Property for sale in all regions of Bulgaria
Property for
sale in Bulgaria News
20 March 2006
Developers Queue To Buy Land In Bulgaria.
About 30 developers and property hunters line up on an empty white sand
beach, straining to hear the English translation of a speech from Krasimir
Todorov. Todorov, the mayor of Avren, is trying to sell 300,000 sq metres
of municipally owned land south of the Black Sea port of Varna. It includes
a thick strip of forest and hot mineral springs suitable for spa treatments,
and it borders the Kamchia River that is part of a protected environmental
area.
“This is one of the prime properties along this coast,” he says,
gesturing towards the sea. “We offer an excellent return for investors
but also a great place for a holiday home.”
His sales pitch seems to be working. The Moscow government has already invested
in this area of Bulgaria’s coast, with plans to build two five-star
hotels on a promontory enclosing the south side of the beach. And more buyers
– institutions and individuals from Russia, the UK, Ireland, Spain
and France – are circling, eager to get in on Europe’s latest
emerging market property boom.
Not surprisingly, the latest trend is a move toward more upscale development
– high-end villas and bigger apartments that will serve as long-term
second homes rather than rental properties. It helps that the country’s
government has backed new legislation aimed at protecting the Black Sea
coast; high-rise buildings will be banned and new zoning regulations required
a certain amount of green space to be preserved amid new construction. As
Bulgaria comes closer to European Union accession, financing a property
purchase has become easier, and airlines are ramping up flights to Sofia
and Varna.
“We believe the market is moving from a mainly investor-driven one
to a more balanced investor/lifestyle profile,” says Mark Schubert
of Lemon Tree Villas, a company that twice a month brings 30 to 50 potential
homebuyers to the country.
Sunny Beach is perhaps the best example of the Black Sea coast’s past.
Built in the Communist-era 1960s to attract sun-and-sand tourists, the resort
benefited from a wave of new investment in the first part of this decade,
with an estimated €500m funnelled into refurbishment and construction,
including a few new five-star hotels. Still, it has remained a mass-market
family destination, full of Soviet-style housing blocks made only slightly
prettier by their new paint.
Elsewhere, however, the quality of new development is rising. Bulgarian
Developments is currently marketing Oasis Kamchia, a low-rise holiday retreat
in a forest in the Avren region close to the beach that features a gymnasium,
tennis courts, swimming pools and café/bars. John Cain, from Chadderton,
near Manchester, recently bought a large two-bedroom apartment there. “I
was originally looking to buy in Spain, but the quality of the complex and
plans for the resort convinced me to buy in Bulgaria,” he says.
Bay View Villas, a resort under construction on a hillside five minutes’
drive from Sunny Beach, is another example. Brick with a cladding of local
stone is used instead of breeze blocks, along with high quality kitchen
and bathroom fixtures. Communal facilities include 1,000 sq metre pool complex;
a spa and fitness centre; a terrace restaurant; and two supermarkets. Golf
carts provide transport around the complex, and three motor-yachts will
be available for charter by residents. A family-sized, four-bedroom villa
costs up to €236,000. Peter Jennings of selling agent Lemon Tree Villas
predicts: “This kind of development is what will put Bulgaria on the
second-home map.”
He is equally proud of the less expensive Windows to Paradise, a group of
high-end apartments to be built on a cliffside site 10km from the historic
town of Balchik on the way to the Romanian border. It will adjoin one of
three three 18-hole golf courses designed by Ian Woosnam and Gary Player
being built in the region, and a marina will be built in a cove below the
site. A two-bedroom apartment in the first phase of construction, due for
completion in 2007, costs €80,000, and most have been sold off-plan.
Bargains in Bulgaria
Not so long ago, the very idea of taking a holiday in Bulgaria would have
seemed far-fetched. Buying a home there would have certainly meant you received
strange looks in the street.
Yet the former Eastern Bloc country has gained popularity to such an extent
that tourist numbers have soared and it is now seen as not only a good place
to invest in property, but somewhere to live. Property is cheap, the climate
is good and the beaches and mountains offer a spectacular backdrop.
Visitors are often shocked to discover that Bulgaria, once a favoured holiday
haven of people from the Soviet Union, has 137 miles of Black Sea beaches
and more than 130 peaks over 2,000m (6,560 ft) high. The country is an excellent
destination for those who enjoy skiing and hillwalking.
If there is a time to invest, it is now. Bulgaria is due to join the European
Union in 2007 and the slow pace of economic development will undoubtedly
begin to quicken. Currently, it is one of Europe’s poorest states
- Gross Domestic Product per head of population is less than a third of
the EU’s average - but the Bulgarian economy is growing faster than
just about anywhere else.
Slow development has meant low prices for those savvy to the charms of Bulgaria.
A three-course meal for two with wine can cost as little as £6 or
£7 and a pint of beer can be drunk for around 50p.
Mark Schubert, co-founder of one of Bulgaria’s top real estate brokers,
LemonTreeVillas.com, says: "What’s happening here is what happened
in Spain around 20 years ago.
"You can still buy beach front property for 20 (roughly £14)
a square metre on the Black Sea, but prices now also range up into the millions."
Schubert, whose firm sells around 100 houses to Britons a month, says small
houses about an hour from the sea can be had for under £15,000 - although
another £3,000 plus is often necessary to install indoor plumbing
and a kitchen. Alternatively there are new developments springing up where
a brand new fully fitted apartment in the upmarket Bansko ski resort can
be had for as little as £23,000.
Although the prices may seem modest, they are a boon for many Bulgarians
who - stranded in rural areas after a collapse of industry during the last
decade - are eager to move into cities to find work or live closer to their
families.
The Bulgarian embassy in London says it is flooded with dozens of calls
a day from Britons searching for information on how to buy property, and
the number of long-term visas it has issued has jumped 100 per cent over
the last year.
John and Lita Bailey, recently-retired teachers from Kent, came on holiday
to Bulgaria a year ago and bought two houses for a total of less than £10,000.
They were drawn by the sunny weather and the rugged charm of their village,
where indoor plumbing is rare and neighbours keep animals and grow most
of their own food. Like most newcomers, they have been astounded at how
friendly people are. "We’ve had dinner in a different house every
night this week," laughs John. "But, of course, a neighbour translates
for the time being."
So, What does the future hold for Bulgaria’s
real estate market?
The Bulgarian commercial property market has experienced dynamic development
in all sectors, with trends varying greatly in terms of growth cycle, performance,
investor interest, and geographic location. Modern quality supply has registered
robust growth, with most of the activity concentrated in the office and
retail sectors of the market. However, modern-standing investment stock
is still limited in supply, with the retail and industrial sectors of the
market offering the greatest investment potential.
Office market is most likely going to reach its stage of maturity in 2006,
as about 200 000 sq m of office space is in the pipeline, and another 100
000 sq m is at the project design phase. Yet, there are unexploited niches
with enormous market potential, where demand for the right product in the
right location is huge. Thus investment timing and location will continue
to be of major importance. With Bulgaria’s ranking at 15th position
among the top outsourcing destinations in A. T. Kearney’s index, the
country is expected to attract substantial level of investments in the services
sector, which will increase demand for quality office premises.
2005 and 2006 have appeared to be the long awaited turning point in the
retail property sector of the market. The first three malls that will provide
a combined modern retail space in excess of 100 000 sq m are awaiting completion,
and will put under pressure some of the prime high-street locations. These
are: Mall of Sofia that will offer 54 000 sq m of retail space; Sofia City
Centre Mall with about 31 000 sq m of retail space, and Sky City Mall with
16 000 sq m of retail space.
As 34 per cent of monetary household expenditure goes on foods and drinks,
the food retail sector is expected to continue to be the major sector, driving
retail growth. With hypermarkets/supermarkets facing constantly increasing
competition, the first discounters are to enter the Bulgarian market, probably
by the end of 2006. Some of the largest retail chains, operating in Bulgaria,
are: Metro Cash & Carry, REWE Holding (Billa - 18 stores till the end
of 2005 & Penny Market expected in 2006), Ramstore, VP Market, Praktiker,
Mr. Bricolage, Praktis, Technopolis, Technomarket, HIT and many others.
Some retailers that have shown interest in entering the Bulgarian market
in 2006 are: Lidl, Kaufland (already acquiring land in the largest cities)
and Mercator.
Indisputably, the logistics/warehousing sector is the sector, anticipating
its dynamic growth and development phase. The current level of modern stock
is obviously insufficient. Due to the lack of such products, prime rents
remained at their high last year level of five euro a sq m, with almost
no vacancy. Older stock however will continue to retain vacancy rates of
about 30-50 per cent. Approaching its EU accession, Bulgaria will have to
absorb a constantly increasing level of FDI, which factor will set high
requirements for the industrial property sector of the market. In the past
few years, demand has concentrated in several industrial zones in key parts
of the country like: Sofia, Plovdiv, Rousse, Stara Zagora and others. However,
unexploited opportunities for development still exist along the Pan-European
Transport corridors (mainly along corridor No 7 - The Danube River), and
near the major Black Sea port towns of Varna and Bourgas.
One of the largest development schemes under way is Sofia Airport Centre.
The proposed business park, with offices and a logistics centre, has a projected
built-up area in excess of 115 000 sq m, and will be constructed over the
next two years. It is located about 300 m away from the airport’s
new terminal, designed to accommodate up to 2.6 million passengers a year.
On the investment side of the market, yields have followed their logical
trend of compressing, reaching nine to 11 per cent in 2005, and expected
to compress further, in line with Bulgaria moving closer to EU accession.
However, they still offer significant premium to the yields in the other
European countries.
Suitable investment grade stock is limited in supply, with alternative investment
schemes (sale-leaseback scheme for example) gaining momentum. However, large
international developers and investment funds, both public and private,
have entered Bulgarian market, a major factor, expected to stir market activity
and development.
Development of the real estate market is of great importance to Bulgaria.
The construction industry in the country employs a significant number of
people, adds value to economy and thus contributes to the steady GDP increase.
On the other hand, the banking industry is more than ever involved in the
real estate sector by facilitating mortgage credits to individuals and companies
by offering more flexible conditions, lower interest rates and longer terms.
Last but not least, rapid real estate market development attracted huge
foreign investments in the country, both speculative and Greenfield, that
accelerated growth of the economy.
What are the main reasons for this?
1. The economic environment in the country improved significantly in past
five years - we have one of the lowest corporate rates in Europe, inflation
is lower, incomes are rising constantly, predictability has improved, economic
freedom increased and overall people’s expectations are positive.
2. Legislation has been passed that facilitated secondary mortgage market
and real-estate related investments - the law on mortgage bonds in 2000
(banks can find additional money for their credit activities), the law on
special purpose vehicles in 2003 (companies that can invest in real estate
and thus provide opportunity for small investors to put their money in big
investment projects), the improvement of the central credit registry within
the national bank and start of operation of the first private credit bureau
that would allow for greater transparency.
3. EU accession is anticipated as a reliable measure of an economy that
is heading to a more stable and secure business environment for investors.
The state’s role should be to guarantee private property rights and
contract enforcement. Unfortunately, we are witnessing some negative draft
laws and intentions in this field that could have contradictory results.
Such examples are the draft law on registering construction companies, the
draft act on the sea coast, the idea to tax all agricultural land in the
country, among others. If theses are to be implemented we can expect adverse
effects on the real estate market.
Transparency and security are very important for this market. The government
has received financing from the World Bank to create a property register
and cadastre. These are in the process of being set up, and delays are causing
problems and leading to a less liquid market. An obstacle to a more transparent
market is the practice of misreporting the transfer price in real estate
deals. There are two incentives to hide the true figures - due transfer
tax (two per cent) and the informal economy (all deals above 30 000 leva
should be reported to the Financial Intelligence Agency to check the origin
of the money and this may be a difficulty if you have misreported your income
to avoid high social security contributions, for example).
Housing market - after the most successful year (2004),
2005 was characterised by steady housing construction, higher prices, friendly
banks and willing customers. Although, price inflation was less aggressive,
we witnessed increased prices in several secondary markets in the country
(Stara Zagora, Pleven, Blagoevgrad, etc.) as a result of catching up with
business development. 2006 will be less profitable for construction entrepreneurs
(more time to sell finished apartments, need for more flexible payment schemes
in order to be competitive, higher quality demanded by customers). Lower
profit is a consequence of increases in the price of materials, lack of
qualified and experienced labour (it costs more in salaries to keep it)
and higher supply.
Vacation (apartment) buildings
- the boom in construction of such buildings was dominant in 2004 - 2005
with major destinations summer resorts (Sunny Beach, Golden Sands), as well
as winter destinations (Bansko, Pamporovo). Bad infrastructure, lack of
commitment and control from local municipalities is on the path to turn
these places into overbuilt cities where no decent return from investment
can be achieved. That is why, one should be careful when considering investing
money in this area. Anyway, other destinations inside the country are gathering
momentum and are likely to be very profitable and attractive.
Land - one of the major characteristics
of land market in Bulgaria is the current ban on foreigners acquiring land
in the country. However, this is not considered as an obstacle but a factor
that increases the transaction cost, the time to conclude a deal, and involves
intermediaries. In any case, this gives the opportunity to many poorer families
to sell their land at a higher price. It can hardly be said that there is
a dynamic land market in Bulgaria apart from in the big cities and resorts
where major construction activity is concentrated. Agricultural land is
still less attractive. Despite this, several specialised land investment
funds were created so we believe that this market is just starting its real
development. Still, land investment will require long-term commitment and
is less liquid.
Office market - starting to
be very dynamic in the capital and expected to be of greater attention for
investors. “Specialised” in such investments are special purpose
investment companies that accumulate funds from smaller investors, invest
them in big projects and manage the property for number of years. Since
demand for specialised, high-quality office buildings with additional services
is accelerating we can expect that many entrepreneurs will be attracted
in this segment. Since more and more companies are willing to build own
offices and then sell and lease back we can expect future development.
Industrial market - concentrated
in several areas in the country (Sofia, Plovdiv, Sevlievo, Bourgas) but
more cities are making efforts to attract big companies. Acceleration of
the decentralisation process in Bulgaria will give powers to local municipalities
to offer competitive business environments and stimulate new investments.
The process, however, is slower than desired. Land prices, the urbanisation
process and local authorities’ willingness to assist business are
seen as incentives for big foreign companies to invest.
Trade market - every time
an economy grows, trade properties are on the edge of investors’ interest.
With rising incomes, consumer confidence and purchasing power increase,
and this inevitably boosts spending. In 2005, construction of several big
trade centres started, with completion expected in 2006. These malls are
attracting huge investor interest and all units are fully pre-sold. The
cities of Sofia, Varna, and Stara Zagora attracted such projects.
Property as an investment
- price inflation of all types of property (except for land) turned real
estate investment to be very profitable. Bulgaria was among the few countries
in Europe that secured property investment return of above 10 per cent in
2005. The picture is changing slowly in a downward direction but is still
attractive for investors. Lower levels of European interest rates and good
practice (no major problems with foreign investors in the country so far)
attract less speculative investors as ordinary foreign citizens and companies.
The trend however is for steady flattening of Bulgaria’s property
returns with European levels in the next three to four years.
Sofia - capital property market
should be analysed separately from other locations since it differs in many
ways. First, housing demand is more dynamic and constant that is due to
in-country migration, higher incomes, headquarters’ location of almost
all international companies, good investment prospects, etc. That is why
housing prices rose permanently with changing of preferred districts in
time. Central locations are still of interest but high-quality residential
complexes with restricted access in the outskirts of the city are attracting
customers. They offer European quality of construction, additional services,
property management, security and comfort to its buyers. At the moment,
wealthy people are among the major customers but we witness change in customers
profile since middle-class buyers are supported by banks in such transactions.
Office buildings in Sofia are to become soon the most attractive type of
construction. EU accession and positive expectations of business facilitate
investment in real estate for their activities. Although rents lagged behind
in 2004 and 2005, we see increasing of their levels that should continue
in 2006 if no major political downturns happen. Construction of two malls
and lack of free trade space are no surprise.
As a summary we expect that real estate market will further develop with
less intensity in its housing and vacation apartments sectors, and future
focus in office and land segments.
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