IN 2009 WHAT TO EXPECT IN BULGARIAN REAL ESTATE MARKET?
The year 2008 was a gloomy period for the global real estate market. From the United States the credit crunch spread all the way to Europe: In the Baltic states, property prices dropped by some 20 percent, the number of bad credits in the UK jumped by 47 percent compared with 2007, and in Spain the holiday homes market collapsed. Luckily, Bulgaria turned out to be among the few countries that were – so far, that is – spared the impact of the global economic downturn. While markets around the world are still shattering, Bulgaria is closing the year with an overall property price growth of some 20 percent. But what’s to come? What can investors and developers expect in 2009? The residential property market brought profit margins of between 25 to 30 percent to those who bought an apartment in a large city in 2007 and sold it a year later. Experts see a similar growth also in 2009, with Sofia ,Varna, Plovdiv and Burgas still being the places to invest in if you are risk – averse. These cities are Bulgaria’s major economic centers and are expanding rapidly; building space there is scarce and demand for residential properties exceeds supply. Every year tens to thousands of people are moving to live, work or study in a major city, and they all need a place to live.
To be sure, some properties are better investments than others. If until recently price was the main factor that underlay buyer’s choices, quality has now emerged as a decision – making factor. A large number of surveys have shown that potential buyers prefer living in smaller apartments but of good quality and in a good location. In 2009 this tendency is expected to intensify the segmentation of the residential market. Prices of properties in city centers or in prestigious districts are expected to rise by some 20 percent and more, while those of properties in less attractive areas are not expected to pick up by more than 10 percent. Developing gated communities has turned into a popular trend, and although you may be asked an up to 30 percent higher price compared with that of regular properties, this investment is bound to pay off.
Business properties - offices, trade, logistics and industrial buildings – will remain a safe investment option. Some experts have been warning that shopping malls, the new hit on the trade market, are in danger of oversupply. To some extent this is true for Sofia and Varna, which have been steadily heading towards their saturation points, but in all major cities there is an acute need of malls. In most cities, malls have doubled in value over the last 18 months.
Investors should pay special attention to logistics and industrial properties. Needed as they are, these two sub segments remain under developed. Experts had forecast a huge industrial and logistics building boom for 2008, but high land prices eventually prevented investors from taking full advantage of the opportunities this market offers. It is now expected that developers will solve this problem by avoiding customary industrial spots such as city suburbs and areas along highways, where land has become very expensive.
This is how Bulgaria may end up with a network of less than perfect but fairly cheap logistics and industrial premises. In larger cities, 2009 is seen to be the year of office buildings – in Sofia alone more than 1.5 million sq.m of office space is scheduled to come on the market. Now is the time for developers to pay attention to smaller cities with vibrant economics, such as Stara Zagora and Veliko Tyrnovo.
Land will remain the safest bet, and a profitable one. Regardless of its purpose – agricultural or building – cheap land is increasingly hard to find in Bulgaria. In 2009, an overall price jump of 20 percent is expected.
So, in a situation of unstable world economy climate, no news is good news. The year 2009 will hardly bring any surprises to investors and developers, and the trends from 2008 will continue. It seems hat the Bulgarian property market has finally found its level.
