Bulgarian Properties

The interest towards the Bulgarian property retail space sector continues to drive the construction of new shops and retail spaces. This is result of the constantly increasing demand and insufficient supply of retail and business spaces. Both small and large premises are high in demand. Rental levels in Sofia are between €12 and 25 per sq.m per month. The highest asking prices achieve €120 per sq.m. per month and include best locations and condition of premises.

There has been a 10-15% increase in the rental levels compared to 2007. The prices in Varna and Plovdiv are similar to those in the capital. A shop in the centre of Varna and Plovdiv can be rented at prices between €15 - 30 sq.m. per month. The development of large scale retail, office and entertainment project is Sofia (Mall of Sofia, Stroytown and Sky City) and later on in other major cities will have significant effect on this segment of the Bulgarian property market.

Sale prices of office and retail spaces vary significantly considering the immaturity of the Bulgarian property market. Prices in Sofia range from €400 to €3,500 per sq.m. Similar price ranges have been achieved in major city centers in Bulgaria - Varna, Burgas and Plovdiv. Total area with retail spaces in Sofia currently under construction is about 205,000 sq.m. and 130,000 sq. m. in Plovdiv.

Despite its significant growth this segment of the Bulgarian property market is still unsaturated. Not surprisingly most major retail operators still prefer to build their own centers than to rent.

The launch of the first low-cost airline WizzAir and the completion of the new Sofia airport have created a stir in the airlines community and companies are queuing to sign up new contracts for regular and charter flights to Bulgaria. Three new low-cost airlines are to start flights to Bulgaria within the next 10 months. The Italian My Air is planning to start low-cost flights from Sofia to Venice and/or Bologna. Prices will start from €1, excluding airport taxes.

Air Berlin is another low-cost airline which is about to launch its regular line from Sofia to Berlin. The company has an extensive flights network to most European countries, as well as Egypt, Tunisia and Morocco. The expected single ticket will be EUR19. The Slovak airline Sky Europe starts its regular flights from Sofia to Bratislava for about €70 return.

Easy Jet are also looking at the possibilities to establish Sofia airport as a control center for its operations in the region, as well as the Middle East. What stops Easy Jet’s regular flights from London to Bulgaria at the moment is the protective licensing regime operated by the Bulgarian government, in attempt to protect the national carrier which has regular flights from Gatwick to Sofia and Varna. After 2007 along with its EU membership Bulgaria joined to the Open Sky European Airspace Agreement, which means that governments will no longer be able to impose any protective business legislation and practices.

Two Chinese air companies (Air China and Hainan Airlines) are also serious bidders for a slice of the market. There is an interest also from the Qatar Airways, KLM and Cimber Air for opening new regular and charter flights to Bulgaria, which promises a busy year ahead. First Choice will start flying from Bristol and Glasgow too, along with its usual Birmingham destination.

Bulgarian properties 47% nationwide average growth in 2004 (highest in the world) has made Bulgaria one of the hottest investment destinations worldwide. Even though in the short-term a significant capital growth is still expected, the big question is how will the market perform in the mid- to long-term. Several are the factors that will shape the Bulgarian property market in the next several years.

Bulgaria mortgages have become widely available and accessible only after 2001. The Bulgarian bank system privatisation by German, Austrian and Italian banks was complete by 2001, which resulted in a total credit expansion of all banks including various mortgages tailored for the Bulgarian properties market. Bulgarian mortgages underwritten at the end of 2004 have reached BGL1 billion (€0.5 billion), which is a 140% growth in one single year. As part of the GDP though these mortgage and credit levels are still significantly behind those in the US and EU. Only 0.5% of all credits have become overdue which makes mortgages a very low risk venture. During 2004 interest rates have been reduced by 1.6% and are about 7.5% in Q3 2005.

Foreign investments in Bulgaria. These are investments in Bulgarian properties by foreigners and Bulgarians living abroad (20%/80%). Bulgaria is increasingly becoming a popular destination both for a holidaymakers and Bulgarian property investments. A drastic increase has also been registered of foreigners planning to settle down in Bulgaria on a permanent basis. Even though statistics are not reliable it is believed that in 2004 investments in Bulgarian properties by foreigners and Bulgarians living abroad have reached €1,050m.

Changes in Bulgarian GDP and the increased earning capacity of Bulgarians is still not a direct factor affecting the Bulgarian property market. During the 1997 - 2004 period, the GDP has more than doubled, with relatively the same pace every year. Bulgaria properties prices growth however, has been registered only after 2002, therefore increased GDP accumulated for 5 years to explode in 2002 and result in unprecedented Bulgarian properties capital growth during 2002 - 2004.