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Black Sea coast: Sophistication adds to the strain
Sofia News Agency, 27.02.2008
As the global credit crunch tightens, British and Irish home buyers, who drove the development of Bulgaria's Black Sea coast, are being replaced by cash-rich Russians and Romanians. A sharp fall in demand for smaller studio and one-¬bedroom apartments of between 40 and 60 sq m in established resorts, has pushed down prices by between 8 and 12 per cent in the past six months, according to estate agents. Prices now range between €800 ($1,185) and €1,200 ($1,777) a sq m in new developments, depending on proximity to the beach. But rental yields are low, at about 2-3 per cent, because of a relatively short summer season and an over-supply of smaller apartments. The re-sale market is still in an early stage of development, although many speculative buyers have already "flipped" properties acquired early on. "A purchase today should be considered a medium-term investment. People selling should be prepared to settle for only a small profit," says Mihail Chobanov, managing director of Bulgarian Properties, a Sofia-based agency.
Yet the mood is still optimistic. Not only are more Russians, Poles, and Romanians expected to join the market for moderately-priced apartments, but a growing number of high-end projects are being launched in previously undeveloped areas. Land prices are soaring, especially in the "villa zone", a 10km strip around a regional town that municipal planners allocate for suburban development.
Purchases of property and land for development counted for at least 40 per cent of Bulgaria's estimated €5bn in foreign direct investment last year. While growth is slowing, the country's economy is still projected to expand by about 5 per cent this year and next, led by foreign investment and domestic demand.
Brian Conneely of West Properties International, an Irish company, says: "The slowdown has probably come at a good time for Bulgaria. There is a swing now from budget properties to those in better locations, of good build and good management."
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