Real estate breaks record
The Sofia Echo, 1-7 July 2005
THE Wall Street Journal reported in June that the prices of real estate in Bulgaria jumped 48 per cent last year, a world record and the highest rise in prices registered in any country.
Even the most developed countries have seen drastic price increases in the last three or four years. Though surprising, the rises in Bulgaria were part of global trend.
"Over the past three years, measures of housing values are up 48 per cent in France, 33 per cent in Brazil and they have nearly doubled in South Africa," the journal wrote. "In just the past year, prices have risen 19 per cent in Hong Kong."
The newspaper said that low interest rates were the main driving force behind the boom. But there are several other factors, including the intensifying flow of capital, aggressive bank-lending and a frantic search by investors, large and small, to find better returns than those offered by stocks and bonds.
Foreign capital is behind a serious part of the Bulgarian real estate boom, according to surveys in June. Bulgarian companies have invested more than five billion leva of their own funds in real estate during the last two-and-a-half years, according to a report by Creditex, a credit management agency. Much of the money has been poured into high-end residential property.
In past months, real estate agents have had some disagreements about the domestic market, with some saying that a drop in prices by 20-25 per cent is expected in the second half of 2005 and others saying that market segments, such as luxury housing, will continue to rise because demand still outmatches supply.
Most realtors agree that prices for agricultural land will rise the fastest when the country joins the European Union.
Two large-scale investments by foreign property developers in Bulgaria attracted attention in June. First, the UK-based fund Equest Partners announced plans to inject 50 million leva to support the growth of domestic supermarket chain Familia, which aims to become a major local food retailer.
Equest handled its move through its Equest Investments Bulgaria fund, which acquired slightly more than 30 per cent in Familia with a hike in capital.
The fund agreed to contribute more investment in the next three to five years if Familia needed further backing for its development. Familia said it would invest money by opening new stores, training staff and developing better knowledge, products and services.
Familia has 17 stores in Sofia, where it competes against major foreign supermarket chains like Billa, HIT and Metro and Bulgaria's Evropa and Fantastico. Familia's goal is to promote convenience.
The fund, which has raised 120 million euro for investment in the country, has so far invested 70 million euro in equity in four companies in real estate and auto sales. The fund now plans to invest in the financial services sector.
Bulgarian Property Developments, which is traded on the London Stock Exchange, bought six properties in Bulgaria, five in Sofia and one in Bansko. Four of the properties are on Sofia's ring road, close to the airport, and the fifth less than a five-minute drive away. The property in Bansko will be used, according to a preliminary plan, for an apartment complex. The company plans to buy properties in other cities.
The property exhibition Immobilia Bulgaria in Varna, set to open on July 5, will sell property all over Bulgaria. The Sofia Echo is one of the exhibition's media partners and will be an active participant in the event.
Developers, architects, banks, realtors, analysts and property renovators will be at the exhibition which runs through July 9.
Immobilia Bulgaria will next appear in Bourgas from August 18 through August 21, and then in Sofia in October. In 2006, the fair will take part in the spring edition of the Plovdiv International Fair.