20.03.2007 Property prices in Bulgaria: The only way is up
Nikola Stoyanov, BulgarianProperties
Part 1 – Residential market
After 3 years of constant price increases, the property market in Bulgaria continues to grow dramatically. Since Bulgaria’s EU accession on 1 Jan 2007, certain areas of the country have indicated new property price records and a serious increase in demand. The trend in property prices in the whole country is up, but it varies from region to region. The capital city Sofia has the biggest demand for property, closely followed by Varna - the biggest city on the Black Sea Coast. We have to mention also a few other bigger cities and regional centers in the country like the cities of Veliko Tarnovo and Bourgas. This demand in Bulgaria’s biggest cities is being driven mostly by local buyers. There are a number of reasons for these markets to continue their upward trends such as:
• Strong local demand
• Availability and ease in obtaining mortgages and personal finances
• Demand for luxury residential properties for long-term rent both by local tenants and increased number of foreigners coming to work in Bulgaria
• Highest capital growth and profit from re-sales of properties purchased 2-3 years ago
• Highest return from rentals due to all-year round occupancy
• Sofia still remains the European capital with the lowest property prices
• Strong potential for future property growth
• Limited availability of plots for development, especially in the central parts and the prestigious residential areas
Other good opportunities to consider are the smaller beach resorts at the Southern Black Sea coast like Lozenets and Tsarevo which have great potential both as holiday destinations and as investment opportunities, but still remain undiscovered by the majority of the foreign property invetors. These areas indicate much lower property prices than the popular international resorts like Sunny Beach and Golden Sands, but it is now time to buy in the smaller resorts on the Southern coast, as the first signs for future growth have appeared. These underestimated areas are offering great natural conditions, wide sandy beaches, longer and warmer summer days, easy access to the international airport and increased number of holiday makers during the last couple of years. Don’t forget that these places are not over-built like most of the popular beach resorts which additionally adds value to any property purchased there.
The ski resorts: Bansko’s property prices are stable at the moment and no serious increase has been indicated during the last few months. There is a good variety of offers in this resort and buyers will benefit from great standards of the proposed developments and complexes for sale. This is the best developed market out of all the ski resorts in the country and it seems that the competition between the local developers is now working for the benefit of the buyer. Recently news for the approved construction of a second Gondola lift in Bansko to match the increased number of skiers in Bulgaria’s best ski resort was announced. Apart from the first golf course in the region (Pirin Golf, some 8 km from Bansko), there are plans for another golf course just 2 km from the resort and probably two more courses south of the nearby town of Razlog. We have many reasons to believe that over the next 5 years, the area of Bansko will turn into the best all year-round mountain destination in Bulgaria, mostly due to its strategic location and great resort and leisure infrastructure currently under construction. There is no other mountain area in the country offering so much to holiday makers.
Borovets is a good place to buy, mostly because this ski resort remains the one with a very short supply of luxury, new-built properties and has very few developments under construction at the moment. The reason for this is the lack of development land for sale there and the high number of protected territories where construction is not allowed. This is the reason that property prices in Borovets are higher than Bansko and Pamporovo. Due to some internal obstacles, the Super Borovets Project has still not been launched, but without any doubt, after it does start, the prices will grow even more.
Probably the most interesting news lately comes from Pamporovo. This ski resort in the Rhodope Mountains has serious indications for future growth with demand by smaller or bigger investors. Mostly due to the fact that the local project for development of a new and bigger skiing area and resort (the project is called Perelik) is fast approaching. The contract for the development of the new skiing area and resort was signed last week, which grants a green light for the project. There are number of interesting development projects in Pamporovo at the moment with more high quality ones in the pipe-line.
How is the rural property market going?
We have always recommended to our property buyers to diversify their investments by purchasing one or more properties in the beautiful Bulgarian countryside. These properties feature great value for the price and they are selling for between 3,000 to 40,000 Euros. In practice, every re-sale in the future accumulates good profit. All our buyers who have re-sold their rural properties so far have generated profit and managed to sell their rural houses bought 2-3 years ago at 40 to 70 % higher prices. The prices continue to grow, although with lower rate than the capital and city properties.
We at BulgarianProperties are indicating increased interest and more rural properties sold during the last 3 months. We can find the reasons mostly in the lower prices and great value, high potential for capital growth and of course the beautiful nature of the Bulgarian villages.
As a general conclusion: The positive trend in the property price throughout the whole country continues. The potential for growth over the next 2 years is still very big until the market reaches a certain maturity. There are a number of reasons why we believe that the positive trend will continue (please see below), but it is obvious for everybody that Bulgaria still remains one of the European countries with lowest property prices and greatest value.
Various factors will continue to power up the market which will result in higher price levels:
• Bulgaria’s EU accession
• Lower prices than all countries in the region. To catch up during the next 2 years
• Increased demand by local property buyers
• Accessibility and ease of obtaining mortgages and various finance by Bulgarian banks
• Decreasing interest rate levels of mortgages in the country
• Constantly increasing standard of living and higher incomes of the working population, especially in the capital and bigger cities and regional centers
• Improved business climate in the country attracting more foreign investments, more businesses opening and more working opportunities available for the population
• More international companies entering the country needing luxury properties to live in and rent
• Increasing prices of development land resulting in higher production costs for the new developments
• Increasing cost of labour leading to increased production costs for new developments
• Greater demand for property in certain areas leading to purely speculative price increase
• Last but not least: Strong purchasing power of more than 2.5 million Bulgarian nationals living and working abroad, mostly in Western Europe, UK and USA. Many of them are seriously considering buying properties in their home land.
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