Housing will remain an essential and fast developing area of the market, especially in Sofia and the larger main cities like Veliko Tarnovo, Blagoevgrad and the cities along the Black Sea coast such as Varna and Bourgas. In 2007, prices in this sector rose by some 25-30 percent, reaching 1,500-3,000 euros per square metre in Sofia and up to 800-1000 euros in smaller cities. It is expected they will jump by 30 per cent again.
Experts cite the rapid increase in the cost of land available for housing as an important reason for this price hike. In 2007, a square metre of land for building purposes varied from 50 to 3000 euros per square metre, depending on the city and the location. Varna for example would generally cost you around 1000 euro per square metre for a typical residential building plot whereas 240 km inland from Varna at the popular Veliko Tarnovo would only cost you around 120 euro per square metre which is why you see lots of flats in built up areas on the coast, the cities and the ski resorts.
Generally, 2008 is going to be a generous year to those investors who know the real estate situation in Bulgaria well and know what and where to buy. The problem with Bulgaria is not so much oversupply but often poor quality; especially older refurbished houses and therefore owners and developers of high quality buildings have nothing to fear. The Bulgarian authorities operate a planning and building regulation system very similar to the UK and this will hold new buyers in good stead but they must be aware of bad quality old refurbs and too good to be true prices often advertised.
In 2006, prognoses for real estate market development in Bulgaria suffered the “too good to be true” syndrome. Some experts argued that prices for properties were unrealistically high and would inevitably collapse in 2007, due to oversupply and lack of investor interest. Instead, they rose by a further 25-30 per cent in the period January- November 2007. That was a logical consequence of Bulgaria’s accession to the European Union, the general trends of the European real estate market and the relatively stable local economy.
Now, however, the Euro-euphoria is over. Prices for property on some real estate markets in the newer European Union member states started to fall by 10 per cent and more. Shockingly, that happened to promising markets like the Latvian and Estonian, until recently among the EU countries with the strongest economies. Even the real estate markets in the United States was shattered by a severe credit crisis caused mainly by lax mortgage underwriting. Little wonder that sceptics again started to “promise” a dramatic fall of prices for properties in Bulgaria, followed by a withdrawal of numbers of investors in 2008. Why do experts expect higher prices for real estate properties in Bulgaria?
The expected growth of foreign investment in Bulgarian real estate for 2008 is 40 per cent. Another reason is the easier access to mortgage loans, which is expected to improve further now that more and more foreign banks are entering and are currently active in the Bulgarian credit market. Another important factor is that 35% of Bulgarian territory is now officially within the Natura 2000 programme and will be protected against certain types of development. A third of Bulgaria is made up of mountainous regions. This will automatically lead to a shortage of building land which will increase its value and have an ongoing effect on property prices.