08.08.2008 BULGARIAN PROPERTIES: Despite Lower Demand, Prices of Quality Holiday Properties in Bulgaria Remain Stable
BULGARIAN PROPERTIES Head Office
Generally speaking, the main elements that influence the demand and supply and consequently the prices of holiday homes are the buyers (who up to now are mainly foreigners), the developers, the investors, the real estate agencies and the sellers of the already built apartments. On a macro level we have to take into consideration the economic and mortgage crunch which influences greatly the Western economies, the development of the Bulgarian tourist industry and the overall publicity of our country abroad (which is more negative than not).
Regretfully, the combination of the abovementioned macro factors led to a reflux of the main group of foreign buyers of holiday property in Bulgaria – the British and the Irish. Currently they are concerned about the increase in the interest rates on their loans and the rising prices of fuel, foods, etc. which makes them less solvent. On the one hand, this led to a decrease in the demand in the seaside resorts and on the other a great number of the owners of holiday homes in Bulgaria, facing the impossibility to cope with the current economic situation, are looking for fast sale of their properties abroad (some of them even sustain loss) in order to use the resources for other purposes, which on its part leads to an increase in the supply of holiday properties. Most frequently the financial difficulties the foreign buyers experience become the main reason for selling their holiday properties and not that these properties are a bad investment. Asking prices vary quite a lot depending on the time frame in which the sellers want to conclude the deal, as well as on the quality of the property and its features.
Moreover, the reflux of foreign buyers of real estate is further stimulated by the negative reports of Bulgaria in the Western press, the lack of tourism development strategy and the threat a great part of these holiday homes to remain tenantless due to the greater number of beds in the resorts than tourists.
Meanwhile, there is big supply on the part of developers and investors of unfinished and even of finished but unsold apartments in the resorts. Pressed by the increasing interest rates in Bulgaria, as well as by the frequent impossibility to take a loan and repay it the developers and the investors are also looking to strike a deal at lower prices. This is mostly valid for projects that haven't been designed with a clear vision about the target market and the buyers preferences and needs.
To put it in a nutshell, we have an increased supply of holiday property – on the part of developers and on the secondary market which is already developing, but at the same time we are witnessing a decrease in the demand of this type of property. This will logically lead to a change in the prices. This is a normal market trend and it is not surprising or illogical. It will lead to the dropping out from the market of the non-professional developers who offer projects of poor quality and have poor reputation as the ones left will be the quality and carefully premeditated projects offered by the professional building companies. They will have to analyze the market in more detail, to define their target group, to think of the correct marketing strategies, to be partners with professional real estate agencies and not to count on financing their projects from off-plan sales.
It is difficult to provide statistics of the selling prices compared to the buying prices but we can say that a great part of the sensible holiday home buyers manage to make a profit. However, it is misleading that the investment in properties regardless of the type and location promises great profits – everyone that has counted on that remains more or less disappointed because there is no such asset that guarantees big profits and even if there is one it is only a temporary phenomenon that can be used only by well-informed investors who can sell at the right moment. After that moment the market readjusts itself and the possibilities for speculative profits decrease considerably.
Currently, the prices of resale apartments vary greatly. The properties in the villages around the seaside resorts are sold at about 500-900 Euro/sq.m. as the general trend is about 800 Euro/sq.m. The prices of finished apartments in the resort of Sunny Beach vary between 1,000 and 2,000 Euro/sq.m. depending on the location, the quality of the construction, the extras offered and the presence of a management company. We are talking mainly about apartments in the resort itself and not in the newly-formed areas around the resort that are far from the sea and close to the main road. The same can be said about the resort of Sveti Vlas where the prices of a first-line property can go as high as 2,500 Euro/sq.m. The prices of finished apartments in the Golden Sands resort are slightly higher than those in Sunny Beach – between 1,200 and 2,500 Euro/sq.m.
The smaller seaside resorts like Kranevo, Byala and Kavarna along the northern Black Sea coast and Kiten and Ahtopol along the southern offer prices between 600 and 1,000 Euro/sq.m. An exception are the more developed resort towns like Ravda, Balchik, Sozopol and Chernomorets where prices rise to 1,200 – 1,400 Euro/sq.m. A very good example of a developing holiday home market is the village of Lozenets on the southern Black Sea coast where prices are rising and currently they are between 1,000 and 1,300 Euro/sq.m. for finished apartments. Essentially, there is no difference between the prices of finished apartments and of the projects that are being constructed at the moment.
In the years we, BULGARIAN PROPERTIES, managed to sense the upcoming trend of holiday home oversupply and imposed strict rules of selection and offering of holiday property – with specific locations, quality of the construction, additional extras, furnishing, management of the properties and their renting out and we can say that we are not witnessing a great increase in the number of our clients wishing to resale their holiday properties. However, there is greater interest in reselling in general as we receive holiday home resale offers on a daily basis by sellers that have purchased their properties from other real estate agencies or from developers.
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