Psychological comfort
Recently, a survey was conducted on one of the websites, during which respondents were asked to consider the question: "Why would you buy real estate in Bulgaria?" Among the answer options were: "I have a business in Bulgaria", "The country is an EU member. Convenient for traveling around Europe", "A profitable and not yet very expensive investment", etc. However, the undisputed leader was the answer: "I like the country: sun, sea, mountains..." This makes one think: have we entered a time when price is no longer the only main thing? However, we will return to prices later, but for now - about the country.
Bulgaria has many natural advantages over its competitors, primarily the hotter Mediterranean countries. The climate here is much milder: in summer the air temperature rarely rises above +28°C, while the sea water warms up to +25°C. Add to this the clean sea and almost ideal sandy bottom. In the winter season, the country's geographical location ensures stable snow cover for its ski resorts. And this past snowless winter, while many ski centers in France, Austria, and Switzerland could not open at all, Bulgarian Pamporovo and Borovets were operating at full capacity, and the management of Bansko, called "the most significant winter resort in Eastern Europe" by the authoritative German weekly Die Zeit, stated that it would receive a total of over 1 million tourists.
Moreover, in Bulgaria our people also feel psychologically comfortable. Of course, the time when the USSR considered this country its 16th republic has long passed, but also the later negative period accompanied by the popular "Russian, go home" at that time. Today, Russian is often taught again in Bulgarian schools.
Prices rising with profit
Until recently, the Bulgarian direction was one of the most economical for us. Then we had to abandon this definition and say goodbye to the dream of cheap Bulgaria. And the concept of "economical" was replaced by another, more comprehensive and, in essence, more correct - "profitable". Even despite the frantic buying up of any property by foreigners, the real crush arranged by investors, the crazy price growth (over the last five to six years in some regional centers they have risen by 150%, and in particularly popular ones by 300-350%), so, despite all this, Bulgaria has been and remains a profitable place for real estate investment.
Especially considering that price growth will most likely not stop now that the country is already in the EU. For example, as the BBC recently noted, British analysts believe that due to the need to bring norms and rules into compliance with EU rules and upcoming changes in Bulgarian legislation, land plots will rise in price by at least ten times. Therefore, it is time to acquire. Understanding this, some banks in the UK have even developed special lending programs for buying real estate in Bulgaria.
The final results for 2006 have not yet been summed up, but already published data allows us to speak of an 8-15% increase in the value of Bulgarian real estate last year. However, statistics are a tricky lady: 8-15%, as well as the 20% promised by analysts for 2007, is just an average "hospital temperature". In Sofia, for example, according to Colliers International, housing is not rising so noticeably. But in some lesser-known places that have suddenly begun to gain wild popularity as resorts or balneological centers, prices jump several times within a few months.
Be that as it may, the Bulgarian euro per square meter ratio does not shock anyone yet. And in a recently published study by the international company ERA Real Estate, it is even claimed that in terms of real estate prices, Sofia ranks last in the list of European capitals. For example, a two-bedroom apartment with an area of 85 sq. m. can be purchased here for only €78 thousand, while the average price in Berlin is €180 thousand, Lisbon - €185 thousand, Vienna - €231 thousand, Madrid - €357 thousand.
Community of different languages
As for the national composition of foreign investors, the tone in Bulgaria is set by the Irish and British, who have accumulated vast experience in investing in Spain, Portugal, the Czech Republic and Cyprus. A number of analysts believe that the British, for example, account for more than 60% of all foreign transactions in Bulgarian real estate. And if you believe a survey conducted by the MRI Overseas Property fund, after the accession of Bulgaria and Romania to the EU, about 13% of Britons are ready to buy housing in these countries, including for investment purposes.
According to some estimates, if in 2001 foreigners collectively invested about €14 million in Bulgarian real estate, then by the end of 2005 this figure had grown to €320 million. And regarding the past year of 2006, a number of experts cite a figure that looks completely unrealistic of €10 billion - total real estate investment, of which €2.5 billion is accounted for by foreign citizens. And this despite the fact that transactions are not always formalized based on the real value - everyone wants to save on taxes.
Foreigners brought not only "clean money" to Bulgaria. Thanks to their attention, the volume and quality of construction, as well as the level of services provided, have significantly increased in the country. Probably not all companies involved in real estate meet, so to speak, international standards, but the desire for civilized work is evident. The emergence of large residential complexes and cottage villages with their own infrastructure is also an achievement of recent "foreign" years. In previous times, the most prestigious house located within the city limits, the most fashionable villa located outside the city could well stand surrounded by very unremarkable dilapidated buildings from the socialist era. Now the 'villa zone' is an attribute familiar to Bulgaria.
Interest in old village houses located 10-15 km from the sea, in ecologically clean areas, and in land plots located outside traditional resort centers but suitable for hotel construction, and in still undeveloped mineral springs – these are just a small part of what the presence of foreigners means for the Bulgarian real estate market.
So lively on the shore…
The most sought-after locations on the Bulgarian real estate market remain the popular Black Sea cities of Burgas and Varna (and, accordingly, the resorts of Sunny Beach and Golden Sands). It is no coincidence that, according to the National Statistical Institute of Bulgaria, the highest prices per square meter are recorded in these two cities. This leadership is only challenged by the Bulgarian capital, where real estate has been and remains the most expensive. For reference: in the fall of 2006, the average price per square meter in Bulgaria was €520, while in Burgas it was €755, and in Varna €820.
It should be understood that the above price is calculated taking into account the cost of real estate in resort complexes. Of course, one can (as is usually done) talk about the gradual merging of Varna and Golden Sands, or Burgas and Sunny Beach. Yet, the Golden Sands apartments built with all modern requirements and the old apartments in the center of Varna with its overly dense development, lack of central heating, and parking difficulties cost differently: €1,400-2,000 for the former, and €400-600 for the latter, which probably average out to those €820-850 per square meter. But only on average.
The only thing better than mountains is mountains
The second most popular direction of the Bulgarian real estate market is housing at ski resorts. In terms of the number of guests, the winter resorts of Pamporovo, Borovets, and especially Bansko are in no way inferior to the summer resorts of Sunny Beach, Golden Sands, and Albena. Today, the privatized and already half-reconstructed Pamporovo, the investment-starved Borovets, and the Eastern European ski Mecca Bansko attract a huge number of foreign investors.
By the way, a component of the modernization program of this resort is the implementation of construction projects in the neighboring town of Razlog. In the future, these places should turn into one prestigious resort zone of Razlog-Bansko with its own SPA centers and golf course. The construction of new residential properties is essentially a structural direction of Bansko's development: last year, the volume of housing supply in the mountainous regions of Bulgaria almost doubled, and the lion's share falls precisely on Bansko. Accordingly, prices in Bansko have come close to the European average: €1,200-1,400 per square meter for apartments that are part of a modern apartment complex.
To the village, to the wilderness
In our country, ecological tourism is not yet so popular, but Western Europeans, exhausted by civilization, have fully appreciated its charm. Therefore, the British, Irish, Scandinavians, and Germans are actively buying houses and land plots in Bulgarian villages. If for us, 10-15 km from the sea is a 'disaster!', for residents of Western Europe it is no problem at all. By the way, a similar picture can be observed in Spain, Portugal, and practically all 'resort' countries.
There turned out to be many lovers of silence, clean air, and a healthy lifestyle, so recently rural areas (especially in the Central Balkan region, the Rhodopes, etc.) have begun to develop very rapidly. Real estate prices here are of course rising, but not as actively. Moreover, this growth started from a very 'low base' – villagers still remember times when a sotka (100 sq meters) of land could be bought for €5 or €10. So it will be a long time before Bulgarian villages reach Sofia or Burgas levels.
Investments in health
Until recently, investments in the development of the resort industry – at the sea or in the mountains – were considered the most attractive from all points of view. However, now a real investment boom is observed in Bulgaria in the field of balneology.
In terms of the concentration of mineral springs, Bulgaria occupies one of the first places in Europe (their exact number is somewhere between 500 and 2,000), but currently no more than 30% are used, while the rest patiently await new owners. Moreover, there are not only many springs in Bulgaria, but they are also scattered literally throughout the country, so an investor can choose a combination of SPA center – sea/ski resort, or SPA center – excursion/congress tourism, or some other.
As the Chairman of the National Association of Balneology and Tourism of Bulgaria, Tsveti Milanova, noted in an interview, 'attracting foreign investors is the main task of the Association, for which a special department has even been created. Its specialists are ready to provide the most complete information on the composition of the mineral water of a particular source and the state of its surrounding infrastructure, and even help in preparing the necessary set of documents.'
The pioneering investors in the field of balneology were the same British and Irish, with the Germans hot on their heels. The French and Israelis are beginning to play a noticeable role.
Offices: in short supply and high in price
Another direction worth mentioning is the development of the commercial real estate sector. Despite the fact that shopping and entertainment complexes and office centers are being built everywhere, the main point of attraction remains Sofia, which is called the center of the Balkans, and which currently occupies the first line in the classification 'The most profitable investment in offices in Europe.' The need for commercial and industrial real estate in the Bulgarian capital is very high, demand still far exceeds supply, and the return on investment is estimated very high – 13-15%.
Investors should also consider analysts' opinion: the most noticeable effect of Bulgaria's accession to the EU will be in the office real estate sector. While on average the market expects, as noted, a 20% price increase, prices per square meter of office space could jump by 30-40% or more. The world's largest investment and construction companies, including non-European ones, have already assessed this potential.
Awaiting investors
Absolutely all specialists, one way or another related to the investment market and real estate market of Bulgaria, believe that the most promising is interregional cooperation and, accordingly, investments in regional projects.
The construction of tourist facilities in Blagoevgrad and Gotse Delchev, residential and SPA complexes in the Smolyan region, the Perelik sports center in the Rhodopes, a mud therapy center on Lake Tuzla, a mountain sports center in Berkovitsa, a comprehensive recreation center and yacht centers in the Pernik region, a children's camp in Sushitsa – are just a small part of the projects that Bulgarians are ready to offer to foreign investors. According to Bulgarian Minister of Economy and Energy Rumen Ovcharov, the country aims to bring the level of foreign investment to 25% of GDP. This is facilitated, in particular, by the law "On Stimulating Investments", under which the state is even ready to provide land plots for certain projects without an auction.
How it will end
After Bulgaria's official entry into the EU, today one can not so much see significant changes as hear numerous forecasts. Most believe that there will be no sharp price jump in any market segment; that interest in investments in land, the purchase of houses in closed-type cottage settlements and quality real estate will increase steadily, as will the flow of foreign direct investment; that the growth in construction rates (according to the Bulgarian Construction Chamber - 13% until 2010) and mortgage lending volumes will generally have a beneficial effect on Bulgaria's investment climate. Others warily observed the peculiar stupor that the Real Estate sector fell into before the start of 2007.
Actually, this situation is well known to us: in anticipation of a price jump, some developers "froze" sales, others suddenly began to put properties at significantly higher prices than before. The market became slightly destabilized, and this destabilization was fueled by rising prices for building materials. As a result, some even began to talk about a crisis, but his voice was drowned out by a unanimous chorus: "In the Baltics, after joining the EU, prices did not fall but continued to rise. And they will continue to rise here!"
Real Estate Digest