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Bulgaria Real Estate Investment Market to 'Take Longer to Pick Up'

It is going to take a little longer before the real estate investment market in Bulgaria improves due to the opportunities available at the moment in western Europe, says the managing director of Tishman Management Company.

"
A number of the American and European investors would prefer to invest in those markets than to be investing in the emerging markets like Bulgaria, where the additional risks are not truly reflected in yields,"
Julian Edwards, Managing Director of Tishman International Ltd. and Managing Director of Tishman Management Company, EOOD, said in an interview for Novinite.com and its "
International Survey: Bulgaria-USA."


Asked about how Sofia Airport Centre, co-owned by Tishman International Companies and GE Real Estate for Central and Eastern Europe, remained on track despite Bulgaria's deteriorating market conditions, Julian Edwards said:

"
When we commenced the development of Sofia Airport Center we had clear plans that we felt were achievable. We had financing in place, which has been maintained, and we have continued to be focused on the job at hand and have not varied from our business plan and goals."


He pointed out that Bulgaria offers foreign direct investors a good stable country to work within, a good, well educated work force, an attractive tax regime, lower or just the same risks and costs as in other parts of Europe.

Still the deteriorating economic climate has forced Tishman to stop looking at investment projects in both Bulgaria and Romania but the company is currently in the early stages of considering one or two potential investments.

FULL text of the interview with Julian Edwards [url=http:
//www.
novinite.
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Real estate overview

After the euphoria of 2007/08, which ended in an overpricing of Bulgarian real estate, the devastating effect of the crisis was felt in full in 2009 and partially in 2010. During this period, the number of transactions fell by about 40 per cent.

In 2010, real estate agents observed a progressive take off in activity which, has translated into increased global demand for homes, set against existing offers, consequently bringing forth transactions. Finally, the market appears to be returning to normal.

The "
remains"
of the crisis allow the rise of conditions for a pseudo-balance: a number of owners have to sell their properties, due to financial reasons, simultaneous with sustained demand. This creates a lot of opportunities to be seized.

The profile of real estate buyers changed in 2010. We observed a withdrawal of the investors (Greek, Irish and English) in favour of young couples with two incomes now making their first acquisition. Therefore, it is the small and medium apartments that are currently in greatest demand. With regard to purchase price, we notice that a great deal of sellers have not reflected on the general drop of the market value of their property, which tends to limit the number of transactions.

This phenomenon has been observed in most neighbouring European capitals that have weathered the crisis. We see a gap between the average price offered and the real underlying value of the property. The overpricing can reach 20 to 25 per cent, even more in some cases in areas like Lozenets, for example. Owners should have more confidence in their broker for the valuation of the properties, since the crisis allowed the best performing agencies to emerge. It is the real estate agent who, eventually, facilitates the transaction.

The absence of a device helping to access the property as well as the shortage of fluidity in the financing offers, make up, without any doubt, an additional breaking point influencing the number of transactions.

As far as rental properties are concerned, expatriate families have not abandoned Sofia, but they look more towards the southern suburbs of the city. In this context, Boyana, Dragalevtsi and Simeonovo remain sure values for houses or housing estates. Young bachelors or families without children favour the proximity to the city centre.

The offer of medium-sized apartments in Sofia is a long way from being saturated;
the result of that is a balanced price level in this segment, which is not the case at the high end of the market (big houses, apartments of standing) where the offer has considerably narrowed and the expected result is a slight increase in prices.

In our estimations, the crisis impact on the rental properties in Sofia is lower because the eventual decrease in rent is less dynamic than the one in investment. On the other hand, this market remains attractive thanks to the presence of expatriates, embassies, etc.

An investor can easily bet on a profit in the range of 6.5 per cent a year. Therefore, we encourage the individual investors, Bulgarian or foreign, to turn to the investment in rental properties in Sofia, insofar as on the one hand the tax system is, as everybody knows, extremely attractive and, on the other hand, the rates and conditions offered by agencies are competitive.

Some agencies, for example, have specialised part of their activity towards meeting the requirements of expatriates or foreign investors. Turning over the management of their properties to such agencies, the clients will be sure to find a sensible partner tuned to their concerns. One can find, particularly in renowned estate agencies, some brokers who speak two or more languages and are acquainted with the international environment.