Eastern Europe Property

The trend of the past four years of a steady increase in prices of holiday property at the Black Sea coast has started to drop off.

Prices in the past three to four years initially increased by to 20 to 30 per cent and even 50 per cent in a year, but this had not been the case in 2007, investor.bg reported.

The average price of bachelor flats and two-bedroom summer apartments in Sunny Beach dropped by four per cent between July 2006 and July 2007, according to a survey commissioned by investor.bg.

A trend of falling holiday property prices has been evident in other southern Black Sea resorts in Bulgaria, including Ahtopol where prices of bachelor flats went down by five per cent and that of three-bedroom apartments by eight per cent. Other resorts where prices decreased were Primorsko and St Vlas.

Investors have focused their interest on smaller inland villages and towns. Prices of some properties in Lozenets, Chernomorets and Golden Sands have gone up by more than 20 per cent.

Investors in holiday property would benefit from selling rather than renting out, specialists said.

A large number of Bulgarian seaside hotels could face bankruptcy already this year, the head of Bulgaria’s Tourism Agency Anelia Krushkova said.

Low prices have made Bulgaria an attractive destination in the past decade, with German, Russian and Scandinavian tourists being the most numerous.

But the rising number of tourists sparked a construction boom all over Bulgaria’s Black Sea coast, to the extent that supply now far outweighs demand.

Although Bulgarian hotel owners have lowered prices for foreign tourists, they are still to do so for local residents and could fail to attract enough revenue to pay off the bank loans used to build most hotels, Krushkova forecast.

The ongoing construction, which goes on even during the tourist season, has turned away some foreigners, the agency’s data shows.

After years of solid growth, the number of foreign tourists has fallen by 0,37% in the first five months of the year, compared to January-May 2006.

Even so, revenue from foreign tourists grew by 16% compared to the same period of last year, reaching EUR 532 M.

But the cramped conditions and the interminable construction is driving away even Bulgarian tourists, who spent EUR 497 M in the first five months of the year on vacations abroad.

Bulgaria’s wilderness areas, among the largest in Europe, are threatened by property investors who use legal loopholes to contest the territories’ protected status to build holiday flats.

Last week, Bulgaria’s Supreme Administrative Court stripped the protected status from the country’s largest nature area, Strandzha, which spreads over 116,100 hectares (286,890 acres) in the southeast of the country.

The court ruled in favour of a major property investor, Krash 2000, which operates in the southern Black Sea region, one of the few areas untouched by the construction boom along the coastline.

Krash 2000 had sold some 90 holiday apartments in its “Golden Pearl” complex in the village of Varvara before local environment authorities froze construction last year.

A 1995 law regulating Strandzha’s special status bans massive construction in the area, but Krash 2000 succeeded in having the law nullified in court by claiming it did not set clear boundaries for the protected territory.

Last year, another wild spot on the Black Sea — the Kamchia river estuary north of Strandzha — was similarly stripped of its protected status by a holiday resort investor.

Environmental watchdogs have warned that over half of Bulgaria’s protected wilderness areas are susceptible to the same claim as their boundaries are only vaguely defined by law.

“The court gave Strandzha to the mafia,” political analyst Evgeniy Daynov said in Dnevnik newspaper Thursday.

Daynov was among some 500 protestors who demonstrated in Sofia last week to protest the court’s decision.

The protestors gathered suddenly, briefly blocking traffic on major crossroads and staging a lie-in in a central square, booing police and carrying banners reading “For a concrete-free Strandzha” and “Strandzha is not for sale.”

On Monday, 35 demonstrators were arrested. Interior Minister Rumen Petkov said he would be “uncompromising” in dealing with such unauthorized gatherings.

But the protests seem to have worked as Environment Minister Dzhevdet Chakarov told journalists Thursday that the government would definitely appeal the Strandzha court ruling and fight to win back the nature area’s protected status.

“The government is categorical on its position — we will appeal the court ruling and do whatever it takes to save the Strandzha territory in its current boundaries,” Chakarov said.

If the court decision is confirmed on appeal, the government is also ready to decree a moratorium on construction in the area, Chakarov said.

He said his ministry would review the legislation and fix all existing loopholes to prevent threats to other so-called wilderness areas.

“Strandzha falls within the Natura 2000 European network of protected areas for both bird and habitat protection, so wilderness area or not, it will be protected,” Chakarov said.

Environmentalists remain doubtful, however.

“Assurances of such type do not inspire hope. It is unacceptable to rely on Natura 2000, when we have our Bulgarian law to protect a nature park that has been one for 12 years now,” Radostina Tsenova of the Bulgarian Biodiversity Foundation told AFP.

In February, the government voted to include some 20 percent of the country’s territory in Natura 2000, a centerpiece of the European Union’s strategy to halt the loss of biodiversity.

The decision sparked weekly protests by environmental groups who said at least 30 percent of wilderness areas should be included, and who accused the government of bending to pressure from investors.

Bulgaria has one of the best preserved nature habitats and largest wild animal populations in Europe, including thousands of brown bears and wolves.

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.

Bulgaria has made it to the top 3 of preferred tourist destinations among the Europeans, together with Greece and Tunisia, Bulgarian National TV Channel reported.

This summer the travelling agencies expect a 12% growth in the number of foreign tourists in Bulgaria and 60% of them will come from the EU member states.

In the last four years the country has gained popularity because of its luxurious hotels, unconventional tourist offers and the attractive venues. Still, there is a chance for Bulgaria to repel foreign tourists because of the uncontrolled construction works all over the Black Sea coast.

Bulgaria must also put some serious efforts in improving its executive and legislative power in order to put and end of the reckless constructions, CEO of the Bulgarian Tourists Agencies Association Donka Sokolova said.

“If we make even a single false move, Bulgaria will be forsaken by tourists for the next ten years at least,” Sokolova warned.