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 News

 Year in Review  04.01.2008 back
Real estate continued to be one of Bulgaria’s talking points and treasure troves in 2007.   This article gives a summary as to all that happened on the property market during the year.

Real estate continued to be one of Bulgaria’s talking points and treasure troves in 2007. Whatever the reason – momentum from previous years, good advertising, price speculation and a construction boom – hundreds of millions of euro worth of real estate changed hands in Bulgaria. If in previous years the market was driven by British clients seeking family houses in villages, in 2007 things changed. According to some analysts, interest in holiday properties in Bulgaria among UK buyers decreased by 70 per cent, mainly because of the mortgage crisis in the US and Europe. Despite this, in 2007 Brits continued to be the market leaders. According to research by Green Life Property Development, UK clients accounted for 40 per cent of buyers of holiday homes and Russians 38 per cent. Scandinavians made up 3.64 per cent of the market and Greeks just 1.84 per cent.

In general, however, 2007 could be described as a turning point in the development of Bulgaria’s real estate sector, with the focus having shifted to commercial properties. One can easily name 2007 as the year of the shopping malls and residential and gated holiday complexes. There is hardly a big city (with a population above 50 000) that by the end of the year did not have a shopping mall or was not in the process of getting one. Some had more than one, as was the case with Sofia and Varna, with malls predating 2007.

After the hotel construction boom in 2006, in 2007 investors headed for residential and holiday complexes. Some saw in them a solution to city traffic, others a way to profit by renting them out to foreigners, advertising them as second homes.

The big players joined the race seeking big profits in deals. The market changed pace so often that at times it was difficult for analysts to keep track.

The statistics say it all. From January to October, six large-scale commercial projects changed ownership for a total sum of about 460 million euro. The largest deal was the acquisition of Mall Varna. Scottish Miller Developments paid 120 million euro to the local Interserviz Uzunovi for the high-quality trade centre in Varna.

Porsche Business Centre, close to Sofia Airport, changed owners as well. Landmark Property bought the business development from Orchid Developments for 13 million euro. Landmark enlarged its portfolio with another business development, Hyundai Business Centre, on Sofia’s ring road, close to Business Park Sofia. The investor, Industrial Commerce, Hyundai dealer for Bulgaria, sold the business centre, which was still under construction, for 22 million euro.

Mall of Sofia developers, Israel’s Cinema City International and Aviv-Osif Group, sold their new commercial project, Mall Plovdiv, to US company General Electric and Irish investment fund Quinlan Private, the present owners of Mall of Sofia. The sum of the deal was 100 million euro.

Austria’s CA Immo International expanded on the Bulgarian property market by acquiring a third business development. Soravia Bautrager, also an Austrian company, sold Megapark Soravia to their counterparts for 96 million euro. The commercial centre, equipped with offices and retail areas, on Sofia’s Tsarigadsko Chausse is set for completion by the end of 2009. Its gross actual area is expected to reach 0.9 sq km (90 000 sq m).

There was already a contract for the purchase of Business Park Varna, as reported by Bulgarian-language media. Africa Israel Investment Europe, a company owned by Israeli billionaire Lev Leviev, moved to acquire the business centre for an undisclosed sum. Some said that the price of the deal was about 76 million euro.

By the end of the year a trend became clear. The number of investors investing in business and commercial properties aiming to sell a completed project was increasing. For instance, European Convergence Development Company, the major investor in Galleria Plovdiv Mall, announced that it was looking for a buyer to acquire the shopping centre after completion. The project is set for completion in 2009.

Naturally, with all the good news about foreign investments, Bulgaria received recognition among foreign analysts. Bulgaria was still a good investment spot, Knight Frank Global Price Index said in December.

“Despite numerous concerns over the level of oversupply in a number of locations within Bulgaria, notably the winter ski resort of Bansko and selected coastal resort locations, Bulgaria has supplanted the previously top performing Baltic hot spot at the top of the Knight Frank league,” the report said. Bulgaria was becoming ever more popular with British investors, the report said. With Black Sea beach resorts and high quality ski destinations, as well as a fascinating blend of eastern and western architectural and cultural heritage, it clearly has something to offer almost everyone, it said.

The “positive” findings of the report actually revealed some of the problems the company’s real estate sectors failed to overcome in 2007. Infrastructure and over-construction continued to be Bulgaria’s downfalls. Despite the widely spoken-of EU funds, the Government and municipalities did little to improve road infrastructure, which in places is absent, and five star hotels are accessible only through rivers of mud. Builders continued to lack efficiency and quality control, with complaints from disappointed owners of brand-new properties increasing every week. 

Oversupply was another issue that appeared set to become even more serious in 2008. The country’s resorts are, more and more, starting to look like urban residential areas, with construction persisting practically throughout the year in spite of official bans during peak summer and winter seasons.

With all that said, the Government and investors ended the year with much to do in order to keep Bulgaria on the right track. Otherwise 2008 could see Bulgaria lose its place “among the best places to invest in property in Europe”.

Source: Sofia Echo

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