Mihail Chobanov: I Hope the Holiday Property Market Storm Will Bypass Us

dnevnik.bg

It looks like the unprecedented boom on the holiday property market is slowing down noticeably after in the last year the buyers thinned out. The conclusions for the real estate industry and for the tourism sector will be commented by the participants during the second day of the Balkan Real Estate Conference BalREC on April 16th at the Kempinski Hotel Zografski in Sofia. One of them is Mihail Chobanov, co-founder and CEO of BulgarianProperties – the leading real estate agency in Bulgaria specialized in servicing foreign buyers. Mr. Chobanov is also a partner in the company LUXIMOTI – an agency selling luxury real estates in Bulgaria and abroad, as well as in the company PropertyManagementBG – the first and currently the leading property management and maintenance company in Bulgaria. Lawyer by education Mihail Chobanov is also a developer, an investor and a project manager.


The holiday home market in Bulgaria has slowed down after a few years of unprecedented boom – both the demand and the supply. What will the main results of this cooldown be?

- After 3 extremely successful and dynamic years at the beginning of 2007 we witnessed a calming and weaker interest on the holiday property market in Bulgaria. The resorts offer many new developments for sale and in 2008 it is obvious that the supply exceeds considerably the demand.

The withdrawal of the main holiday home buyer group – the British and Irish started in the beginning of 2007 and this trend has intensified in the last few months. This is a direct result from the financial and mortgage crisis in the US and the UK. Now the buyers from these countries feel more insecure when investing in real estate because they are not sure what their future income will be.

The reason for the smaller number of property deals in 2007 is also a purely psychological factor – Bulgaria’s accession to the EU. The majority of the buyers aimed at acquiring real estates before Bulgaria joined the EU when the prices were lower so that they could resell them at a higher price after the accession. Today most of these expectations proved right as the prices of real estate went up but their cost is still quite acceptable. Moreover, we are also witnessing a price increase of about 25% in the big cities around the country – in Sofia, Varna and Bourgas where there is considerable demand from Bulgarians as well.

Another reason for the weaker interest is the speculative price increase in the last couple of years. The buyers from Britain and Ireland traditionally look for properties with more reasonable prices but with potential for their increase so that they can make good profit when reselling.

The low quality and the too big a promises are another main reason.

But an interesting trend that started in 2007 is the increased interest in properties in Bulgarian ski resorts from buyers from Russia and Greece.

The local buyers from the big cities around Bulgaria are also becoming more active on the real estate market in 2007 as they look for holiday homes in the ski resorts. I hope that in the next two years the withdrawal of the British and Irish buyers will be compensated by the increasing interest from clients from other nationalities including many Bulgarians.

An advantage I can point out to the future buyers is the considerable balancing of the prices. I would advise the clients, when choosing a property, to choose those that have property management, guaranteed renting, modern amenities and attractive location. And, of course, an acceptable price. Another positive thing is that the quality of the construction and the materials is improving with every passing year.

In contrast to the ski resorts, in 2007 the interest in the seaside resorts was higher or at least the same as that in 2006 when the real estate market was at a standstill. This is due mainly to the increased interest from buyers from Russia, Poland, Romania and the Baltic countries, as well as from Bulgarians. The property supply in these areas started with very reasonable prices and this attracted new buyers.

Which are the most positive and most negative scenarios in the near future? Which do you thing is the more realistic one?

- We are the EU member country with the lowest prices and our capital is the only EU capital which is also a ski resort. Therefore I hope the interest towards Bulgaria will remain the same and even increase in its capacity of the most attractive and at the same time secure investment destination.

But in view of the great internal indebtedness in the branch and the lack of an actually functioning economy combined with the international crisis and the reaction of the Bulgarian banks there is a possibility of a serious collapse.

I personally hope that we will fly low for a while and the storm will pass by us…


Besides Bulgaria and the Adriatic region do you see any possibility for development of the holiday home markets in other countries in the region, Romania and Serbia in particular?

- Romania and Serbia do not have our natural resources to be our direct competitor in the holiday property sector. Croatia and Montenegro developed in quite a different (and right) direction and are in another price range. They are going their own way which we must try and follow.

From now on what will the direction of the development of the Balkan holiday property market be?

- I can describe the right future short and clear: quality, amenities, infrastructure and property management. If all this is achieved the market will stabilize itself.

Does the real estate industry have the capacity to meet the demand of services related to the property – from its maintenance to its renting out?

- What I have already mentioned is one of the main and inseparable factors to the business. I am glad that in the years after we set up our company PropertyManagementBG Ltd. other companies emerged as well which have their finger on the pulse of this matter and the investors, mainly on national level, became aware of the necessity of these concomitant services. There is still insufficiency of both staff and legal base for this type of activity but based on the do-it-yourself principle this business is developing and is overcoming the significant lagging behind compared to the great construction volume.


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