Wed, 08/01/2007 - 13:09

Investors should be selective and anticipate popular areas beforehand

Seven months after EU entry, it's still difficult to analyse Bulgaria's real estate market because of the lack of reliable data. So I recommend buyers to discriminate and check out those areas with improved access routes. Recent extensions to Sofia's metro, including a line from Mladost to the airport, are the kind of developments that lead to increasing property prices and other bonuses such as the arrival of new low-cost airline routes.

I predict safe capital gains in all major cities, especially Sofia. Recent reports reveal that Sofia's residential apartments increased by an average 10 percent in the year's first quarter. The city's potential for above average incomes' growth depends, at least partially, on the recent influx of companies setting up call centres, back office process centres and IT outsourcing and services. With a global market for labour, the IT sector could be the path to the city's future prosperity. Large infrastructure projects and other propertyrelated sectors will trigger increased earnings and disposable income, helping to fuel demand.

EU accession has seen a sharp increase in foreign subsidiary companies starting up in Sofia as well as heightened interest in commercial premises. This bodes well for further price rises, even though a large amount of new stock is on the market. Perhaps surprisingly, Bulgarian and Russian investors are snapping up the bigger and better quality houses. This is an interesting trend and I would advise those seeking to buy a new upmarket building to find out more about the other purchasers. Wealthy residents often choose larger two and three-bedroom apartments and this may lead to a shortage of these types of properties in coming years. But I would also urge investors to choose somewhere you would be happy to live yourself. This helps you cut through the sales hype and ensure that your property sells when the time comes.

It helps to discover who has already invested in a new area, the amount spent and the factors driving future property supply and demand. Check out your fellow land or property pioneers by studying published information and using the Internet. When, for example, I researched the potential in Sapareva Banya - a Spa town near Dupnitsa - I discovered that a Russian buyer had bought over 110,000 square metres there. He was also planning to build an aqua park and a complex of chalets. I also read on the Internet that Rila Sport intended to buy land and erect a new lift connecting the town to an expanded ski area of Panichishte in the Rila Mountains. And other well established Bulgarian property developers were planning to follow suit.

Preliminary research completed, you can then visit your chosen location. A trip to Sapareva Banya takes 10 minutes from Dupnitsa and 50 minutes from Sofia. I found that a recently built dual carriageway links the Dupnitsa-Samakov road to the town centre. The streets and pavements are being upgraded and sewerage infrastructure is being constructed under the new road that leads up the hill to a picturesque development at the foot of the mountain. There was another good omen - the town's mayor, quoted on Bulgarian TV, said that he had heeded the lessons from over-development of areas like Sunny Beach and Bansko. Early indications point to an emphasis on low density chalets and houses rather than apartments.

You can undertake a similar approach elsewhere, enabling you to spot potential attractions early. I recommend combining your holiday travels with property hunting. My personal discovery was Koprivishtitsa, one and a half hours from Sofia. The town has attractive houses and no Communist-era type development, all set at 1,060 metres against a stunning mountain backdrop. It's also a top draw for Bulgarians honouring one of their most celebrated events - the April Uprising of 1876. Then there was Karlovo and nearby Sopot (two hours from Sofia), both impressive for their superb Balkan Range views and excellent access.

Some towns, cities and even whole countries now evolve very quickly from “undiscovered hotspots” to “a mature market” thanks to a deluge of publicity. The right purchase can produce spectacular returns but, needless to say, staying ahead of the game is tricky. I always recommend investors to approach with a “buyer beware” mindset and seek independent legal advice.

Purchasers often wonder if they should choose bigger or smaller developments. Doubtless, larger complexes can offer a feeling of safety in numbers but sometimes modest ones reap higher rents and occupancy levels. When you want to resell, apartments in smaller developments go faster and fetch a higher price because you are not competing with so many others in the same block.

Many new low-cost carriers have sprung up from Germany, Norway, Austria and other Eastern European countries, but the two biggest low-cost operators from the UK and Ireland, Easy Jet and Ryanair, are yet to announce routes at the time of writing. However, packed charter services have been flying to the Black Sea and this is likely to trigger further expansion in existing services. Of particular note is the new terminal at Burgas.

It is fair to say that rental returns in some tourist areas are patchy. More cheap flights are required to accommodate tourists who avoid packages and buy their flight and board separately. Those with premium locations are seeing the best rental and capital appreciation returns.

A recent trip to Thessaloniki has made me appreciate the importance of Greek tourism. When two new highways are completed in a few years time, Bulgaria will become even more accessible. A pint of beer in Greece can cost anything between five and eight euros and property is two to three times the price of Bulgaria. So the Sandanski area and possibly some of the Rhodope mountain villages, as well as the ski resort of Pamporovo, could be lucrative investment areas.

Finally, property investors who prefer to spread their bets and diversify their portfolio may care to examine Turkey. When I visited Istanbul and, more recently, Izmir, to finalise our launch developments there, I discovered great low-priced properties with a compelling growth history supported by 6.1 percent GDP growth last year. In addition, as of next January, 30-year mortgages will be made legal. With a quarter of the Turkish people under the age of 15, population growth of one percent per annum and good rental yields, you're likely to hear a great deal about this emerging market. Just remember that you read it here first!

Issue 11

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