Sofia - A capital investment idea

Easier Property News, 5th September 2006

Cities, particularly those in soon-to-be EU member states, are rapidly emerging as the safest bets. As multinational companies look for cost-effective locations for headquarters or major distribution outlets, central and eastern European cities often bag the business and are inundated with workers after temporary or semi-permanent accommodation. So much so that often demand outstrips supply.

Take the Bulgarian capital city, Sofia as an example. With a current population of 1.4 million, the city is the administrative, cultural and industrial centre of the country. Since the fall of communism in 1989, major international companies not previously present in Bulgaria have flocked to the capital city having a direct effect on the property market, particularly the corporate rental market. Recent entrants include Microsoft, Deutsche Bank, Google and Hewlett Packard. Throw 16 universities within the city boundaries into the equation and it’s painfully obvious that quality, high-grade residential accommodation is an absolute necessity for Sofia.

The Wall Street Journal reported in June 2005 that the prices of real estate in Bulgaria jumped 48% in 2004, a world record and the highest rise in prices registered in any country. Yet incredibly, property prices in Sofia still come in a lot less than other Central European countries. The International Herald Tribune stated in March 2006 that residential prices in Sofia still average only 600 euros per m², that is much less than the 750 euro average per m² in Bratislava, Slovakia; 850 euros in Bucharest, Romania; and 1,500 euros in Prague.

Bulgaria’s president, Georgi Parvanov, achieved NATO membership in 2004 and accession to the EU is penciled in for early 2007. The latter has triggered several improvements in infrastructure. The EU Structural and Cohesion Fund has allocated almost six billion euros to Bulgaria, this funding aims to reduce development gaps across the EU. Bulgaria also has dedicated two billion euros to highways, 720km will be added over the next ten years and the new runway at Sofia Airport is due to open in September 2006, at a cost of 110 million euros.



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