The global economic downturn and poor management of investments have undermined the Bulgarian real estate market in the first half of 2009 with the office segment being the most severely hit, according to a new survey.

The commercial sector has been badly affected by ample supply and flagging demand, says the survey by Foros real estate agency.

Around 20 to 30% of offices across the country are empty. Rental and sale prices have decreased by 12.27% and 7.26% respectively since January.

The residential property market is also suffering. Jones Lang LaSalle has estimated the decline at 12% in Sofia in the last year while real estate agency Address puts it at 16 to 38% in the last six months alone.

Analysts from Foros are predicting sporadic investment activity in the second half of the year. Development projects will be delayed and a recovery is not expected until the economy improves.

However, some analysts see the green shoots of recovery in consumers’ revived interest and restored confidence, as well as in decelerated price downtrends.

Although there is dismay among environmentalists that what they regard as development that impact on areas of importance are still being given planning permission.

They are campaigning against a €2.2 million residential property development near the town of Kavarna in north east Bulgaria. They claim that the July Morning holiday village being developed by Bulgarian Land Development will have a serious impact on a site of natural beauty.

It is part of plans for a much bigger €40 million development that will have 351 homes, a spa centre, restaurants, golf and football pitches and five swimming pools.

Work begins on the €2.2 million first stage next month and it will have 55 apartments. ‘This development will destroy nature. It will also harm the coastline,’ said one group spokesman.

Meanwhile and Irish company, Blackwater Homes, which is currently promoting a 354 apartment complex in the Black Sea coast in Bulgaria, including a spa and a hotel, has filed for bankruptcy protection.

Serious property investors are now choosing not to invest in Bulgaria as the property market in this country is now saturated and property prices are expected to start decreasing soon as the property bubble has burst, local real estate advisor Alyona Frendo warns.

Experts are advising Maltese property investors not to continue with the dangerous trend of purchasing land and property in Bulgaria as investors may start losing money as from this year.

The main problem with Bulgaria is that everyone is building even with permission from Bulgaria’s permit authority and the Bulgarian Government announced that it will start tracking such illegal constructions and property. The authorities in Bulgaria are estimating that around 25 per cent of all property in Bulgaria is actually built without permit.

“When buying in another country, most people never do much more research than what is given to them from the investment company. This is a dangerous habit. Everyone between the potential buyer and the property is just a salesperson, and they all get paid on making sales.” said Alyona Frendo a local international property advisor.

Foreign citizens and companies have spent a total of 310 million euro in acquiring real estate in Bulgaria during the first three months of 2007.

Bulgarian National Bank data published on May 29 shows that the 310 million euro is an increase of 63 per cent compared with the same period in 2006 when foreigners spent a total of 190 million euro in Bulgaria’s property market. Proof of the impact that the real estate sector has on the Bulgarian economy is that the money spent on real estate accounted for close to 40 per cent of all foreign direct investment in Bulgaria in January-March 2007.

Bulgaria has also been criticised for focusing on the development of property at the expense of infrastructure projects, such as those for transportation.

The Bulgarian participation was not only numerically the strongest of all foreign countries at Domexpo. In the four days of the exhibition, visitors were virtually queuing at the Bulgarian booths to inquire about the offers and the conditions for acquiring property in Bulgaria.

Bulgaria seems to have stolen the attention of Russia’s wealthy, including from traditional destinations such as Spain and Cyprus.

This is hardly surprising, given the real estate boom in 2006. The supply side is there, it remains to be seen if demand will continue to be strong.

• Bulgaria and Romania would register the highest growth in newly build retail property by the end of 2007, a real estate company Cushman & Wakefield report said.
• The retail property growth would reach 150 per cent by 2007, the report said as quoted by the Romanian English language daily Nine O’clock.
• Trade centres covering a total area of 98 000 sq m will be built in Bulgaria by the end of 2007.
• Once Romania enters the European Union, it will become the second biggest retail property market in Central and Eastern Europe after Poland.
• Romania plans to construct trade centres of total area of 560 000 sq m.
• The countries from Central and Eastern Europe would register the highest growth in retail property supply, the report said.

Historical houses, in some cases over 200 years old, are looking for buyers as well. Calling it your Bansko home might not be as straight-forward as buying an apartment though.

In most cases, these properties are not actively on the market and are in a sorry state. The owners have passed away and the people who inhereted them don’t care much about the property itself. They are still interested in selling the plot itself (often at bargain prices).

There are a few of these houses nearby Bansko as well, in a small town called Dobrinishte. Dobrinishte is a spa and thermal center with 17 mineral springs. The temperatures of the springs range from 33?? to 45??.

Balkanstroy, the local construction company, will build a ski and golf complex near Bansko, South-western Bulgaria, said the InvestBulgaria Agency which is due to issue a First Class Investor certificate to the project. The 240 mln lev complex, located in the Kulinoto area, should be ready in 3 years.

Balkanstroy will built 20 km of ski lifts and 60 km of runs with a daily capacity of 6,500 skiers. The complex will have a total of 3,000 beds.
The golf component of the year-round complex will feature a golf course, clubhouse, hotel and retail facilities.

The new golf courses announced are part of the plan to turn Bansko in a all-seasons resort (complete with spas, horse racing, mountain biking, etc.).

Hopefully this will change the image of Bansko as a ski resort for yuppies (e.g. people working in Bulgaria’s IT outsourcing industry).

Investment in British property offered higher return rates and lower risk than a similar deal concluded in Bulgaria.

In the past months the situation in Bulgaria began to change. The annual credit growth decreased significantly from 36 per cent in 2005 to 13.9 per cent in September 2006.

Prices of property located in attractive regions, like Bansko winter resort, decreased during the second quarter of 2006, agents said.

Over-supply furthered competition between property owners, which also affected prices. Bulgaria’s rapidly developing tourism sector could not cope with this over-supply, Assetz analysts said.

Personally, I haven’t noticed a drop in prices for Bansko homes. At least when it comes for development projects. Prices for appartments and studios fluctuate quite a bit so it’s more difficult to identify a trend.

Bulgaria will join the European Union on Jan 1, 2007, and is on the verge of becoming the Riviera on the Balkans. The improved economic conditions, political and social stability in Bulgaria over the last 3 years have culminated in a real boom of the prices of property in Bulgaria.

Other important factor for the rising property market is the huge tourism potential in the country. Incredibly, Bulgaria is now the third most popular holiday destination after Spain and France for British holidaymakers.

There isn’t anything new in the review, the property market statistics have indicated a similar trend.

The other popular holiday spot for UK buyers is Bansko and the neighboring area. All in all, over 768 Million euro have been invested in real estate according to the agency. Maybe, as prices grow, alternative solutions might spring up, like home share.

The current favorite is Austria’s bid – Salzburg. In a couple of days, IOC is expected to select the initial short list of 2014 candidates. Hopefully Sofia will be among them. In the unlikely event that Sofia wins the bid, property prices in the ski resorts are expected to soar as millions of euros will go into infrastructure projects.

While Spain and such baked in temperatures of 37 degrees, Bulgaria was a pleasant mid-to-late 20s, so one could move around without fear of heat stroke and that propelled us into moving off our loungers and going into Varna to potter and get some culture in.

Bulgaria is not retail/spa posh in the way we in Ireland have become used to, but it is lovely and decent and rich in other ways. I want to go back and explore much more.

In terms of package holidays, Bulgaria is a great value – even better than Morocco. Go there now while it is still a bargain, because in 2007 Bulgaria is to due to enter the European Union, and those of us already living in high-priced euro land know you can kiss goodbye to it being a good-value haven.

We went only for a week but my eight-year-old son and I wish we could have stayed longer. No English language TV and we still hadn’t managed to get bored. Amazing.

Drilling deeper yielded more info: the winery wasn’t producing, rather it was producing vinegar. Earnings in the last year of operations – 250,000 euro on sales of 500,000.

The winery’s profit margin is healthy but where this monsterous P/E ratio is coming from. At 60 times earnings, it matches Google’s P/E and beats Microsoft’s by some 200%. Amazing.

Update: A Bulgarian real estate company will be listed on the main market of the London Stock Exchange. P/E yet to be seen!

There is a numbe of projects that are focused on building artifical “villages” in traditional Bulgarian style around some of the springs.

The house prices (per square meter) are significantly higher than those of similar houses in Dobrinishte or Bansko. If you’d like access to a spa at all times or you feel like getting some much needed rest away from people, such a village is a good choice.

As an investment property, such a house could bring in significant rent as the spas are getting more and more popular. Being just a few kilometers from Pirin National Park can’t hurt either.

Veliko Turnovo‘ s varied past is reflected in its architecture. Founded by the Romans, it was the capital of the Second Bulgarian Empire from 1185 to 1393, when it fell after a three month siege to the Ottoman Turks, who controlled the entire region until the late 19th century.

The town’ s natural fortifications are visually stunning. It is surrounded on all sides by the Balkan mountain range, from which the peninsula takes its name, and overlooks the Yantra River, which snakes through a valley far below.

The wooden Turnovo houses have white washed facades, oak balconies and roofs of red ceramic tiles.

In the past several years, about 10 Ottoman-era houses were sold to Britons intent on high-end restorations. Most of them were registered as national monuments of culture, so government approval was required before any changes could be made.

Some of the finest examples of Ottoman-era houses are in the village of Arbanassi, about five kilometers, or three miles, away on a hill overlooking the city. Because the entire village is classified as a national monument, the building materials are strictly defined: oak, sandstone, red ceramic roof tiles, traditional straw and plaster walls.’

You can live comfortably in a national monument of culture for only 20,000 to 40,000 euros, however the cost of restoration is estimated between 50,000 and 130,000 euros.

The common agricultural policy of the EU determines the quantities of different cultures that a member country can produce. So if you rely on some bureaucratic decision taken somewhere in Brussels, you may be unpleasantly surprised.

If you have invested, let us say, in vineyards, it may turn out that there is too much grain production in Bulgaria already and your production asset will bring you less income than you expected. This is where the basic advantage of funds lies as compared with direct purchase of land. Thanks to their bigger volume, funds can diversify their portfolios.

That’s an interesting twist on diversification when it comes to investing in agriculture. Next week’s tip: mix sheep, dogs, foxes, and hens to minimize risk

The low cost carrier WizzAir is also adding flights from London (Luton) to Sofia and Bourgas’ airports. The number of flights to Bourgas will be increased to 3 per week, once the summer season starts (June 15).

The overall increase in tourists flying to Bulgarian airports have increased 17% in 2005. A similar increase is expected this year.

With the ascension to the EU, Bulgarian wineries will once again stand a better chance to compete in the European markets. Not to mention that over 6 billion euros will go from EU coffers to Bulgarian agriculture projects.

The third factor which makes investments in wineries so attractive is the low land costs because there’s no actual market for land. Quite a few foreign (mostly French) companies have purchased huge blocks of land and started their own successful brands.

Here’s a snippet from The Prague Tribune:

Large foreign investments, the purchase of modern technologies, the arrival of young, well-educated specialists and traditionally favorable climate and soil conditions – these are factors that currently favor the formerly undervalued Bulgarian wines. Above all, red Bulgarian wines are scoring big at international wine tastings, and Czech and Moravian wine-lovers are once again returning to Mavrud, Melnik, Gamza and Dimiat…

One example is the Belvedere group which bought several state-owned wineries and transformed them to a modern winery that’s selling wine under the Domain Menada brand throughout Europe.

There’s a total of 3 (three) airports in Bulgaria that you and I can fly to. That’s Sofia, Burgas, and Varna. All other airports are either directly owned by the defense ministry or in the process of being conceded to a private party. It has taken 15 years since the fall of communism to see one of these “military” airports welcome a private company – even as a concession.

If you look at the map, you’ll notice that there are big red circles around these three airports. This is a zone that doesn’t allow more airports to be constructed. So in practice, if your project is not close to these three airports, you’ll have one helluva drive, considering the only highway starts in Sofia and barely reaches Stara Zagora (about 200km).

The design of the courses is being done by Ian Woosnam Design, working in conjunction with European Golf Design. The development company behind the project is Barage Complect, one of Bulgaria’s leading property development companies

I am extremely excited about this opportunity. Golf is in its early stages of development in Bulgaria and I am keen to be involved in helping develop the sport in the country. We aim to create world class facilities which will promote the game of golf and tourism in general. The backdrop to the Bansko site is spectacular and with mature pine tress and streams I envisage a rugged mountain look to the course. The Balchik site is very different, being on a plateau adjacent to the Black Sea coast with magnificent cliff top views.

So far this spring, the prices have stayed the same. An average project could take 18+ months to get from the drawing board to completion. An increase in the price of building materials frequently meant that the budget had to be adjusted quite dramatically (15-20%). The increased competition in the sector spells good news for investors who would like to better control their costs.