Luxury Properties in Bulgaria Still in Demand
Enterprise Magazine, August 2011
It is as if during the crisis, at least in Bulgaria, luxury properties were out of the scope of experts and analyzers and were somewhat forgotten.
In fact, there have always been and there will always be prestige properties. And it is exactly they that survived and turned out to be resistant to economic and financial cataclysms. Of course, the sector underwent some changes, the criteria are now different, but they remained a defining segment on the market.
Experts agree that the luxury property market is coming out of the crisis. It has been more dynamic since the last quarter of 2010. And if in 2009-2010 there were almost no deals in that segment today sales of luxury properties are increasing.
What has changed?
In order for a property in Bulgaria to be considered luxury firstly we have to take into consideration local conditions, because for example we cannot put under a common denominator both in terms of quality and price elite properties in Sofia and London. And local “details” include bad infrastructure, not yet well organized public transport, overdevelopment in some quarters, constant repair works and a not very satisfactory environment.
What makes a property luxurious is its location, price, quality of construction, area, and layout, explains Polina Stoykova, Chief Operations Manager of luxury property agency LUXIMOTI. According to her the buyer asks about these things first. What is also important is the parking space, the maintenance of the property, the neighbors, the environment, the access and the infrastructure. In most cases gated developments tick all the boxes and that is why most of them can be defined as luxury, says Ms Stoykova.
At the moment deals with elite properties are concluded mainly in the capital Sofia and the areas around it. There is also some interest in the area of the Sea Garden in Varna and near the city but it is somewhat limited and focused mainly on second homes. Real estate agents comment that sellers in the Black Sea region count mainly on Russian buyers.
As for the capital buyers prefer most the top central part of the city – the streets of Moskovska, Oborishte, Shipka and Veliko Tarnovo and the area of the Doktorska Gradina (Doctors’ Garden). These are the streets with the highest property prices and greatest demand both for apartments and houses.
Boyana and Dragalevtsi are also sought after areas and now areas outside Sofia are also in demand – like the very green Bistritsa and Zheleznitsa. There are also a few gated developments like in the Kambanite area and in the quarter of Iztok.
What remains is the question how long residential capitals in Sofia with good infrastructure and easy access will remain outside the scope of the luxury properties. “It is difficult to convince a client to pay a lot of money for a property in the northern or western quarters of Sofia no matter how high a quality it is, how big and expensively furnished it is. The stereotype can’t change so fast”, says Polina Stoykova.
”I guess this may change but it will take years. The city planning has to change. For example, Pirotska street is also in the very center of Sofia but properties there are not that expensive. People don’t see it as a luxury location. Look what is happening in London, for example. People are leaving the center and are buying outside it. This can also happen in Bulgaria but only if there are good transport links and easy access. These are mass scale projects and I don’t know if they can happen in the near future…”
What is in demand
Today there is big supply of properties at prices that are more attractive compared to a year ago, explains Polina Stoykova. According to her now one can buy a luxury property at a much lower price than a year ago. There is no shortage of exclusive property offers. “We are also witnessing the construction of new beautiful high-quality buildings. Small boutique buildings with few apartments and attention to details”.
When the client is looking for luxury they look for an apartment or a house with a big yard (at least 1,000 sq.m.) which are finished. At the moment there are no off-plan deals because the buyer wants to see what they are buying.
Who is buying
Most of the clients are Bulgarian, real estate agents state. The potential buyers are managers of Bulgarian and foreign companies, as well as Bulgarians living abroad.
As a whole the client has become more demanding and knows exactly what they want to buy. If before a deal was concluded after 5-6 viewing trips now this happens after 13-17 viewings.
According to Ms Stoykova you cannot fool the client. “Before it was as if luxury wasn’t much different from the apartments in Soviet-type blocks, people didn’t make much of a distinction. This has now changed and people come with a clear idea of what they are looking for. Nowadays you can’t just take the client to something that is not luxury and present it to them as such. The more important question now is whether there is high-quality life in Sofia”.
However, the attractive price and the wide choice of luxury properties gradually widen the profile of the potential clients as well, real estate agents comment. A while ago only a few could afford to buy a luxury property, now more and more people from the middle class are thinking of such an investment.
As we already mentioned the location is the most important feature defining the demand. And if in quarters like Lozenets the overdevelopment and the not so good infrastructure reduced prices to 750-1,000 EUR/sq.m. in areas like Doktorska Gradina prices remain stable and deals are concluded at prices of 2,500 EUR/sq.m. – the same as before the crisis. This will always be the case as there can’t be any overdevelopment there, the properties are unique and have proven their high quality. Deals there are concluded fast, even for properties in dire need of renovation work, experts explain.
Rich Bulgarians avoid new construction and prefer to buy an aristocratic home. This is due to the fact that these buildings are of high quality and have withstood the test of time – they have high ceilings, spacious rooms, thick walls and good insulation, and big common areas.
With new buildings the main problem is the bad layout, the unrealistic area and the lack of space. Nowadays the client wants a big terrace but it must be a bonus to the apartment and not cost the same as a square meter of the property.
90% of the clients of luxurious properties do not use bank financing, real estate agents agree.
“Most of our clients pay with ready cash. Either they have the money or have sold a property and are now looking for a bigger one – either as a lifestyle choice or due to need”, says Polina Stoykova. Her observations show that if they must take out a mortgage loan anyway the banks are more willing to finance them because of the higher cost price of the property and the higher income of the buyers”.
According to experts the stricter policy of the financial institutions has had a sobering effect on buyers. Most mortgage loans are for the lower price segment.
LUXIMOTI comment the following: “Our forecasts for the property market were that the number of sales will increase which at the end of the year and in the beginning of the next one will lead to a slight increase in prices”. And rightly so, in the beginning of the year we witnessed a more dynamic market which at present is at a standstill. The recovery is very slow, the sovereign debt crisis in EU countries is deepening and economies are coming out of the crisis very slowly. The year started very optimistically but now the market is slowing down. Still, we can say that the activity on the luxury property segment has remained stable in the last 2 years and we don’t expect any shocks.
This general picture of uncertainty is not valid only for Bulgaria. As early as February and March there were signals about a decrease in property prices in the UK, the first in the last 8 months. The situation in the USA is similar. It is difficult to forecast anything because the situation is very dynamic and the pace of coming out of the crisis cannot be foreseen with certainty.
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