Investors in overseas properties should always be wary of developers’ hype and this has become very apparent in Bulgaria which has seen much publicity as the next property hotspot.
There has been specific focus on the Bulgarian coastal holiday home market. As a result, there is virtually no secondary market, developments have been hyped and sold by agents on high commissions and price rises and anticipated rental yields are, for the most part, unrealisable. According to mortgage lender Creditex, the advertised 20% rate of return for property along the coast is not realistic and the actual rates did not exceed 5%.
More than 100 three and multi-bedroom apartments in Slanchev Bryag (Sunny Beach), Elenite and Dyuni Black Sea summer resorts have remained unsold for months, real estate website imoti.net reports. This is seen as a clear sign of stagnation in the market for big apartments in the leading resorts on the Bulgarian southern Black Sea coast.
Dinko Slavov, sales manger of Bulgarian Properties, said that stagnation existed but it was affecting areas in resorts far from the coastline as well. A study by Creditex shows that the negative trend was not limited to seaside resorts but also affected big cities in the country.
The level of return on real estate investments in Bulgaria has halved since 2002 and in the case of housing units in Sofia’s Mladost neighbourhood, the rate has dropped to 4.11% from 9% said Creditex. The decline is being seen in all parts of Sofia.
Website Property Secrets is advising buyers to stay well clear of the Bulgarian coast as an investment opportunity, warning that it has been over-hyped and over-supplied and offers poor resale and rental opportunities,’
Property Secrets believes the real opportunity in Bulgaria lies, as it does in other markets in central and Eastern Europe, in the cities, and in particular Sofia – though investors might have to wait some time to see profits.
The firm argues that demand for property in the cities is driven by three factors – the emerging middle classes who provide the demand for modern apartments, plus increasing affluence, coupled with the supply of capital in the form of mortgage lending.
’Various forecasts have been made about the rate of increase of Sofia’s population from the conservative to those that predict its population will double within 10 years. All we can be very confident of is that Sofia’s population will grow rapidly and fairly dramatically as a result of inward migration. Sofia’s salary levels represent more than two and a half times the country’s average – plenty of incentive then to go to the capital and find a job,’ says Property Secrets.
Unemployment in the capital has dropped significantly from 15% in 1993 to 2% currently and Sofia has a huge 27% of its population within the household formation age range (20 to 34). Sofia also has the second largest household size in the CEE at 2.5 people per household. This is also a clear indicator of future, or current, pent-up demand for housing.
Property Secrets has launched its ‘Bulgaria Property Market Profile’ which is the latest in their range of country profiles, providing an in-depth analysis on property markets and investment hot spots in Europe. The Bulgaria Property Market Profile has been produced in addition to existing country profiles in Albania, Czech Republic, Poland, Romania and Ukraine, with more to follow shortly such as Cyprus, Croatia, Latvia and Malaysia.
Bulgaria Property Market Profile will be available to download for £17.99 or free for Property Secrets members. Property Secrets membership costs £7.99 per month. Visit www.propertysecrets.net.