In year 2003, real estate prices average growth rate reached 12 % for the entire real estate market in Bulgaria. The author anticipates that the trend will slow down and will keep a moderate, but systematic pace of increase until year 2007, the tentative year scheduled for Bulgaria to join the European Union.

Local property market is experiencing an impressive revival and looks more lucrative than ever since the introduction of free market economy in the early 90s. Several factors contribute to this phenomenon:

• Mortgage lending potential - currently, mortgage loans are 5% of the total credit supply within the local banking sector. In developed credit markets, this rate is usually in the range of 15 - 20%.
  

• Increased foreign direct and indirect investment in Bulgarian real estate

- Bulgaria's expected EU membership perspective;

- Expanding tourist industry;

• Stable macroeconomic indicators:

- GDP annual growth of 4.5 % to 5%;

- Dropping unemployment rate: from over 16 % to under 13 % for the last 12 months;

- Improved credit rating – BBB-.

• Attractive Return on Investment rates in the real estate sector – on average 15 to 18 percent.

  This review does not intent to be exhaustive and complete for the entire real estate market of Bulgaria. Rather, we shall focus on facts and trends of the real estate market in the capital of Bulgaria - City of Sofia and the area of the Black Sea Coast - vastly booming urban centers and tourist destinations with relatively more sophisticated market, which attract foreign opportunity investors in recent years.

  Sofia Real Estate Market

  1. Residential

  Residential properties supply is on the rise but still cannot meet the demand. During the last year, the demand for residential real estate, especially apartments in all Sofia regions, has significantly risen due to improved and competitive mortgage lending by the banking sector - 80% annual increase as compared to 2002. In 2003 Sofia was characterized with dynamic local economic development, marked with almost 3,6% unemployment rate. There were more offers of high quality recent developments or renovated apartments providing contemporary design and excellent finishing works. The average sales price depending on location and type of construction was in the range between EUR 300/sq.m.* and EUR 600/sq.m.
  
  

  *1 EUR = 1.32 USD
  1 sq.m = 10.76 sq.feet

  For more comparative prices, see the following FIABCI chart.

  Rents for furnished apartments in Downtown and Southeast region were between EUR 5/sq.m./month and up to EUR 10/sq.m./month for the most spacious and exclusively equipped. High quality individual houses for rent are located mainly in Sofia outskirts, beyond the Beltway, at the foot of Vitosha Mountain. Foreign business community, diplomatic missions and expatriates were actively seeking in these areas for unfurnished or furnished houses with nice gardens and professional landscaping. Rental prices for such type of properties depending on location, size of property, quality of finishing works, type of furniture, were between EUR 1500 and EUR 5500 per month.

  During the last year the market segment of luxury estates has not changed significantly. Exclusive residential properties were offered at average price of EUR 650/sq.m. Sales price of high quality apartments and townhouses in Sofia Downtown could go up to EUR 1000/sq.m.

  2.Offices

  The office space supply was higher in the last two years. Market demand for office space was relatively flat. As a result, vacancy rates in some office centers reached 25-30%. There was a secondary office space market generated by adapted apartments in condominiums with rents of EUR 3/sq.m./month to EUR 6/sq.m./month. Lease prices for office space in new business centers in Sofia were between EUR 7/sq.m./month and EUR 24/sq.m./month. Average sales price of offices was about EUR 600-700/sq.m., prime "A" class office spaces could reach a price of EUR 1500/sq.m.

  3. Retail

  Demand for retail space was steady. It was concentrated mostly in Sofia Downtown. Rental prices varied from EUR 25/sq.m./month to EUR 120/sq.m./month depending on location, type of business activity, size of premises, window display and quality of finishing works. Sales prices of retail real estate with good to excellent location were in the range between EUR 500/sq.m. and EUR 2600/sq.m. Average sales price in Sofia Downtown was EUR1300/sq.m.

  For more information, see the following article: Retail Real Estate Rentals in Sofia, Bulgaria Near These in Athens, Greece and Istanbul, Turkey

  Bulgaria Black Sea Coast
  
  

  The market of Black Sea coastal real estate in Bulgaria has grown significantly since the beginning of year 2003. Sales prices of brand new income residential properties have increased almost twice in some areas compared to year 2002. Seafront real estate was on average 30% more expensive than water view locations. Bulgaria is still a popular holiday destination for lower income tourists, which is the main reason for higher demand for smaller and cheaper real estate. Yields for cheaper real estate (EUR 20 000 to EUR 50 000) was greater than these of with price tag EUR 100 000 and up.(Chart 2 and 3).

  Local market of residential properties in big cities along Black Sea coast has grown notably. During the last year demand was higher than supply, due on one hand to the increased supply of mortgage loans and on the other to consistent migration of workforce from inside the country to sea resorts and big coastal urban centers like Varna and Bourgas where more jobs are available. In 2003 the unemployment rate for the city of Varna was 5% in accordance with the NSI of Bulgaria . As a result, the price hike of residential property was almost 24% in Varna .
  
  

  Plots of land were also attractive for investment purposes. In 2003 their prices had increased more than 30% on average compared to year 2002. Some beachfront parcels for development of leisure properties had reached EUR 35/sq.m. compared to similar properties sold at USD 15/sq.m. in 2002. In certain areas close to leading resorts like Golden Sands, Sunny Beach and others, prices had increased more than twice for the previous year and varied between EUR 35-55/ sq.m

  
  I would like to emphasize that this review is just a snapshot of certain exciting market segments directed to individual and corporate opportunity investors in Bulgarian real estate.
  

  Deyan Kavrakov , CIPS , CLHMS, CRE

  CEO
  ADIS Ltd.

  All Rights Reserved. No parts of this article can be published without the written consent of the author.