Analysis of the real estate market in Bulgaria for the second quarter of 2017
Growth of sales and rents of luxury properties in the first half of 2017
- The active market shortened the decision-making time in a half
Stable prices and limited supply mark the segment of luxury properties the half year
The growth of economics and crediting were main factors for the dynamic development of the properties market in the second quarter of 2017, and it seems that their leading role will continue in the future.
According to the latest data, Bulgaria's gross domestic product has maintained a steady growth rate of 3.5%, mainly driven by domestic consumption and exports. Loan growth is also rising, with annual housing loan growth in May rising to 3%, and the total volume has risen to almost 9 billion. At the same time, interest rates on housing loans continue to decline and their actual value to May was already 3.96 % For loans in BGN according to BNB data.
The revival in the economy and the activity of the banks encourage more and more clients to enter the real estate market, both in order to satisfy housing needs, as well as for investment. The lack of good investment alternatives also works in favor of higher buyer activity over recent quarters.
The market during the quarter
With an average of 41% growth in sales and 18% rental growth, the luxury property market is dynamically marking the first half of 2017, according to Unique Estates statistics. After the strong start of the year as queries and deals, high activity is retained during the spring and summer months.
"For the third consecutive year in the luxury segment, summer is a very intense season for inquiries and deals," said Vesela Ilieva, Managing Partner at Unique Estates.
According to her, this activity goes beyond the standard market cycle, with the strongest periods in the year being May - July and October - December. As a reason, he indicates the growing interest in house purchases and the growing number of Bulgarians living and working abroad but enjoying their vacation for investment in property. These factors turn the summer not only into an active season, but also in times of bargaining for big deals, with sales over 1 million euros in recent years.
"What we are seeing now is not just a growth in the market, but also a different dynamics. On one hand, house sales are on the rise, and most of them are made in the summer to look at the yard. In addition, people living abroad are returning this season, and they tend to take time for sightseeing.”, Vesela Ilieva commented.
On the basis of the registered higher interest, Svetoslava Georgieva, Chief Operating Officer of Unique Estates, identifies two main groups of buyers. "The first are people who are motivated to buy a property and accept the realities of the market in their desire to reach a deal. The second group is customers who are rather studying and informing themselves, but have not really decided to make a purchase, however test the market, "she said.
In the second quarter of 2017 the trend of growth of transactions with luxury real estate with investment purpose is preserved. The reasons are improved financing conditions for banks, market growth and lack of good investment alternatives.
In the luxury segment, these buyers have budgets of up to 300,000 euros, with demand being mainly for apartments in prestigious areas that are easy to realize on the rental market.
At the same time, the proportion of customers looking for profit from resale within a year also increases. Most often these are people with budgets of about 150-200,000 euros who buy homes for repair in the central parts of Sofia. In the standard case, they invest around 50,000 euros in full renovation of the property and resell it within a few months, with the asking price being 250-280,000 euros. However, such transactions are rare, as housing with such potential is hard to find in the market. Such resales are typical mostly for wives of affluent businessmen, and the preferred locations are the areas around the National Palace of Culture and the Doctor's Memorial, as well as the Vitosha Blvd., Patriarch Evtimii Blvd.
„Right now there is a niche for such deals, because many clients search apartments for personal needs, but do not have the time for a repair and it is hard for them to imagine how exactly the property would look like when complete. Those type of buyers search for something which is ready to use. When it comes to Bulgarians abroad, the lack of time is a strong factor, because they are here for a short period. “, said Vesela Ilieva.
Prices, search, supply
Similar to the search in mass segment, the search of luxury properties stays active in the first half of 2017. One of the most common inquiries are in range 250-450 000 euros, as for this money is searched an apartment with at least three bedrooms or houses in private complexes.
The interest in new building is preserved. Most prefered are apartments in small, quality buildings in good neighbors in Sofia. Though, supply continues to be poor, as the bigger part of the new projects are on early stage and are still not on the market. The expects are till the end of the year the imbalance between search and supply to be preserved.
In the segment of houses the interest is in two directions. Mass demand is targeted at private or detached houses in closed complexes. In these cases, most often buyers are families with children. In the higher price segment - over 600,000 euros, people are looking for detached houses, new construction, with a large yard, modern architecture and interior and advanced technology, but here the supply is also weak.
The rental market also remains strong, with interest in residential buildings in professional maintenance and various services - reception, cleaning, sports center, restaurants ... The rent of apartments in similar buildings is around 1500 euro/sqm. for a one-bedroom apartment and about 2000 euro /sqm. for one with two bedrooms. Demand is mainly from people whose business requires periodic residence in Sofia. Preferred areas for such rentals are the elite neighborhoods such as Lozenets, Iztok, Izgrev, Geo Milev, Ivan Vazov …
In the price plan, changes in the luxury property market in the first half do not exist. Unique Estates’ analysis show that market activity is reflected in the shorter term for transactions - if a few years ago, the realization of one property took about six months, at a market price of one transaction up to three months.
Expects of Unique Estates are till the end of the year are the prices to increase by no more than 5%. Similar is the development in the mass segment of the housing market where in the first half of 2017 prices slightly increased only in certain districts of the capital.
Market in districts
- Doctor’s Memorial
The demand in the area is mainly for aristocratic old apartments with 2-3 bedrooms, for repair. It is basically in the vision of buyers looking for investment properties. It does not offer the massively demanding new construction at the moment. In the last half of the year, prices have fallen slightly, but remained among the highest in Sofia.
It covers the central part between "Al. Dondukov, Largo, Hristo Botev Blvd, Vitosha Blvd, National Palace of Culture and Evlogi and Hristo Georgiev Blvd. Like Doctor's Memorial, it is attractive mainly to buyers with investment purpose, but in recent quarters many people rediscover this part of Sofia as a place to live. Prices are stable.
- South districts
They cover the neighborhoods along Bulgaria Blvd and South Park, which are traditionally in the sight of buyers of luxury properties. It is mainly looking for new construction for living and investment. Slight increase in prices during the six months.
- Elite neighborhoods
This category covers prestigious neighborhoods with a more central location such as Lozenets, Ivan Vazov, Iztok, Izgrev, Yavorov. Demand is for both new homes and old bricked apartments in maintained buildings, but the supply is weak. Developed rental market. With the start of new residential projects around the Marinella Hotel, the interest of the buyers towards the region is growing. Prices during the six months remain stable.
- Vitosha footpath
Traditionally the strongest in these districts is the house market, but there are offered and properties in private complexes. To the neighborhoods at the foot of Vitosha are the buyers of high class houses - over 500-600 000 euro. The demand for properties with modern architecture and interior design, pool, technologically equipped, but the supply is weak.
Whatever sale strategy is chosen, personal contact with potential buyers is of utmost importance. The big consulting companies with experience in the luxury property segment have a broad base with long-standing clients with whom they are in constant contact. In many cases, in the presence of an exclusive offer, it is offered personally first to this type of customer and does not reach the mass market.
- Technical process
Technology is a must-have part of any business and in many cases an excellent mean of attracting customers and highlighting the benefits of a bid. In the real estate market it is a practice to present a property with a video capture, in which the clients can get an initial idea and have a willing to organize a view.