Reasons to buy

The architecture and construction brief for the Belgravia was to develop apartments that have strong appeal within the local market in order to maximise rental return and reselling prospects. Gated communities with leisure and parking facilities have become increasingly popular within the Sofia market and with limited room for expansion so close to the city centre, demand for such accommodation is high. Accordingly, rental returns from these apartments will have a premium and there will be a dedicated onsite rental and management company available for clients.

“Bulgarians’ understanding of luxury is changing. The once-coveted luxury villas of 10 years ago... are still selling for millions of euros... Even those who commissioned these houses are now migrating to upscale gated communities, the market’s rising star, here to feed the demand for luxurious living. There are at least 15 residential gate communities currently in the works in Sofia alone...”

Gated residential properties grow popular in Bulgaria,
Propertywise, March 2007

 

Real estate in Sofia

This vibrant financial and commercial centre is Bulgaria's largest city, home to the Bulgarian National Bank, the Bulgarian Stock Exchange, as well as some of the country's largest commercial banks (such as Bulbank, DSK Bank and the United Bulgarian Bank). The city accommodates nearly a quarter of the entire country's population. Manufacturing, construction, trade and transport are the primary sectors of the local economy. Increasingly, Sofia is attracting attention as an outsourcing location for Western European and American multinationals. Sofia is also the headquarters for major Bulgarian and international companies operating in Bulgaria and Eastern Europe. The Sofia population has doubled over the past 10 years and the unemployment rate in the city is only 3 percent, compared to average European levels at 10 percent.

Sofia is tackling congestion challenges by improving the infrastructure (which includes a major new highway and bypasses) and transport links, including an underground railway network, which is expected to be operational by the end of 2007.

Over the past 18 to 24 months there has been a trend towards property investment in the capital. As a result the real estate market in Sofia has achieved growth of up to 100% in some areas during this period. Residential areas close to Sofia's central business district have limited room for expansion as the EU ecological and preservation standards restrict mass development. As a result, these areas are experiencing highest demand, particularly for premium accommodation which is in limited supply. Suburbs are expected to develop and properties close to the central areas are expected to increase in value.

Newly built properties (particularly gated communities) have become the preferred option compared with the traditional purchase of renovated, older apartments. The first quarter of 2007 has seen an increase in the number of residential developments sold off-plan, expected to be delivered on the market within six to twelve month's time.

Mortgage-financed purchases also gained momentum during the period. One and two bedroom apartments currently register the highest demand. Property prices are still considered to be in their infancy stages of growth in comparison to other European cities.

"Liam Bailey, Knight Frank’s head of residential research, describes Bulgaria as ‘one of the big winners’ in capital appreciation since the millennium. He says: 'Slowly you’ll see its properties and amenities going up-market. It’s a place to watch.'"
The Independent, June 2007

"The world trade organisation forecasts that by 2010 Bulgaria will be visited annually by 20 million tourists – the forecasts make Bulgaria one of the world’s most promising international tourist destinations. Married to the strong economic growth and political stability described below, Bulgaria continues to be a strong investment prospect..."
Blogspot

 

The Bulgarian property market

It is generally forecasted that property values in Bulgaria will continue to increase at a double-digit rate over the next three to five years largely because of mortgage lending potential.

Currently, mortgage loans are 5% of the total credit supply within the local banking sector. The increasing number of mortgage loans continues to stimulate the internal residential market. In developed markets, this rate is usually in the range of 15%.

In addition, there has been increased direct and indirect foreign investment in real estate. Bulgaria remains a country with extremely low real estate and land prices compared with Western European and most Eastern European states. Also, the costs associated with property transactions in Bulgaria are generally much lower than in developed economies.

All properties are bought freehold and more than 90% of occupied residential property is owner occupied. The harmonisation of Bulgarian legislation with that of the European Union means that the actual process of a real estate transaction in Bulgaria is not significantly different now to the procedure that exists in other European countries.

The real estate market in Bulgaria is, after ten years of transition from communism to a functioning market economy, just starting to approach the conditions that already exist within more developed countries with respect to the processes and market realisation. As a result it has achieved its status of an emerging and independent new branch of the European economy.

In 1994 The National Real Property Association (NRPA) was set up to protect the investor's private property rights, to create an efficient and equitable real estate market and to establish professional and ethical rules within the real estate profession.

In September 2002, with the support of the American Chamber of Commerce, NRPA introduced an index of real estate and investment activity of the market in Bulgaria. It is the first country in Central and Eastern Europe to establish such an index. This is considered a serious indicator of investment activity and business development. With increased purchasing power, product and asset price inflation is expected. In Sofia, this is mainly due to strong investment in properties from Bulgarians living abroad, as well as foreigner investors.

In a recent real estate review compiled by Colliers International they state that "in addition to increasing demand from foreign expatriates (and the expected increases in tourism) the next few years also looks set to be revolutionary in terms of demand from wealthier Bulgarians as many banks have now started to offer mortgage financing, and as a result the demand for quality houses and apartments will continue to gradually increase". Most of the recent rise in the Real Estate Market Index was indeed driven by the increase in the cost of luxury apartments by some 5-6%.

"Over the last several years Bulgaria has made impressive progress towards long-term stability and sustained growth. As a result of sound macroeconomic policies and deep structural reforms, average growth has reached the levels of the eight recent EU entrants (EU8) at close to 5 percent per year..."
World Bank

"Bankers and other employees in London's financial industry are set to spend 3 billion pounds ($5.3 billion) of their 2005 bonuses on buying more than 20,000 new homes in the next few months, according to a report published today. Some of the bonuses will be spent on buying real estate overseas in countries such as Bulgaria."
Bloomberg – 2006