Rising transaction volume and stable prices of luxury residential properties in 2020
Sofia’s market of luxury properties maintained its dynamic nature and demonstrated price stability even in the difficult 2020, according to Unique Estates’ data. In the second half of the year, the company noted a rise in inquiries and sales compared to the previous year, both in the houses segment and in the luxury apartments segment.
There was a trend toward a higher demand for newly constructed properties, and districts that could meet this demand enjoyed increased buyers’ interest. Their attention is permanently shifting to Vitosha’s foothills and some of Sofia’s fast-growing southern areas. Considering the active demand and the slower rate of new construction, the expectations are for a balanced market this year and even for a slight rise in prices.
Increased attention to the home and the quality of life during the pandemic resulted in an active demand in the luxury segment of the residential property market. In a situation where working from home has become prevalent and given the two lockdown waves, more and more people from the middle class consider purchasing a house or replacing their current home with a more spacious and functional one.
‘The market of luxury properties showed an elevated activity level last year. In nine months we registered the same number of transactions as the entire 2019. At first, given the lockdown in the spring, buyers were in a state of shock for some time but later on many of them found that no large price drops were to be expected and demand returned to normal’, Svetoslava Georgieva, Chief Operating Officer of Unique Estates, summarised the situation.
In addition, the company’s data shows shorter decision deadlines. In recent months the time to reach a deal was 1 to 5 weeks since the expression of interest, compared to the traditionally much longer periods in the luxury properties segment. In many cases, homes under construction are sold as early as the design phase, which is also atypical for this market.
New construction is emerging as a preferred sub-class in the luxury properties segment, especially among the younger generations of buyers. Millennials are more and more active, and prefer houses or apartments in small boutique buildings or in gated complexes in Sofia’s southern areas, as well as at Vitosha’s foothills.
In addition to traditional clients from the corporate sector, in recent months many Bulgarians living abroad are showing an interest to making a purchase. Many people of pre-retirement age are also looking to invest in a luxury property, seeking a stable and profitable investment for their savings.
Interest by Area
Vitosha Collar and Suburban Areas
The pandemic revived the demand for houses in Sofia’s suburban areas. Unique Estates’ data for last year shows a rising interest to both traditional locations, like the Vitosha collar districts, and areas that have remained in the background for a long time — Lozen, Bistritsa, Bankya, Vladaya, Pancharevo, Zheleznitsa.
The resurgent interest in them can be explained by the two lockdown waves and the trend for people to work from home.
‘Many of our clients decided to invest in a second suburban home, in order to have enough space where they can settle temporarily, with the benefits of enjoying the greenery, a yard, clean air and more space in the event of a pandemic or other restrictions. This demand formed a new segment on the market — the purchase of a second home around Sofia — and brought back the interest in a number of relatively forgotten areas’, Svetoslava Georgieva commented.
Based on her observations, in less developed areas of the market, such as Pancharevo and Malinova Dolina, attention is drawn primarily by gated complexes. On the other hand, in established districts, like Boyana and Dragalevtsi, deals are also made for detached buildings.
Boyana and Dragalevtsi are traditionally viewed together by the buyers of luxury properties. Until recently the two districts were popular mostly for the purchase of houses, but the appearance of new construction projects in the area in recent years stirred up the sales in the apartments segment as well. Demand is mostly focussed on small boutique buildings or gated complexes, and buyers mainly represent generations Y and Z (people born after 1980 and after 1996 respectively).
‘If people from the previous generations found it hard to accept moving to an apartment beyond the ring road, Y and Z representatives have, for a long time now, not been viewing Boyana and Dragalevtsi as areas with houses only. To them, these are locations near the mountain, suitable for sports and physical activities, with an improved infrastructure, and large stores’, Svetoslava Georgieva summarised.
While Dragalevtsi was targeted for the construction of large areas with new apartment complexes, Boyana offers a mix of old and new construction. The supply of apartments there is concentrated in the Gardova Glava area.
The proximity to a shopping mall and a subway station, as well as the emergence of new apartment complexes, turned Krastova Vada into an attractive district for the buyers of luxury properties. The area around projects like Amaya Residence, GORA, etc. turned into a fast-growing location with residential and office buildings. Prices in this part of the district fluctuate around EUR 1900–2000/sq.m and beyond. Its advantage is that it represents a concentration of larger projects with well-organized access, good internal infrastructure and parking space. In this regard, Krastova Vada enjoys a more homogenous development compared to neighbouring districts, like Manastirski Livadi and Vitosha, and definitely shifts the focus of luxury property buyers away from them.
In Manastirski Livadi the most sought-after area is the one around the Bulgaria Blvd, where supply is concentrated into gated complexes or high-end detached buildings. In this part demand is mostly for finished and furnished homes, and prices go as high as EUR 2000/sq.m. Price levels are substantially lower in the interior of the district, where access is more difficult and construction is more chaotic, mostly detached residential buildings. The situation is similar in the Vitosha district. The demand for luxury properties there is concentrated around the Ring Road, where most of the offerings are for gated complexes and the street network is much better. The rest of the district has poor infrastructure and provides only limited supply of suitable apartments – newly constructed ones, with large surface areas, well-arranged access and good parking opportunities.
Iztok/Izgrev and Lozenets
Both districts have existed for decades and the buildings in them are not homogenous. In recent years the entire appearance of Izgrev has changed, thanks to the emergence of new residential projects, constructed on top of former industrial plots, for instance, Tintyava St. The district is one of the most dynamically developing ones in Sofia and is drawing a lot of attention from buyers in the luxury segment.
In Iztok purchases are made by people who are used to the area and fond of it. When a good property is listed on the market, buyers are willing to pay EUR 2000–2500/sq.m and beyond for new construction at the putty and plaster phase, and even more than EUR 3000/sq.m for a property in a new luxury building. If a few years ago mostly old construction was offered in the Iztok district, this has already changed and now there are offerings in small boutique buildings and mixed-use complexes. The prices of homes in them are significantly different than the ones for old buildings in the area. The prices of panel construction remain the lowest, and they range between EUR 1200 and 1500/sq.m for an apartment in the Iztok district.
Similar to other older districts of Sofia, in Lozenets the supply is not homogenous as well. the supply of new construction stirred up the property market in the area in recent years, and in some of the more sought-after projects prices can go up even beyond current offer prices. At the same time, there are already completed buildings with some apartments still unsold. The market is dynamic and a property offered at the right price can be sold within a week. Buyers prefer new construction, and in newly started projects where there is still some choice, starting prices are about EUR 2500/sq.m.
Centre and Doktorski Pametnik
The two areas were among the preferred ones by the buyers of properties intended for rental or AirBNB purposes. With the fading of this market last year, there was a rise in sales offers since many luxury properties that were bought for rental purposes were placed on the market. Prices responded with a slight decrease or stagnation, with average levels for the Centre range about EUR 2000/sq.m. There are, of course, occasional high-priced properties. The central part of Sofia is where the highest prices are normally registered, and for 2020 this was an apartment of 100 sq.m surface area on a landmark street near the Alexander Nevsky Cathedral. The price for this property was EUR 4400/sq.m. Another signature deal for the period was the sale of an apartment of 150 sq.m in the area of the President’s building, with a price once again above EUR 3000/sq.m.
The demand in the Doktorski Pametnik area is mostly for luxuriously furnished homes of 150–160 sq.m, and in isolated cases here prices could also reach and exceed EUR 3000/sq.m. Unlike the remaining central areas, where last year it was possible to negotiate discounts of up to 10%, in this district most of the sales are without a discount of the offer price. With the increased supply, the transaction volume in the area also rose. Similar to other areas from Sofia’s center, here again there were many properties bought for AirBNB letting purposes. The rental market is not particularly active, since the lack of parking space and the poorly maintained common parts in some buildings deter clients. Furthermore, rental homes are sought mostly by young people, who prefer new buildings in the Sofia’s southern areas.
Overall, the prices of luxury apartments in Sofia in 2020 maintained the previous levels — around EUR 1700/sq.m. The situation was similar on the house market, where the average price was EUR 1365/sq.m. While apartments marked a slight rise in transaction volume, on the house market it was significant compared to 2019. The main driver was the sales in Boyana and Dragalevtsi, where prices marked a substantial increase. Districts like Pancharevo are also gaining popularity, mostly because of the emergence of new gated complexes with similar types of properties.
Compared to 2019 there was an increase in both the sale of houses and apartments at a discount, and in the average price per property, based on Unique Estates’ data. Last year for luxury houses it was 12.5%, and for apartments — 7.3%. In 2020 sales at a discount reached 72% of the total volume, compared to 68% a year earlier, according to the same data source.
The rental prices of luxury apartments remained with almost no change compared to the previous year, and the average price for Sofia in 2020 was EUR 7.3/sq.m. The highest levels remained those in the Doktorski Pametnik and Ivan Vazov areas, with the ones in the latter location reaching EUR 10/sq.m last year. Price ranges were around EUR 7–8/sq.m in Sofia’s Centre and the Lozenets district, and these were the areas with the highest number of successful rental transactions.
Unique Estates expects the recovery of the rental market and stable prices in 2021. Last year the company recorded a rise in the transaction volume of rental apartments in Sofia but a moderate decrease of prices — by 8% on average. The forecast now is that the gradual vaccination would allow the resumption of travel, and with it — the demand for properties for mid-term accommodation.
‘The lockdown and the restricted movement of people last year, as well as the withdrawal of many offers from the rental market, resulted in a decrease of prices, especially in the central part of the city. Since mid-2021, however, we expect a new recovery to begin. Most landlords are optimistic as well’, Zara Koteva, a Manager in the Luxury and Corporate Rents department of Unique Estates, commented.
According to Unique Estates’ consultants, in recent months there has been a change in the structure of rents, with many properties for mid-term accommodation are being offered for long-term residence. Offers are mostly in the central areas and around the Doktorski Pametnik. The demand is predominantly by young people working online for foreign companies or studying in western universities, temporarily via distance learning, as well as by corporate clients. Nevertheless, many tenants are willing to sign a contract for several months, which does not match the standard two-year contracts offered by landlords.
‘The coronavirus crisis changed the market and owners need to be more flexible if they want the quick realization of their properties. Mid-term rents, from a month to a year, are more and more prevalent on the market. Clients themselves are driving these terms’, Zara Koteva explained.
For the choice of a rental home, the important factors are the proximity to a park, good relationships with neighbors and the condominium in general, the proximity to sports and relaxation centers… More and more people have pets and the willingness of landlords to allow them in the properties offered also plays a role in the selection criteria.
House renters are mainly families with children, and the demand is predominantly for properties with large yards, a lot of greenery, and in many cases — with a bathing pool. There are a lot of inquiries about houses in gated complexes in Sofia’s suburbs. Overall, the supply of rental houses is limited and Unique Estates expects a slight rise in the rents in the short term.
According to the luxury properties company, the time is also right for investment acquisitions, since the rental market is stable, and some segments are showing a trend toward a gradual increase. Last year the return on such an investment ranged from 4 to 6%, which is a good level for residential properties. The mid-term rents segment is also showing signs of recovery, which is expected to improve the employment and profitability levels on the market.