Capital Newspaper for Varna: The Northern Island - the Wave of New Construction

Especially for the addition of Capital Weekly for Varna, we collected comments and analysis on the local property market. See what The Regional Manager of our office in Varna Kalin Chernev, BULGARIAN PROPERTIES‘ Executive Director Polina Stoykova, as well as representatives of other reputable agencies shared about the trends in the city.

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Suburban areas that were previously preferred for a holiday home now attract interest for year-round habitation.

By number of transactions and volume of new construction, Varna is timidly ranking after Sofia and Plovdiv in the new property boom.

The largest Black Sea town is not left out of the general trend of revival that has covered the real estate market in the country. Here too, property prices and investment activity are rising. Unlike Sofia, where the recovery in the sector is almost red hot in the last year, the situation in Varna is far more balanced. Especially compared to the years before the crisis.

The statistics even show that Burgas, which has lagged far behind the sea capital, has been competing strongly in the recent years with it in terms of new construction and sales of residential properties. According to the latest National Statistics Institute (NSI) data in the first quarter of the year in Varna, roughly the same number of building permits were issued compared to those in Burgas and both cities compete for the third place in the country on this indicator.

What is more interesting is that the number of the issued visas for new construction, compared to the previous quarter or the same period a year earlier, remains unchanged in Varna, unlike in Sofia, Plovdiv and Burgas. This shows that, although dynamic, the construction sector in the city remains relatively stable at least in the beginning of the year. In terms of the number of dwellings put into operation, however, Varna is a national leader among the regions in the country. The data from the Registry Agency shows that the registered sales and sale deals in the city increased by 11% in the first months of the year, compared to the January-March 2017 period. "It seems that the tendencies from Sofia and Plovdiv are being transported to Varna with some delays, where we will experience a real upturn in 2018, " commented Polina Stoykova, CEO of Bulgarian Properties.

Among the factors that drive the market ahead are the still low interest rates on mortgages and the rising incomes of the population (from 2016 to 2017, the average annual salary in the city grew by about 10%, NSI data). " Affordable loans continue to activate customers who have been postponing for a long time, and the rising incomes give them confidence that they will be able to repay their long-term loans,” said Lyuba Atanasova, Executive Director of Imoteka Agency.
For each budget

Even though with a trend for rising, current prices in the sea capital remain far below pre-crisis levels. The real estates website Imot.bg data shows that average prices in ten of the most popular neighborhoods were over 900 Euro per sq.m. in 2008, while now they are still far from this threshold. "The appreciation of the properties in Varna is moderate, following the price movement in the bigger cities in the country. By improving the balance between supply and demand, prices will become even more sustainable, " said Delyan Dimitrov, regional manager of "Imoteka" Varna.

Naturally, in some parts of the city, such as the center, where there is no opportunity for new construction, and supply is generally severely restricted, prices have held high levels for years. "What’s interesting in the sea capital is that there is a very wide variety of residential projects - from the lowest to the highest class, and the prices, respectively, vary from 650 Euro per sq.m. for new construction to Sofia levels of over 1000 Euro per sq.m., " said Bulgarian Properties. Mass demand, however, moves in the lower limits - usually flats of about 80 sq.m. and price of about 650 Euro per sq.m. according to local brokers.

Hotspots

There is no district where there are no deals, says Kalin Chernev of Bulgarian Properties, but on the other hand, in the last few months there have been a number of districts in the city that have enjoyed greater interest from the buyers. According to Dimitrinka Kostadincheva, Regional Manager of Address Agency - Varna, these are the neighborhoods Mladost, Levski and the new Briz area. According to agency data in these neighborhoods, 80% of the apartments are sold within three months of the announcement of the property for sale.

The most dynamic in terms of construction are currently the districts "Troshevo", "Mladost" and "Vazrazhdane". In the last two, prices are more affordable, but for a year there is an increase of about 8%, said Kalin Chernev. They are more popular among buyers due to the proximity to the central area and at the same time to the sea, and the other reason is that there is still room for construction of new buildings. And if in “Mladost” and “Levski” one can find properties at an average price of 750 Euro per sq.m., in the center, "Briz" and "Chaika" the average prices are over 830 Euro per sq.m., and according to realtors there are "very courageously" selling properties for over 1000 Euro per sq.m.

A curious trend is that areas previously considered for holiday homes are beginning to be transformed into such for a year-round habitation. "This is the area that connects Varna with Golden Sands", gives an example Dimitrinka Kostadincheva. "There are many new gated residential complexes, there are many deals where the Russians do not buy but sell properties that were bought years ago as holiday homes," she says. After an improvement of the main boulevards, the distance from Golden Sands to the center of Varna is 10 minutes, which attracts more people to live there all year round. According to Kalin Chernev, this area gives the opportunity to buyers who want something slightly different from the urban environment - greenery, more spaciousness, sea view, yet close to the big city. That's why the properties there require a slightly larger budget.

See who buys

Brokers in the city agree that most of the buyers are younger people who come to study or work in Varna and initially rent a home and then decide to make an investment in their own property. The inquiries come mainly from Dobrich, Targovishte, Razgrad, Byala and other settlements in Northwestern Bulgaria. "Small homes are sought after by older people because they want to be close to their children who have already settled in Varna," said Kalin Chernev. And while traditionally the most sought-after properties are the 1-bedroom flats, according to him, the 2-bedroom apartments have become more and more popular lately.

The new construction is definitely in the focus of the buyers, brokers say. "If I have to rank them, the most preferred are the newly built finished residences, then the ones under construction. There is also interest in old construction, mostly from clients searching for property in the center or in the neighborhoods, but have a modest budget, "says Kostadincheva.
"About 60% of the deals are mortgage loans," she added, adding that in the rest of the deals purchasers usually use consumer credit and exceed their planned budget in advance to buy a home without the need to secure the loaa n with mortgage.

The market in the city part is dominated by Bulgarians. Foreigners from different nationalities (not only Russians or British citizens, as they were years ago) are increasingly interested in properties mainly in smaller settlements in the area of Varna such as Byala, Kavarna, 0bzor, Kranevo. Foreign students are also a factor, but only in the rental market.

Rental market

In a city that offers summer tourism opportunities, before the start of the summer season, the rental market "is stirring up", as the realtors say. However, if we exclude holiday interest, the long-term rental of apartments in the city has a certain character. Dimitrinka Kostadincheva from Address distinguishes tenants in the city into three main groups - young Bulgarians who start their higher education or work in Varna, foreign students, and people in management positions who are relocated in the city. "Young people usually rent 1-bedroom apartments, which cost around 400 BGN per month. The 2-bedroom apartments vary around 500-550 BGN, and the 3-bedroom apartments are already over 550-600 BGN, " commented Kostadincheva.

Depending on the type of construction and location, rents vary, but the yield is roughly the same throughout the city. Kalin Chernev estimates that the return on investment for rental is about 5%. "A 2-bedroom apartment in Mladost district, which costs 50,000 Euro, can be rented for 450-500 BGN. In the center, however, this apartment will cost 100,000 Euro and the rent will be about 850-900 BGN." However, purchases for investment are little - just over 10% of the deals and the rest are for own use, according to data from Address.

What is being built

And if the buyers in Varna are on the wave of new construction, the builders also offer a good choice of projects and locations. One of the large and interesting projects currently under construction and more than half of the houses there are already sold or reserved is Varna City Park South (37 000 sq.m. total area). This is the second residential project of the investor Interservice Uzunov, who also manages Mall Varna. The residential complex, located on Vladislav Varnenchik Blvd, opposite the Varna Towers business center, offers a view of Lake Varna, spacious green areas and water supply with mineral water. The residential buildings have a heating and water supply system that uses a geothermal option near the city, a project with no analogue not only in Varna but also in Bulgaria according to the website of the project. The prices in the complex are in the range of 690 - 850 Euro per sq.m., but the household expenses are more economical because of the mineral water.

In the same price range (650-800 Euro per sq.m.) apartments in another new complex - "Labyrinth" are also offered. Situated in the broad center of the city, on Acad. Andrei Sakharov blvd., it consists of six 9-story buildings located in a park environment. The plot on which the complex is built is 12,000 sq.m., of which the buildings occupy about 2500 sq.m. In "Briz" quarter the Coral Residence complex - an investment of "Planex" is being built. It is situated on an area of 4227 sq.m. and consists of 2 low-rise buildings.

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