More than 10 per cent of the foreign investment in Bulgaria for 2005 is in the real estate sector, Pencho Nenov, vice executive director of InvestBulgaria agency said.

Nenov was present at the opening of the Real Estate Expo yesterday, 24 Chassa newspaper reported.

According to the agency,37 of the apartments purchased last year in Bulgaria were bought by foreigners. Investors come mainly from Britain and the Scandinavian countries and are interested in purchasing property within mountain and seaside resorts.

Reasons for this interest in the country include the good climate and the prices three to four times lower than those in other European states.

Real estate market tendencies also include increase in the number of newly constructed buildings. Only for 2005, 1900 new buildings were erected, which is 400 more than the number for the previous year. Most are concentrated near the seaside and for the purpose of spa tourism.

National Statistical Institute survey shows investors constructing new hotels aim at higher quality of service. As a result, five per cent of the newly built facilities rank five stars, and another 15 per cent have four stars. The most expensive hotels are located in Nessebar.

Prices of office buildings are falling because of the intense construction of business facilities. Investors show growing interest in plots in industrial areas.

Real estate market tendencies show a considerable increase in the sales of hotels under construction.

According to a 24 Chassa report the largest part of such offers is concentrated in Bansko, Pamporovo and the seaside resorts. Until present investors showed interest in the purchase of completed hotels, especially by the seaside, or separate flats in apartment complexes.

Market research shows tendencies are changing and the demand for buildings under construction is growing. The main asset of such facilities is that they are multi-functional.

This allows investors to change usage during the construction work. A building planned as an apartment complex may be transformed into a first-class hotel, 24 Chassa reported.

Agents said this is neither a plus, nor a minus, but simply a new opportunity for investors.

Other market tendencies include projects executed by more than one investor. Owners of a plot transfer building rights to a partner company in exchange for claims over several floors of the building.

According to imot.bg data, an unfinished building in Bansko sells for up to 3.1 million euro, depending on the construction stage. Some of the common features of such construction sites include proximity to ski lifts or entertainment spots and availability of pool and coffee bar areas.

Preferences and shopping habits of Bulgarian buyers are shifting toward larger facilities, Colliers International found in its report on retail property in Bulgaria in the first quarter of 2006.

This trend is supported by the increasing number of international-style shopping malls currently under development, as well as the number of projects in the pipeline.

In 2006, three major shopping centres will open in Sofia and one in Veliko Turnovo (northern Bulgaria). Large-scale shopping facilities are also planned to be built soon in the Black Sea cities of Varna and Bourgas.

Demand for retail space in high street locations in Sofia continues to exceed supply. Strong demand comes mainly from fashion boutiques, fast food restaurants, pharmacies and financial institutions.

Demand for retail space in shopping centres is very high, which is evidenced by the 100 per cent occupancy of Mall of Sofia, Colliers said. According to them, demand comes primarily from large international brands, such as Benetton, Mango, Sisley, Tom Tailor and others, as well as from large domestic electronics stores and supermarkets.

Colliers has found out also that the demand for retail space in residential areas is higher in locations on major road arteries connecting the neighbourhoods with the rest of Sofia.

Supply of retail premises in Bulgaria is still predominantly formed by high-street retail and warehouse retail.

Rental levels in large shopping centres in Sofia range between 30 and 60 euro a sq m per month, depending mainly on the size and position of the retail unit. Due to the limited supply, rents on attractive high streets command significantly higher levels.

Typically, hypermarkets in the country own their premises, though they have recently started looking for expansion options by renting premises as well.

The property investment opportunities in Bulgaria fall into four main categories, wrote the Independent on Wednesday in an article that praises the property market potential of the country on the threshold of the European Union.

“The first lies in the capital, Sofia, which is growing economically and geographically faster than any other former East European capital. The property boom has now hit the centre, with locals themselves pitching into the market - always a good sign.”

The article points out that an average, two-bedroom, new-build apartment in the centre is selling for between GBP 69,000 and GBP 87,000, and values are rising almost by the day.

The author points out that Bulgaria has a burgeoning skiing industry whose centre is Bansko, an ancient village at the foot of the Pirin Mountains. A typical two-bedroom, new-build apartment costs GBP 71,000, with prospect of a rise in values of about 20 per cent a year.

The Black Sea, with its sunshine, cheap beer and great food, beckons investors too. “Locations such as Sunny Beach may be set to become the new Costa del Sol.”

The Independent cites experts, according to whom the really “canny” investment, and one open to those on a low budget, is to buy land. They say the town of Kavarna would command prices of EUR 70 a square metre, and Balchik - EUR 58.

The Independent

PROPERTY NEAR BULGARIA’S CAPITAL A REALLY GOOD INVESTMENT

Property prices in Sofia continue to rise according to the latest imoti.net data.

For the last six months the price of a square metre has risen to nearly 600 euro. Among the most expensive suburbs are Ivan Vazov, Yavorov and the central parts of the city, Banker newspaper reported.

Brokers say offers lower than 400 euro a square metre have simply disappeared. Cheaper properties include those in Obelya, Tolstoi, Svoboda and Lyulin.

Interest in properties situated less than an hour away from Sofia city also rises, brokers say. These estates are cheaper, less than 370 euro a sq m.

Among the most expensive towns in Sofia region is Samokov, due to its proximity to Borovetz ski resort. Koprivshtitza offers newly built houses in the traditional architectural style. Dolna Banya is another place attracting investors’ interest. As a spa resort near Borovetz, it offers good opportunities for tourism.

Property prices in the regions mentioned vary from 300 to 700 euro a sq m, but brokers say that these cheap offers will not hold on for long and prices will inevitably rise. This makes buying an estate near Sofia in 2006 a really good investment, Banker newspaper reported.

It appears that attempts to ready Bulgaria for EU accession are gaining momentum, with tourism and property investment at the forefront of much that is being done.

With the ski season coming to an end, attention is now turning to the stunning Black Sea regions and the authorities in Bulgaria have been busy working on measures to maximise the potential of the already popular resorts.

Already, a National Tourism Board has been created, which will meet in May to discuss ways of uniting large investors, non-governmental organisations and businesses that provide for tourism, reports the Sofia Echo.

Many of the plans will directly impact upon property investment in Bulgaria, with analysts frequently observing that a successful tourist industry is the first step towards a property boom.

“The future National Tourism Board will formulate and seek solutions to essential problems related to regional development, infrastructure, beach and airport concessions, promoting new tourist products, developing new markets, building a network of Bulgarian tourist offices abroad under public-private partnership schemes, and a bigger budget for advertising Bulgarian tourism abroad,” said the initiators of the new board.

The Sofia Echo has also reported on the most popular property investment spots in Bulgaria, as seasoned investors begin to familiarise themselves with the best options for good returns.

The statistics show that 25 per cent of property investors in Bulgaria prefer to purchase land close to major cities, with most of these investing in commercial property ventures such as office buildings or trade centres.

A similar percentage of investors prefer agricultural terrains, however, which is perhaps testament to the diversity of property investment opportunities available in the country at the moment.

The survey also drew attention to the advantages of investing around Sofia as well as the Black Sea, while around eleven per cent favoured ski resorts such as Bansko, Borovets, and Pamporovo.

In addition to these options, Bulgaria is also gaining a reputation for golf properties, with the Sofia Echo reporting that there will be 40 courses in the country in 15 years’ time. Bulgaria is often compared to Spain in the 1980s and its burgeoning status as a golf haven is only likely to strengthen these comparisons.

It was recently reported that Nick Faldo, winner of the Masters on three occasions, was investing in property in Bulgaria, while Gary Player, Ian Woosnam and Jack Nicklaus are all thought to be taking a central role in the design of several courses in the country.

With the ski resorts improving each year and the Black Sea regions continuing to draw tourists and investors alike, the added lure of properties around golf courses would seemingly add yet another dimension to Bulgaria’s growing property appeal.

The Bulgarian property market has returned to tendencies from two to three years ago, when increasing numbers of people bought terrains few kilometres off big seaside cities.

In 2004 this tendency led to property price inflation. Many people back then purchased large properties for personal needs at cheaper prices. Land has now become more expensive and owners started re-selling, tempted by the prospects of easy money, 24 Chassa reported.

Purchasers usually build small housing complexes and then sell to people wanting to live away from the densely-populated city centre. Brokers say one risk is that few people are ready to buy expensive newly-built houses such a distance away from the seashore.

People started searching for houses in remote villages with good infrastructure and good accessibility to large cities. The tendency is expected to grow, the most wanted estates being those in villages no more than 15km away from Bourgas and Varna.

Houses in the areas mentioned cost nearly 30 000 euro. Few years ago the same houses would have cost no more than 5 000 to 6 000 leva, but now that the main buyers are foreigners, prices rose significantly.

Foreigners usually buy the house and after some re-construction re-sell it at a price between 50 and100 per cent higher than the original one. Groups of British arrive with charter flights just to inspect such properties, according to 24 Chassa information.

Eastern Europe maintains its status as one of the most attractive property destinations, though investors are becoming more skeptical about new offers on the market.

Many property companies turn to Southeastern Europe because of the high income return, Dnevnik newspaper reported. In comparison to London’s return rate of five per cent, Ukraine’s reached 15 per cent.

Investors worry whether the small Southeast European market can accommodate all the capital currently inflowing from foreign investors. One of the clearest signals on investor intentions comes from Bluehouse Accession Property, which plans to invest in Bulgaria, though the company might postpone its decision.

According to bankers the previous year Bulgaria accommodated foreign capital eight times as much as the national investment volume. Yet, Financial Times presents a negative development, since companies take loans to finance property construction. This financial decision eventually increases property prices and pushes down the return rate.

Some analysers believe the market would soon be saturated as the funds invested in the past 18 months tremendously exceeds previous levels.

International and Bulgarian companies alike are increasingly interested in the purchase of quality office property in Sofia.

The tendency for companies to get office spaces in apartment buildings is becoming less valid. Though the price of property in office buildings tends to be higher, these guarantee various benefits apartment buildings cannot provide, Dnevnik newspaper reported.

Quality office areas in the central part of Sofia are getting fewer. This lower supply produces some new developments. An increasing number of companies look for office spaces alongside major boulevards in other parts of the capital to ensure easy travel and communication.

Some of the more important projects in the sector at the moment include Europark, an office building of the A-type. Most of the property in the building has already been offered for rent.

Additional major projects include the Porsche Centre and Technopark Sofia, located close to the Sofia Airport. The second project envisions the construction of four buildings, with the first one completed in one month.

Two new buildings are currently constructed and will be completed in the autumn of 2006. They belong to Business Park Sofia, the biggest such project on the territory of the capital. Business Park Sofia consists of 19 buildings and additional 11 constructions that are underway.

A foreigner buys a lift pass in Bansko for 50 leva, later a Bulgarian buys the same pass for 25. Every foreigner knows this feeling, of being cheated. Welcome to Bulgaria, where a few specific individuals make one pay much larger prices than citizens have to. Most countries in Europe do not differentiate prices by nationality; one pays the same price as everyone else. In Bulgaria, however, a prejudiced difference often exists, discriminating against foreigners. Discrimination is not the only aspect. A consequence is a negative image for Bulgaria. Another aspect is the abuse of a free market economy. The large difference in the range of Bulgarian and foreigner prices is unjust.

The different prices can be viewed as discrimination against foreigners, as well as a preconceived idea about relative wealth. By having different prices, Bulgarians imply that foreigners are richer than them, turning Bulgaria into a two-class society. However, there is not necessarily a justification for this preconception. As Martin Luther King said in his letter from Birmingham Jail in 1963, “Paul Tillich said that sin is separation,” and “An unjust law is a code that a numerical or power majority group compels a minority group to obey but does not make binding on itself. This is the difference made legal.” In the present case, it is not that we are talking about a law, but the principles are the same. The majority, the Bulgarians, inflict higher prices on the minority, the foreigners. This difference, though, not exactly legal, still exists. This injustice can be prevented, but instead foreigners are unknowingly prejudiced against.

Another aspect is that the government ends up with an unpopular image among tourists who plan to spend their time and money in Bulgaria. The government enforced a law, after several protests had been made. The law, however, has not been firmly applied, and so the pricing injustice continues. One may cite Henry David Thoreau’s essay Civil Disobedience, in which he says, “[The government] does not keep the country free. It does not settle the West. It does not educate.” He is right; the government does not worry about such insignificant matters as foreign affairs, as there seem to be more important matters at hand. The government does not bother with confirming the implementation of its laws.

The final evidence of injustice is that no one obeys the law about pricing, which is an abuse of the free market economy. As there are no specific regulations within the concept of the free market economy, businessmen can easily make lucrative profits off foreigners. Businessmen do not follow the law, in other words, do not keep the promises that they made when they set up a business. It is reminiscent of Patrick Henry’s speech at the Second Virginia Convention in 1775 when he said, “Our petitions have been slighted; our remonstrances have produced additional violence and insult; our supplications have been disregarded; and we have been spurned, with contempt, from the foot of the throne”. Businessmen ignore the protests against them, along with the laws that the government passes to stop corruption, much as the British government did in Henry’s time. Businessmen do not disregard the law or the government as much as the British government mocked the colonists of the 18th century, but in general, the comparison comes to mind. Therefore the injustice is continued, unjustified and illegal.

There is no real justification for the unfair difference between Bulgarian and foreigner prices; therefore this difference must be done away with. Both Bulgarians and foreigners should pay the same price, especially if Bulgaria wants to join the EU. All countries within the EU have equal prices, no matter who the person is or where he/she is from. The law against difference prices is an effective start, but only if it is applied. The government should work harder at enforcing it. Overall, if all consumers profit, businesses profit as well.

Lena Grosse
Sofia