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The Elite Property Segment Will Be the First to Recover

2009-10-27   |  BULGARIAN PROPERTIES

The luxury property segment followed the general market trend towards a drastic decrease in the number of concluded deals. Meanwhile, the prices of elite properties remained relatively stable as the decrease didn’t exceed 20% compared to the 30-40% decrease in the prices of properties in the general segment. The decrease in the prices in the luxury holiday property segment is slightly higher while in the so-called unique property segment the prices remain stable but there are almost no deals.

According to Nikola Stoyanov - the Managing Director of the luxury property brand of BULGARIAN PROPERTIES - LUXIMOTI the reason for the lower number of deals is not the price. “Clients do not buy because of the stress and anxiety that have come to dominate their everyday life. In other words, even if prices fall by 20-30% this will not make the market more dynamic and increase considerably the number of deals”.

Another reason for the slow market and stability of the prices of elite properties is the fact that owners of such properties are more inclined to wait and not sell at a lower price and they can afford that because they are not so pressed for money. The truly unique properties in Bulgaria are not that many, i.e. there is no big competition which is another reason for the relatively stable prices in the segment. In other words, deals are rare and prices haven’t changed much compared to 2008. All unique property sellers know that now is not the best time to sell due to which a big part of the offers were withdrawn from the market and others were never advertised at all. This phenomenon limits the choice of elite properties and it can be said that until the market calms down and balances itself the best offers will not be put up for sale.

The rental market in the segment

There is a clear trend towards a shift from selling to renting out as there is stable demand for luxurious properties for rent. This is another reason for rental prices to remain stable and the market cannot be flooded with a large number of offers for sale. Buyers are reluctant to buy but they still need to rent quality properties. That is why this shift towards the rental market led to a slight increase in rental prices of elite properties another reason for that being that the supply is not as big as in the lower class property segment.

Most sought-after elite properties

The demand for luxurious properties in 2009 is focused mainly on properties in Sofia – houses and apartments. Traditionally, the southern quarters are more preferred as they are also considered to be more elite. Buyers are interested in properties in gated developments which are fully finished and offer specific amenities and extras. The good news about new apartments/developments is that there is a wide choice and properties of high quality stand out. Prices vary according to the property’s specific features which are more diverse compared to lower class properties. The average prices of the offered luxurious properties are between 1,000 and 1,600 Euro/sq.m. as most deals are concluded at prices between 1,000 and 1,300 Euro/sq.m.

The central area of the city is also considered to be one of the top locations in Sofia and there are a number of luxuriously finished properties to be found there. However, most of these properties are set in old buildings which need serious renovation works and the feature defining them as elite is their location. Prices of such properties are about 2,000 Euro/sq.m. but deals are concluded at an average of 1,300 Euro/sq.m.

The other destination attracting buyers of luxurious properties is the Black Sea city of Varna. The demand there is considerably lower compared to Sofia but Varna has a well defined segment of elite and quality properties.

Buyers’ profile

The buyers of elite properties are mainly people with ready cash looking to buy a better, bigger, more unique property compared to the property they could buy for the same amount a year ago when prices were higher. Most of the buyers in this segment have not been affected by the crisis and have the necessary resources to invest in an elite property. These buyers are very pragmatic and sensible in their choice and are very exacting regarding the property’s parameters. In this segment there are no speculative buyers.

Forecast for the segment till the end of the year

We from LUXIMOTI expect that by the end of 2009 there will be a slight increase in the number of sales which will be mainly due to the positive news coming from the USA and Western Europe regarding the coming out of the economic crisis. Moreover, investors are calming down and even capital markets are witnessing an upswing for a second month in a row. Therefore, we expect prices of luxury properties to remain stable. If the market remains calm In the next few months we could even witness an increase in the prices of the most luxurious and unique properties by up to 10%.

As a result of the calming down of the market and the news of economic stability, we expect the anxiety on the real estate market to fade away and the buyers and sellers to return. There are indicators showing that banks already have enough resources and once again start giving mortgage loans. A new balance is needed on the market and currently everything is moving in that direction. Sooner or later the supply and demand will meet and deals will once again be concluded. We expect the elite property segment to recover first due to the high quality of the properties and the eternal values they offer – location, quality, and prestige. The market in Sofia will be the first to recover followed by that in Varna and the other big cities around the country. There definitely is demand for quality homes and office areas and we believe that the number of deals will increase considerably at the beginning of the summer of 2010.

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