Slight Increase in Luxury Property Prices in 2018
In its analysis of the real estate market in Bulgaria for the first quarter of 2018, the consulting company for properties of the highest class Unique Estates outlines some steady and interesting facts and trends:
Overview
The residential market has kept its dynamics in the first quarter of 2018, backed by general economic recovery and credit growth. The segment of luxury properties has also remained active, but the inertia observed in the end of 2017 has been rather maintained.
The interest in luxury property purchases remains high both for residential and investment purposes, but supply is still lagging behind. The reason for this is the lack of new quality constructions, which meet the needs of buyers, as well as the limited choice of residences in the central regions of Sofia, which are sought mostly for investment purposes.
These factors are expected to lead to a slight price increase in the luxury segment, while the number of deals will remain almost the same as last year.
Demand and supply
In the first quarter of 2018, the luxury apartments market remained active mainly in the lower price segment – up to EUR 300–350,000. Deals were realized mainly in the central regions of Sofia and around Doctors’ Monument, as much of the demand has been with investment purposes.
The major supply in these regions is of apartments in old and aristocratic condominiums. The buyers are mainly people with free capital who are interested in housing reconstruction, as they would like to invest in the renovation of the property, and then resell it at a higher price.
“In the last years, this type of purchases gained popularity among people who are looking for lucrative investment. However, recently, profitable sales offers in this market niche appear less and less often, and this limits the potential for a deal”, commented Galina Grudova, Senior Partner at Unique Estates.
The other type of demand for apartments in the central part of Sofia is also for investment purposes and is mainly aimed at renting platforms, which have gained popularity in the last years, as Airbnb. There are purchases of residential properties, as well.
Deals in the lower segment of the luxury market in the Southern regions of Sofia, around Bulgaria Blvd., as well as neighborhoods in the Vitosha Collar, have been relatively active in the first quarter of the year. The sales have been mostly of apartments for residential purposes.
Deals in the middle price segment of the luxury market – EUR 500–800,000 – were significantly less in the first quarter of the year. The reason is the poor supply of houses and apartments that meet buyers’ demand.
According to Unique Estates’ brokers, the requirements in this price segment are for the apartments to have large quadrature – at least 200 square meters, at least three bedrooms with a bathroom attached to each of them, wardrobes, at least two parking lots and a nice view. As regards houses, it is important for them to have modern architecture, a large yard and “smart” property management.
In contrast to the market for apartments, the one for houses in this price segment is expected to be more balanced, with some projects in closed condominiums coming out in the next few months. They will present row houses, as well as detached ones in the neighborhoods of the Vitosha Collar – Boyana, Dragalevtsi, Simeonovo and The Bells (Kambanite).
The interest in purchases of exclusive houses and residences, the price of which normally exceeds EUR 1–1.5 million, also remains high. However, after the successful deals in this segment last year, at the moment the supply is limited.
The total activity on the luxury estate market remains at the same level as last year, as regards both sales and rents. Unique Estates’ forecast is for leveling off the number of sales due to lack of both suitable projects in construction and plats with a good location for future construction.
Prices
The year has started with continuing price increase of real estates in central regions in Sofia, which are sold for EUR 2,300 per sq m on average, given that prices in the area of Doctors’ Monument are around EUR 2,700 per sq m.
On the contrary, the increased supply of rental properties has led to a drop in prices over the previous year. At that time, there was a growing interest, especially in apartments in the center of Sofia, because of the EU presidency. Many properties have been rented in advance, and this has led to high activity on the market, which continued until the autumn of 2017. In recent months, however, demand has fallen to its usual levels. At the same time, the peak of purchases of properties with investment purposes led to a further oversupply on the rental market, so prices in many areas went down.
Unique Estates’ forecast for 2018 is for a slight increase in luxury properties prices due to the limited supply, while rent prices will remain at current levels or will decrease.