Holiday Properties Are The Only Investment Recommended in Bulgaria
Article: Residential housing market lags behind holiday home market in Bulgaria.
The decline in residential real-estate prices in Bulgaria shows signs of bottoming out. Buy-to-let and holiday homes are the only real investment strategy on offer.
2012 was not a easy year for Bulgaria but showed signs of stabilizing prices and increases in demand from foreign investors, which should lead to growth and development in the future. However, the housing market in the major cities, driven by local buyers, lagged behind the holiday property sector because of concerns about jobs and income.
- In the first two quarters of 2011, the real-estate market in Bulgaria looked as if it was starting to recover; but, the deepening Euro zone crisis and the resulting economic trends meant that the crisis returned to the market and, by the middle of 2012, the number of concluded transactions declined.
- In the second half of 2012, we saw more positive markets, a slowdown in price declines and more concluded transactions, especially for holiday homes in the beach resorts. These developments were stimulated not by increased economic activity but by growing interest from foreign buyers, especially from Russia.
Real estate investment market analysis
The outlook for 2013 in Bulgaria
Demand for property in Bulgaria’s cities would continue to be driven by local buyers and depends on factors such as:
- Extent of recovery in the economy
- Unemployment rate
- Household disposable income
- Availability of mortgage financing
Unfortunately, the economic forecasts for 2013 are similar to 2012 and no growth can be expected in prices – but if the environment remains encouraging, there should be no further decline in prices, either.
- As for holiday properties, interest from Russian buyers is expected to grow because of their keenness to acquire second homes in places like Bulgaria.
Residential real estate
The housing market continues to be sluggish though the fall in prices is slowing and there is a little improvement in the economy.
- Residential prices showed a decline of under 1% in 2012 year on year and there were increases in some parts of the country.
- Downtown Bucharest showed an increase of over 5% in the last quarter.
- Prices are now 38% below their 2008 peak.
- In the capital, Sofia, dwelling unit prices were down 0.6% from the previous year at EUR €740 psm and by 41% from the peak in 2008.
- Out of the 28 provinces, 18 showed price declines in the year to the third quarter of 2012, with the sharpest decline of 13% recorded in Montana.
- In the third quarter of 2012, the average price of existing apartments in Bulgaria fell by 2.2% to EUR €450 psm (but this was an improvement on the 4.3% decline in the year to the first quarter and the 6% decline in 2011).
Hotspots to watch
Yields on apartments in Sofia have continued to increase in contrast to the fall in purchase prices. In the center of Sofia, yields range from 5% to 6.7%.
- The locations most in demand are Doctor’s Garden, Ivan Vazov, Iztok and Lozenets because of the presence of embassies and universities.
- These areas also have plenty of green open spaces that make them desirable to expatriates.
Citizens of the European Union can now buy property in Bulgaria including land. (Previously, land could only be purchased by a legal entity and not by individuals.)
The bottom line
Holiday properties continue to be a reasonable investment in property in Bulgaria because of the location of the beach resorts and the affordable prices. Any other form of investment in real estate is best avoided for the moment.