2006 IN REVIEW: Bulgaria's property market: Bless this house

Framed by the window of my seventh-floor attic studio, just on the outer limit of today’s 10-meter visibility, is the silhouette of a lone construction worker devouring a cigarette atop the roof of an almost-ready new apartment building that has risen on what was an empty plot four months ago when I moved in. So even the fog cannot obscure the rapid, abundant and dense construction that has marked, and some would say scarred, Bulgaria’s urban landscapes in 2006.

You name it, we are building it. Sofia’s first three malls opened in 2006, and a flurry of shopping center construction activity followed suit. In its October 2006 issue, PropertyWise quoted analysts saying that with a population of 1.5 million, Sofia could absorb four or five big malls. If that is true, the capital city will reach a point of saturation very soon, when Bulgaria Mall opens in the next few months.

So either analysts got it wrong, or investors are going overboard, because there are plans for 10 additional malls to open in Sofia alone by 2010.

Neither off-the-mark projections, nor over-development are foreign to the property market.

For the past three years, the supply of property and real estate prices mirrored each other in their upward move. But in 2006, their paths diverged somewhat. National Statistic Institute data suggests that for the first time in years, Bulgarians did not witness a double-digit price hike in residential prices. The slowing growth is not that much a reflection of current market dynamics, as a result of the boomerang effect of all the hype surrounding Bulgaria’s accession to the European Union. The assumption that prices would inevitably skyrocket once Bulgaria becomes an EU member fed the speculative market to such an extent that it became a self-fulfilling prophesy. In many market sectors prices reached Europeans levels (especially if you consider the price/quality ratio) before local buyers got EU passports.

And, speaking of over-development, the elephant in the lounge did make it to the front page this year, with the dense and random construction on the Black Sea coast entering public discourse. Parliament introduced a bill regulating coastal construction. The bill prohibits construction on the beach and sand dunes, as well as in protected areas. The construction density within 100m of the coast could be no higher than 20 per cent. Seventy per cent of the construction area must be designated for greenery and buildings should not exceeding 7.5m. If it comes into effect, the law would not apply to existing developments as well as to those who already have construction permits.

Caveats and loopholes aside, the sheer consideration of lawmakers to regulate coastal construction is no small victory for environmental NGOs whose voice came through stronger than ever in 2006. Da Spasim Irakli, a civic movement to stop development of the pristine coastal region, stirred much controversy and attracted unprecedented publicity for the cause. (The quality and safety of construction also moved to the top of the agenda, at least temporarily, after an old building undergoing remodelling collapsed and killed two young women.)

Partially in response to the somewhat fading allure of Black Sea development as we know it, investors turned their attention to another 2006 newcomer to the market – the golf course. By the end of 2006, there were more than 10 golf course projects in various stages of construction. Investments amount to 700 million leva, according to government data. The largest share of these funds will go to the development of golf courses on the Black Sea coast.

The golf complexes being built at the seaside are next to or within the 20 km zone where old village houses and plots sold rapidly in the past four or five years. Investors bought houses in this area at the price of 10 000 euro because they believed that after the coastline is built up, the interest would shift to them. All the national property agencies such claim that there has been no demand for properties of this type for longer than a year.

The successful completion of the golf-complex projects in this area might revive the market in properties there, and bring returns to investors who bought properties with the intention of resale.

Golf courses are one thing that mountain and sea have in common in Bulgaria. It seems they are not only coming to the rescue of coastal investment but also aiding ski resorts. After asserting itself as a leader among other favourites, such as Pamporovo and Borovets, Bansko is now poised to re-envision itself as a year-round resort. Investors in the golf course between Bansko and Razlog are planning to reconstruct the military airport there so that small civilian aircraft can use it.

One of the most significant changes for The Sofia Echo’s foreign-born readers was the change to the Ownership Act approved on December 8. EU member state citizens can now own property in Bulgaria, provided that they reside in the country.

This overview may sound more like a word of caution than one of encouragement, but what may seem like negative developments could very well be a blessing in disguise. As we prepare to bid farewell to unheard of profitability, we may welcome a more nuanced property market, moving toward greater architectural merit, higher construction quality, improved services. This parting sentence is both a prediction and a prayer, as the fog surrounding the market’s future, just like the one outside, is just beginning to lift.



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