The luxury real estate company Unique Estates has submitted a report to the international group Leading Real Estate Companies of the World (Leading RE), of which Unique Estates is a member, regarding the global luxury property market in the context of the 2020 pandemic. Some of the highlights can be found below:
The spread of the corona virus has had a relatively small impact on the global residential property market, as shown by a research of the Leading Real Estate Companies of the World (Leading RE) international group conducted in 273 markets all over the world. According to it, most markets have even seen a rise in prices for the last six months. Where a downturn has been observed, it is mitigated by the low interest rate levels and the availability of free capital. Many investors are seeking a safe refuge for their money and the residential property market is traditionally perceived as a stable investment in the long run.
The Bulgarian luxury property market is not an exception to the general trend. Although the global index Leading RE places it among the market with slightly falling prices, the recovery potential is serious, mostly driven by local demand and the emergence of new locations preferred by wealthy buyers.
„Domestic consumption has a key role in the recovery of the sector. Our local market is to a large extent closed to external players and impacts, whilst the Covid restrictions are strengthening the positions of local buyers. Despite some periods of a slight standstill, demand has been active throughout the year. Inquiries from customers looking for a higher standard of living because of the new living conditions are increasing. Preferred locations are expanding their scope, the requirements for properties and possibilities for seasonal use are changing, explains Vesela Ilieva, Managing Partner at Unique Estates.
The world map of Leading RE from the end of 2020 displays an optimistic picture. According to the research based on data from companies – members of the global network, 68% of the markets have registered a higher or moderate increase in the prices of residential properties for the half-year. It is only in 18% of the cases that we see a fall in prices, and in the majority of cases it is observed in prominent touristic destinations, such as Lisbon, Bangkok, Panama, etc. Another reason for the more optimistic general picture is the large share of the American market where in the most of locations a growth or retention of prices is observed.
MOVEMENT IN HOUSING PRICES IN A GLOBAL PERSPECTIVE
The authors of the research attribute growths and stable prices to the financial stimuli that “mitigated” the impact of the corona virus on the property market. In other cases, those stimuli, as well as the low interest rate levels have held price drops within tolerable limits. On a global scale, the most massive downward shift in prices is registered in the Asian and Pacific Coast markets, where in 52% of the cases the values are down. On the other end of the scale are USA and Canada, with 9% and 20% of the markets seeing falling prices, respectively.
In Europe it is more moderate, with a decrease in 41% of the markets, in most cases within 10%. Sofia falls exactly in that category. Unlike other European capitals, however, the demand in the Bulgarian capital is mostly driven by local buyers, thus creating a potential for a rapid market recovery.
THE MARKET IN BULGARIA
Following the temporary “freeze” during the spring of 2020, the luxury property market in the country is showing a stable development. The data of the luxury property agency Unique Estates indicate a rise in inquiries and transactions during the summer months and autumn. The volume of transactions is getting close to the previous year’s levels which is indicative of resumption of activity. Only in the segment of above EUR 1 million there is a drop in transactions, as the people able to afford such properties are expecting a decrease in prices, the company explains.
The growing demand for houses with a large yard in the outskirts of Sofia draws the attention to new locations, until then remaining out of the sight of buyers – Bankya, Gorna Banya and Lozen. With the emergence of larger residential projects and high-class detached properties, these areas are becoming increasingly visible in attracting clients interested in suburban properties offering more space and seclusion. In some cases, buyers are directed towards more distant but better accessible locations, such as the golf courses in Pravets and Razlog.
The interest is directed towards houses with a large yard, detached or within the boundaries of gated communities. There is also a demand for land plots for construction but with a square area of over 3000 m2. People who buy such properties wish to secure themselves a place for a runaway from the city in the event of a new lockdown, as explained by Unique Estates. In other cases, the purpose of the purchase is to change the apartment for a larger one, so that its occupants could have more space. As for rentals, the prevalent trend is for a longer stay – most frequently the contracts are for seasonal use, for example for 6 months.
„The change in the daily routing of more wealthy buyers is directly reflected in their requirements for their homes. The presence of a work-room has become a mandatory condition, especially with people from the corporate sector. Clients also insist on a standalone kitchen and sufficient personal space for every member of the family. Modern open-type homes are gradually transforming into homes with more detached areas, Vesela Ilieva adds.
A recent survey of Luxury Portfolio International for the attitudes of wealthy consumers outlines similar trends in a global plan. The participants in it believe that personal spaces become more valuable than shared ones because many people are now forced to work, communicate or study from their homes. This results in optimization of the premises at home depending on the needs of family members. For example, easily reordered spaces are used at different times for online learning, artistic occupations, personal hobbies, etc. Amenities as the home gym, office or swimming pool are growing in demand, as they also provide various options for more personal space to consumers. Accordingly, the lack of sufficient space is the main reason for which sellers want to move into a new home.
INVESTMENT IN LUXURY
With the restricted opportunities for travel and social life the focus of wealthy people has shifted from lifestyle purchases (motor cars, yachts, jewellery) to investments in the home and personal space. This, again according to the survey of Luxury Portfolio International, is a good basis for a stable property market over the next months.
According to Vesela Ilieva, similar trends are observed on the Bulgarian market too. She says that over the last months interest has been observed not only towards purchases for satisfaction of residential needs, but also for investment of savings.
„New construction is the segment attracting plenty of savings. People invest their money in such properties because payment during the construction works is on a deferred basis and they only need to make a single initial instalment. Such buyers are usually targeting gated communities, as well as the luxurious neighbourhoods of Sofia– Iztok, Lozenets, Ivan Vazov. the Vitosha Collar, Centre”, Vesela Ilieva has pointed out.
In her opinion the luxury property market is presently more predictable than in the first half of the year. Unlike in spring, buyers and brokers are quite more prepared for the new restrictive measures, reacting calmly to the situation. The developments around the vaccines for the disease is also making the market more predictable and the reactions more balanced. The forecasts for 2021 are for a stable market in a pricing aspect and reasonable expectations on the part of buyers and sellers. Since travel restrictions are not expected to be lifted immediately, local demand will remain the primary driver of transactions.