Analysis of the Real Estate Market in Varna in 2008. Trends for 2009.

For a second year in a row Varna won the Best City to Live in Bulgaria award. After Sofia Varna is the town with the highest property prices and in some sectors it can even be said that it leaves Sofia in second place.

What was the market in 2008 like:

1. Turning the English clients from buyers into sellers. In the first quarter of 2008 the trend from 2007 was kept as there was high demand for holiday homes on the part of foreign buyers. At the end of the spring season we witnessed a withdrawal of the UK buyers from the market. What was interesting is the fact that even before the crisis hit the UK and the rest of Europe it was the Brits who first started to re-sell the properties in Bulgaria which they had bought in the period 2002-2005.

So in the summer of 2008 attractive property offers appeared on the market – with top locations, which were sold at prices lower than their market price. These properties were bought by Bulgarian buyers due to the simplified bank lending procedures. Meanwhile, the British buyers managed to receive a profit of between 50-80% compared to the prices they had paid in the period 2002-2005.

2. Increase of the percent of Russian-speaking buyers. In 2008 the share of buyers from the Russian markets increased significantly and of those from Russia in particular. The main motive for purchasing a property was the buyers’ wish to own a second home in Bulgaria and smaller part of the buyers bought real estate for investment purposes.

The purchasing of a real estate allowed Russian buyers to apply for a multiple-entry visa which additionally increased Bulgaria’s attractiveness. All Russian clients of BULGARIAN PROPERTIES’ Varna Office had similar requirements to the properties they sought: the location had to be either in the top center or first-line but not farther than the Golden Sands resort. The requirements to the units were for them to be with a size of no less than 120 sq.m., with bigger bathrooms/lavatories. The buildings had to be finished or before receiving Certificate of Habitation, with excellent infrastructure and quality of the finishing works. On the other hand the supply was not adequate enough as in the last few years the construction was consistent with the requirements of the British buyers – small apartments (studio type) with hotel-type furnishing.

3. Disappearance of the Baltic-countries buyers. The clients from the Baltic countries which were some of the most active buyers in the period 2006-2007 sharply decreased. This trend started as early as 2007 after their economies fell into recession and the banks ceased lending resources. In 2008 a lot of these buyers had a few properties in Bulgaria which they had bought for investment purposes and which now they unsuccessfully tried to re-sell in order to get rid of their liabilities to the bank.

4. Increase of the share of Bulgarian buyers. In 2008 there was an increase in Bulgarian buyers who were assisted by the facilitated lending procedures. The demand was directed towards properties with good characteristics: new construction, central location, etc.

5. Increase in property prices. From January until the middle of the year the prices of real estate increased both in Varna and the surrounding areas. In comparison to 2007 the price of a front-line apartment in Golden Sands resort was 1,750 EUR/sq.m. while in 2008 it was already 2,400 EUR/sq.m. The prices in Briz residential quarter were 800 EUR/sq.m. in 2007 compared to 1,500 EUR/sq.m. in 2008; in the top center area the prices were 1,300 EUR/sq.m. in 2007 while in 2008 they reached up to 3,000 EUR/sq.m., as there were some deals concluded at 4,000 EUR/sq.m. in Varna’s Sea Garden area. However, this growth ended at the end of the year as some of the developers adopted a policy of price-decrease or of Christmas and New-Year promotions.

2009 trends:
1. The share of Russian buyers will be kept but their requirements regarding the properties’ parameters will increase.
2. Bulgarian buyers will decrease due to the more complicated lending procedure.
3. The prices of properties in the outskirts of the city, in the old buildings and in the Soviet-type blocks will decrease.
4. Properties in the top center of Varna will retain their prices.
5. The share of rents compared to sales will increase. This is connected to the increasing interest rates under bank loans and to the uncertain economic situation.
6. Decrease of the number of properties sold off-plan, due to uncertain financing on the part of the developers and to the finishing of the projects.
7. Very few new developments will be started. Stagnation of the construction of new residential properties.
8. Increase in demand for finished apartments.
9. Increase in the share of foreigners who have purchased properties in Bulgaria and who now want to re-sell them.

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