The rental prices of a regular two-room apartment in Sofia rose by an average of four per cent in the first quarter of 2008, while three-room flats in prime locations posted a 6.7 per cent mark-up in the same period, according to a recent report of the local think-tank Industry Watch.
Despite the recorded growth in residential rents, their rise still lags behind the growth in sale prices and the flat’s repayment period (sale price/rent price ratio) has been extended from 188 to 234 months on average, according to the survey.
Industry Watch analysts have observed a certain decline in the interest in residential and holiday real estate. Business space – offices and warehouses, on the other hand, are gaining ground.
All in all, the property market will preserve its upswing trend, recording a 13-14 per cent rise in the forthcoming years. Industry Watch’s forecast is based on the expected increase in household income and lending expansion. Although growth in residential loans in Bulgaria as of the end of January 2008 slowed down, it remained high – 62 per cent year-on-year.
By comparison, the volume of mortgage loans in the countries from the European area increases by 7.1 per cent on average annually.
The last quarter of 2007 saw a meltdown in the pace of increase of new residential building permits and their share in the total number of construction permits shrank to about 54 per cent.
The global credit squeeze will reduce the volume of foreign investment in Bulgaria and will retain the prices of Bulgarian public companies, according to Industry Watch expectations.
Equity investments will report losses due to the continued slow down in global stock markets and, consequently, this will impact other investment, including investment in real estate, commodities and services.
The property market will be affected directly, primarily in two segments – big projects, financed by large investment funds and banks, and vacation developments. The prediction has already proved true – British and Irish customers’ flow to Bulgarian resorts has ebbed away.
Luxury dwellings in Sofia, Varna and other large cities will post no less than 25 per cent hike on annual basis in 2008. Given last year's performance of Rousse, when its residential growth exceeded 40 per cent, the Danube town will probably see a higher mark-up, Industry Watch report noted.
With view to the current under-estimation of Vidin and Kyustendil residential units, the two towns are likely to experience a soonest rapid growth in apartment prices, Alexandrov Group real estate agency said. Returns on vacation properties over the upcoming months will slide from two-digit to one-digit figures.
The actual yield in holiday real estate segment will fall below six per cent at the end of 2008 and British and Irish investors’ withdrawal from Bulgarian resorts will be partially off-set by Russian and Scandinavian buyers, Alexandrov Group specialists forecast.
Yields of vacation real estate, however, have already fallen below three per cent in some regions, according to a number of realtors.
