Foros: The Real-estate Market On The Bulgarian Black Sea Coast - Investorbg

Analysis of the recent years, trends, investments

At least three things happened on the Black-sea coast real estate market in the last two years, announced one of the oldest and the most experienced property companies in Bulgaria FOROS, founded 12 years ago.


We are actually one of:

1. The demand for properties (all kinds of) increased a couple of times.
2. The prices of the majority of properties by types rose.
3. These processes happened in a very short period of 1 to 1.5 years.


What have been the major reasons for this?


The lapsed period of 1 to 1.5 years outlined a number of interesting trends in the development of the real-estate market. The last 2-3 years market a lasting trend towards improvement of the market climate and increased demand for properties of diverse type and use. Since the middle of 2003 we have been registering the most significant increase of prices and number of sales for the last 7-8 years. Just a few figures to support the above facts: the number of finalized deals for 1996-64000; 2001-95000; 2002-105000; 2003-145000, forecasts for 2004-195000. The information has been taken from the court registers.

Percentage of increase of the number of real-property deals in certain Black sea municipalities for 2004 compared with 2003


Community

Increase

Varna  29,40%

Kavarna  75,28%

Balchik  50,00%


The real-property prices rose for the last 3 years and in certain areas and for certain types of estates the increase was 100-150%.

The following are the major reasons for the intensive development of the real-estate market in the mentioned period:

1. The continuing process of macroeconomic and financial stabilization, which Bulgarian has been undergoing through the last 6-7 years. Many of the major macroeconomic parameters such as Gross Domestic Product, increased income of the population, level of inflation processes, stability of the national currency, volume of foreign investments, etc., improved their values, and in certain fields the improvement has been significant.

2004 marked a record increase of 120% of the extended home loans. Just for November the home- and mortgage credits extended to individuals mark a growth of 8.81 %. The statistic also points that 99% of the most popular bank credits: mortgage and consumer credits have been regularly serviced.

The expectation of accession of Bulgaria in NATO and European Union and related with this positive consequences. It is necessary to be mentioned that the raise of real estates prices and demand will not be stimulated just because of the fact of the country integration to the European Union. This opportunity can be realized if Bulgaria continues to improve the economic parameters. Being familiar with the economical and political processes in the country we think that this will happen. Only during the last year the growth of the foreign investments increases with 30% to 2 billions euro. The investments from foreigners in real estate are about 10% from this amount or about 200 millions euro.

2. Strong influence on the market renders the started secondary supply of privatized properties /hotels, factories, shops, public houses, etc./. These transactions rendered positive influence as in the market began the supply of large property which were in small quantities or in general were missing till this moment.

3. We need to pay serious attention on internal migration. The Black sea region became an attractive centre for people, looking for job, from all Northeastern and Southeastern Bulgaria. Traditionally Varna is an Academic centre of the Northeastern Bulgaria and most graduating students leave to work and live in the city. Situation in the city of Bourgas is similar. These are as well two biggest and important administrative, cultural, commercial centers along the Black Sea. They are respectively the second and third cities in Bulgaria by economic development.

4. After the Law on mortgage obligations has passed a few years ago, most of the banks emitted such kind of them and generated a long-term financial resource. For this reason a big part of commercial banks offers different conditions for long-term mortgage crediting. Every day the percentage of the deals through mortgage credit increases.
5.Demand from foreigners. During two last years the demand for property purchase from foreign citizens marks a sensible growth. The demand is directed to wide range: from rural properties, apartments, villas, plots to hotels.

7. The newest potential groups of purchasers are Bulgarian people, which live and work abroad. Only for 2004 total amount which have been invested in real estate by this group makes about 800 millions leva.

During that period the interest toward investment in real estate along the Black Sea region of course also quickened. The main places, toward which are directed the investment intentions along the Northern Black Sea are: resort complex Golden Sands, Balchik, Galata, Varna, Kamchia, Obzor, Biala, Shkorpilovtsi, Kranevo, Shabla, Krapets, etc. Along the Southern Black Sea these regions are: resort complex Sunny Beach, Neseber, Vlas, Sozopol, Pomorie, Ravda, Primorsko, etc. Listing these settlements and regions next to them, we can see that practically there was no region near to the Black Sea coast, toward which there isn�t interest to have a property. For these reasons the prices of plots in some regions near the seacoast reached values from 40-50 EUR/sq.m. for farming land to 200-300 EUR/sq.m. for regulated plots in building borders.

During 2004 in the country were concluded about 46 thousands transactions on the farming land market, as the object of the sale became 463 330 decares with average market price 306 leva. For comparison the total size of farming properties, which changed their ownership in 2003 is 345 722 decares with average price 143 leva per decare. In 2004 10697 decares farming land was an object of purchase with target to change the function, as the average price of these deals is 7585 leva for one decare.

Indisputable leader on concluded deals with farming land, aiming to change the function and future building is the Southern Black Sea region. In communities Bourgas, Sozopol, Nesebar, Pomorie, Primorsko and other with 868 transactions have been sold 4305 decares. In the Northeastern region of the country, which includes the Black Sea communities Varna, Biala, Shabla and other, during 2004 have been concluded 104 transactions for selling of 267 decares land. The average price of the transactions � 4200 leva per decare.

One of the main problems that we need to take into consideration is the correct choice of optimal combination between price, place and characterization of the demanding property.

Certainly we can affirm that in this moment from the development on the market exist attractive and not so much attractive kinds of property and regions. The characterization like unique place gives guarantees for the success of investments � guaranteed giving for rent or future increasing of the price and generating of profits. The important thing for everyone, who is interested in purchase of property in Bulgaria, is to find these perspective regions and kind of properties.

Very important bill, about which we think that you must have information, is the project of the Law on Black Sea Coast. Foros participates in this project and has prepared a special report about the eventual influence of the project on the property market along the Black Sea region. The discussion took place under the aegis of the Union of architects in Bulgaria, the Ministry of regional development and public work and the National Association �Real Estates�. Just few citations from the law, concerning the property purchases in the Black Sea region � it provides for two zones � zone A and zone B.

Zone A includes the beach strips and 100 meters zone from farming land and forest territory, adjoining to the coastal beach strip. In this zone will be forbidden construction of buildings, solid fences, etc. and will not be possible to change the statute of farming land and territories from forest fund.

In the zone B, which will include 2 kilometers of farming lands and forests from the zone A, will be allowed construction under certain requirements, namely:

* Density of construction � 30%,
*Intensity coefficient � 1.5
*Density of planting � min. 50%
*Height of buildings under 17.5 m.


It is not sure that this project will be passed, but we recommend you before to buy a land out of regulation to make the necessary verification if the property that you would like to buy will not be under the attacks of the eventual future law and then to estimate whether to take this risk.

Very important branch for the development of the property market in the Black Sea region is the tourism. The information for 2004, which was published a few days ago shows serious growth on increase of the foreign tourist stream with about 14% and on increase of incomes from the offering tourist products and services. Also is interesting the fact, that in 9 months in 2003 for the same period in 2004 the increase of British tourists, which have visited Bulgaria is 60% and reaches the figure of 253 000 visits, and with this Great Britain is on the seventh place from all nations by the number of foreigners, visited Bulgaria.

Prognosis for the development of the property market in the Black Sea region

Our prognosis for the development of the market in the Black Sea region in short- and middle-term is that the prices will rise on the average with about 7-15%. It is good to mention that for some property groups the raising perhaps will be more sensible, and for the others probably will be noted some drop.

The movement of the prices up and down will depend on concrete characterizations of the object, and not on the subjective desires and emotions of owners and investors. In different moments from the development of the market will exist different by degree of attractiveness and retrieval groups of property.

1. Concrete examples for attractive opportunities for investment along the Black Sea region till this moment


-For purchase of plots for construction Kamchia, the Northern Black Sea region after Golden Sands, individual rural regions near to the beach strip, Galata

-For purchase and construction of apartments traditionally Varna and Bourgas, Sunny Beach, Vlas, new regions between Varna and Golden Sands, Golden Sands, Galata, Kraimorie, Biala

-For purchase and construction of houses and villas regions on south from Bourgas, on north from Varna, rural regions with good engineering infrastructure.