag can yield. It turns out that in most cases, the amount rarely exceeds 2000 euro a year. If the complex is more luxurious and in a good location, the amount can reach 2500 to 3000 euro a year.

At the same time, these properties have fixed expenses. One of them is the fee for maintaining the grounds, including the swimming pools, green areas, security and other services without which the property would not be attractive to tourists. The fee is calculated based on the area of the property and is nine to 10 euro a sq m in Slunchev Bryag. Thus, the owner of a 100 sq m apartment in Slunchev Bryag has to pay, on average, about 1000 euro a year for grounds maintenance.

Separately, there is the property management fee, which varies between 300 and 400 euro a year. This fee requires the management company to seek rentals for the months when the apartment is not being used by the owner. Thus, the unavoidable expense of the property owner is about 1300 to 1400 euro a year, according to Petar Radev, the executive director of Property Management BG, one of the largest firms managing property owned by foreigners in the country.

According to Radev, the average yield of apartments owned by Britons in Slunchev Bryag is rarely higher than two per cent, which is partially caused by the shorter summer season, which now lasts 70 to 75 days. Higher yields are available only in developments that work throughout the year, but their number in resorts like Bansko is small.

"One of the big problems of first-time buyers is that they see the purchase as a one-off expense and rarely thought of the necessary annual maintenance costs. Right now, facing the prospect of spending money on maintenance and taxes, they prefer to sell. There is a large number of agencies at the seaside that work on the Russian market and try to sell the Britons' apartments at a distressed price," Georgiev said.

Another confirmation of the lost interest in property in Bulgaria is the news that about 600 Brits have not paid their local taxes for the apartments they own in Pamporovo. The amount is more than 600 000 leva and covers the period 2007/10. Chepelare town hall has said that it sent letters to the owners' British addresses, asking them to voluntarily pay the overdue taxes.

"For the first time ever, we have decided to send official letters, but we cannot even find the addresses of all the apartment owners. Usually we get calls asking for the number of the bank account where to pay, but insist that it should be a town hall account, rather than some intermediary's or someone else who has lied to them in the past," Chepelare mayor Georgi Popov said. "The people are willing, but they either don't have the information or are afraid [of fraud] to start paying their taxes as owners of those apartments."

Will the Britons return?
To answer this question, one must first establish what sent them packing from Bulgaria. The recession is one reason, but it is linked to the worries about the dramatic oversupply of apartments in many Bulgarian resorts and the media reports about inadequate infrastructure, according to Graham Norwood, a British property journalist, who has contributed to numerous British newspapers, including the Daily Telegraph and Sunday Telegraph, the Financial Times, the Daily Mail, The Independent, The Guardian and The Observer.

Fears about corruption and crime were a smaller concern than oversupply and inadequate infrastructure, he said.

Should Bulgarian authorities exercise strict control over future construction, allowing fewer developments in popular resorts and investing in more and better infrastructure, there was a chance that British interest in Bulgarian property would return, he said.

"Throughout the boom, the government was only interested in counting the inflow of foreign investment, without anyone being concerned whether this investment would prove successful and bring sustainable economic development," Homes in Bulgaria's Georgiev said. "What does it matter that Sofia is two hours away from London if you need eight more hours to reach your Bulgarian property, never mind the potholes and the lack of proper infrastructure in the newly-built developments."

According to Polina Stoikova of Bulgarian Properties, the negative image in British media did not help matters. "There were negative reports about Bulgaria by unhappy buyers and people who had been swindled. Since Britain has a more developed civil society, the people's voice is being heard. But it was definitely the financial crisis that caused the outflow," she said.

"If the economy begins recovering, which will happen sooner or later, I think that Britons will regain their interest in Bulgaria. Although there were many people disappointed, there were many who were happy with Bulgaria and Bulgarians, the food, the culture and the nature," she said. "Our experience thus far shows that small investors in property have a short memory and as soon as the crisis is over, they will become bold again."

Liquidation threat
Britons had to buy property in Bulgaria through companies because of the constitutional ban on foreigners owning Bulgarian land. This unnecessary ban could now cause a lot of headaches for the owners of such companies, because by law, all companies must re-register by the end of 2010. The companies that fail to do so will have to be declared in liquidation, which raises the question of what is to happen to the properties they own.

This affects all properties bought by a company in 2002/07. Mostly, these are country houses and involved the transfer of land. With apartments, what is being sold is the right to build and there is no interdiction on foreigners owning them, lawyers say.

"Many owners have no way of being informed about the change in legislation and might not find out that they need to re-register their companies. This will be yet another 'advert' for the Bulgarian market," according to Yulian Georgiev of Homes in Bulgaria.

The ban on foreigners owning land in Bulgaria remains despite Bulgaria's accession to the European Union and has to be lifted no later than 2014.