Bulgaria ranked third in the world in terms of property price growth in 2007. Average sale real estate prices rose by 36 per cent last year, whereas rentals posted a more modest mark-up of 6 to 7 per cent nationwide, reaching 10 per cent in Sofia. These figures were revealed by Deyan Kavrukov, a head of Bluehouse equity fund and a former partner in Equest, in an interview with BNT.
The significant increase is propelled by various factors:
** steady domestic demand
** robust investment growth
** a rise in mortgage lending, which has been increasing by almost 100 per cent annually over the last years
** GDP growth
** considerable foreign demand for local property
“The happy-go-lucky times of striking exorbitant profits out of property deals on the Bulgarian market have been gone for two years now,” Kavrukov noted. He added that currently the most attractive real estate sectors are residential and office ones.
Housing developments enjoy the most stable demand, particularly in Sofia. This stems from steady internal migration into the capital, strong foreign and domestic demand and interest from Bulgarians working abroad who are willing to invest in residences in their own country.
Kavrukov said that the office segment still makes for a lucrative investment. There is a large demand for office areas in Sofia. Supply, however, has started to catch up with demand. Currently, the capital absorbs 50-60 000 sq m of office space a year. Almost 150 000 sq m of new units are launched in Sofia alone every year. Even if the annual absorption rate increases to 70-80 000 sq m, there still will be a tangible vacancy exacerbated by the fact that Bulgaria lost many potential tenants when large international companies chose Bucharest for their south-east expansion.
Kavrukov explained that they opted for Romania because its market is larger, so making it a better option for office relocation. Romania also introduced pro-business tax reforms earlier than Bulgaria. Moreover, its construction and zoning regulations are more flexible and work faster than Bulgarian ones.
The Bulgarian real estate market has shifted towards maturity. In coming years we are unlikely to witness abrupt price rises, Kavrukov noted.
