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Sofia's Residential Property Prices to Go Up in 2011 - Survey

The prices for residential properties in the Bulgarian capital may slightly increase in 2011, according to forecasts by realtor Colliers International, published on Wednesday.

The analysts also pointed out that the gradual improvement of economic indexes in Bulgaria will result in an increased demand and shortage in the supply of residential properties in the middle and high class.

Projects in the middle and high-class include characteristics like attractive location, good quality of construction, easy access, green areas, functional arrangement of the rooms, parking spots, professional maintenance of the property and good infrastructure in the region.

However, the most important criteria for choosing a residential property, according to the experts, is safety, followed by quality of construction and professional maintenance of the property.

According to Colliers, the number of buyers with good income, who are looking for luxurious homes, will increase. If that happens, however, there might be a shortage of apartments with 3-5 rooms and small family houses.

The survey has showed that the price per square meter in such residential properties in 2011 is expected to vary between EUR 1000 and EUR 1900.


Could be promising if they are right

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Sofia Housing Market Shows Strong Signs of Recovery

The January 2011 sales of housing properties in Sofia are up two times compared to January 2010, according to data from the real estate agency Bulgarian Properties.

The company's Operational Director, Polina Stoykova, quoted by the Bulgarian daily "
Dnevnik,"
says data about deals concluded in January of 2011 shows this has been the strongest first month of the year in terms of sales in several years to pass.

The Director explains the common trend is for the sales to go down in the beginning of the year, adding the numbers are a good sign for the real estate market as a whole.

In January, buyers were mostly interested in one-bedroom apartments with a listing price of up to EUR 50 000;
followed by two-bedroom units between EUR 75 000 and EUR 80 000, and by luxury apartments with prices between EUR 120 000 and EUR 300 000.

Considering the average income and the price reduction for housing units, apartments in Sofia are way more affordable compared to 5 years ago, according to Stoykova.

Data from the National Statistics Institute (NSI) shows that housing prices in the capital are at the 2005 level while the average income of 1 employee after inflation deduction is 65% higher compared to the same year.

In 2005, an individual was able to afford with their monthly income about 0.4 square meters of housing in Sofia while in 2010 this number is 0.5 square meters.

For example, a 70 square-meter apartment in 2010 could be paid off in 11 years or 132 monthly salaries. In 2005, these numbers have been 14.5 and 175 respectively;
in 2000 – 9 end 107.

The lowest purchasing power was registered in 2008 – 0.3 square meters in 19.5 years or 233 monthly salaries.

Apartment prices in Sofia have fallen by nearly 33%, compared to their peak in 2008, according to NSI data, and 31%, according to Bulgarian Properties data. The reduction, however, is nearing 0 since the second half of 2010, meaning the real estate prices have already hit their bottom.

Stoykova's forecast is for a continuing strong interest on the part of the buyers in Sofia over the expected relocation, (triggered by better wages), of highly educated people and business people.

Are there any predictions available for the long term outlook for property prices in Sofia?

This is what Colliers have to say hope it helps.


"
Our expectations for the first half of 2011 are to be as challenging as 2010 was. The second half of the year will mark the upswing in almost all real estate segments,"
said Atanas S. Garov, Managing Director of Colliers International Bulgaria.

"
We are positive that new players will be seen this year which will bring liquidity to the market and will define its development in the medium term,"
he added.

Over the past year, Bulgaria's property market has gone from being one of the best performing in Europe to one of the worst performing.

In 2011, demand in mid-plus and high-end residential real estate will continue to grow as the Bulgarian economy gradually improves, according to Colliers, one of the world's leading real estate services organizations.

There is a clear expectation that the residential market has reached the bottom in terms of sales prices. Some developers might even consider adjusting prices in 2011, reflecting the steady demand and what is seen as a potential lack of supply as the pipeline empties.

The improving economic indicators, favorable lease rates and the general positive outlook for businesses are likely to further lead to expansions of office premises. Most demand has been driven by relocation needs, while many tenants took advantage of the attractive rental rate level for high quality office space in communicative locations, and this trend is likely to continue in 2011.

Supply of new office space in Sofia reached a new peak in early 2011. The market grew by 150,000 sqm, predominantly Class A premises. According to Colliers, inventory is expected to mark the same increase during the first half of 2011. As a significant number of lease contracts expire in 2011, the number of transactions is likely to increase.

In the retail sector, the major international players are expected to stick to their expansion plans in 2011, while the local and smaller operators are likely to be more cautious, focusing on optimising costs. Future demand is expected to come from three main segments;
soft cash &
carry, convenience stores and lower-end fashion retailers.

Looking at the business outlook for Bulgaria in general there does seem to be a lot of investment coming in from outside places like China and even Sweden I thing with this kind of investment moving in can only be good all round for all including the property market so from my point of view the outlook is bright but at the moment I think its a difficult time with all investors hesitating and wondering who is going to make the first move but once it starts I do believe it will have a domino effect and the economy will be kick started once again.

To add to what Jane has said we have to remember that Bulgarian property has suffered badly at the hands of the downturn, mostly because it started suffering long before the crisis began. In 2007 Bulgaria property prices began to fall sharply, as it became apparent that yields were not going to be as high as predicted because of over-supply in the rental market. This realisation led to thousands of foreigners all seeking to sell up at the same time;
the rental oversupply became sales oversupply and choked the life out of the market. Now Bulgaria is attracting attention again, because what was always some of the cheapest property in the world is now even cheaper.

Andy wrote:

This is what Colliers have to say hope it helps.

Not much help really as I was thinking in terms of the next 10 or 20 years but thanks anyway.

nu2bg wrote:

Looking at the business outlook for Bulgaria in general there does seem to be a lot of investment coming in from outside places like China and even Sweden I thing with this kind of investment moving in can only be good all round for all including the property market so from my point of view the outlook is bright but at the moment I think its a difficult time with all investors hesitating and wondering who is going to make the first move but once it starts I do believe it will have a domino effect and the economy will be kick started once again.

I agree with you nu2bg about the domino effect. That's what happened in 2004/2005 when Brits started buying in large numbers because others had already bought......................Now that the market is at bottom, I think we can expect something similar before the end of this year. Let's hope so, anyway.