British and Irish buyers are withdrawing from the Bulgarian holiday market. And Russians and Scandinavians are likely to replace them, said Martin Gikov, Real Estate Management Director with UniCredit Bulbank at a news conference about the Bulgarian property sector.
Foreigners accounted for about 30 per cent of transactions in residential developments last year. Their share, however, is decreasing for a number of reasons, Gikov commented.
Irish and British customers, who have so far formed the core of holiday property buyers, reduced their activity following the global credit squeeze. They've also been deterred by low yields on seaside developments. Traditionally, British and Irish seaside property purchases are driven by speculative purposes. Initially they were tempted by the developers’ promises of high returns in the 10 per cent range.
And after their expectations for reaping lavish rewards were unfulfilled - because annual returns on holiday properties currently vary from three to five per cent and active summer/winter holiday season practically does not exceed two months - they opted for “short sales”. Or, in other words, they chose to sell their seaside apartments and invest in more lucrative areas.
Russians and Scandinavians, on the other hand, buy holiday units to use as a second home where they can spend their holidays. They do not rely on mortgage loans for their acquisitions and they are less price sensitive. These clients seek larger apartments, high quality, more green areas and less construction density.
The problem is that most existing and projected stock is different from their requirements and cannot meet their demands, said Levon Hampartzoumian, UniCredit Bulbank’s CEO. In search of larger profits by selling more units many developers erected resort complexes with the construction density of urban compounds, so rendering them unsaleable to Russian and Scandinavian buyers.
Another problem, even more severe than the Irish and British “defection”, is the lack of a secondary holiday market. Brokers say that it is hard to find buyers, Hampartzoumian noted.
Anelia Kroushkova, the chair of the State Agency for Tourism, said that resort property owners are compelled to tout for tourists, mediapool.bg reported.
It is hard to forecast what would happen to these properties, UniCredit analysts said.
