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General:  For the latest discussions of the real estate market in the Black Sea coast of Bulgaria, click HERE for the Bulgaria Realtor BLOG 

Winter 2007-2008 - Our February trip report is out now - a summary:

We took a look at the Nessebar - Sunny Beach area as well as Sofia, and found that what we have been reading (and reporting) is correct.  The market is changing in two ways: who's buying, and what they are buying.  Take a look at our report in the BULGARIA REALTOR BLOG.

Summer 2007 – Is the glance off the rose? (July 2007)

Our summer trip to Bulgaria and Nessebar is finished, and I would like to share impressions with you.

First of all is great relief that the Bulgarian nurses who were imprisoned in Libya for eight and one-half years are finally free, and home with their loved ones and families again.  Welcome home!  I will forego editorial content on this subject here – if you are interested in some editorialising (not just mine), please go to our blog at http://blog.good2004.biz.

Vacationers

First, some impressions about the people (visitors) at Nessebar this season: it seems to both Elena and me that there are fewer non-Bulgarians there this season, and particularly missing are the Brits and the Germans.  I was trying to figure out for myself why that might be, and I came up with the following hypothesis:

Vacation real estate is subject to fads, just like clothes, or more appropriately, restaurants.  One season, restaurant X is “in” and is jammed as a consequence, and six or twelve months later, it’s “out”, and is empty.  The same thing is true for vacationers, one year West Africa is “in” and the next year it’s Tajikistan or Thailand mountain resorts.  The logic?  Zero.  

My conception is that, this season, Bulgaria’s Black Sea resorts are no longer “in”, at least not 1000% like last year.  The basis for my conclusion is what we saw in the Nessebar-Sunny Beach area, and what we’ve heard about hotel occupancy.  Hotels this summer were “spotty” – some full, some with many vacancies.  The hotels with problems tend to be what I would call the marginal hotels – 2 or 3 stars, maybe 4 and even 5 star, but older.  Most of them lack the complete conveniences of the newer hotels, for example no pool or only a small one, no minibars in the rooms, only local TV and smaller units, faulty A/C, no internet facilities, etc.  The newer up-scale hotels with all the “mod-cons” (modern conveniences) seem to be relatively full.  They are usually larger, and most of them are integrated into some vacation organisation – Tui/Tomas Cook, Hotelplan, airline companies, etc.

I think that a second reason for the change in vacationer composition at the beaches is that Bulgaria can now offer more dimensions in the vacation market, mountains in the winter, smaller villages, self-contained resorts, etc.  Also, the offers are more up-scale.  Evidence of this are the statistics for the first six months of 2007, which showed a slight decline in the number of visitors, but a substantial (more than 15%) increase in the Euros spent.

Another phenomenon is that the Rumanians are coming to Bulgaria for vacation!  The reasons are somewhat varied, but they predominantly centre around price – Bulgarian resorts are less expensive than the equivalent Rumanian ones.  In addition, the Bulgarian accommodations are nicer, and the beaches are nicer as well.  There is a quote in one of the clippings that says, in essence, that the problem with Romanian beaches is the Danube, which spills the sewage of Europe onto the Romanian beaches!

The final part of this is that there are more people with apartments now!  Many of the people who bought apartments are not so interested in going out in the evening, preferring to stay at their summer home, cooking for themselves and watching TV with the family.  This is something of a backlash for the vacation hotels!

Market Shakeout?

There has been some press about the market shakeout that theoretically is taking place in the Bulgarian real estate market.  For my money (and that is what I’m investing with!), this is a minor correction that will be healthy for the industry in the long run.  There are many things coming that will help maintain the value of the current regional markets in Bulgaria.  Some examples:

Bulgaria has a lot to offer, and the total market is just starting to realise how much there really is.

Prices

The apartment prices (those are the interesting things for you investors out there) appear to have settled a bit, with increases of maybe 15-20% over last year for new apartments.  Now, nobody hesitates to talk about €1000-1200/m² and more for furnished luxury apartments.  My feeling is that the price increases have calmed down to a more-or-less consistent €/m² increase number rather than a consistent % increase number.  I’m convinced that this is only a temporary situation; prices will start up on a % increase basis again once the market shakeout has finished.

We’ve seen that buyers are becoming more selective in terms of location (remember the three most important things in real estate?  Location, location, and location!).  The market in central Sunny Beach has dropped a little in price, but new apartments in the less crowded area between Nessebar and Ravda are still increasing in price.  The table and chart below will give you an idea as to what’s been happening.

   
New Apartment Development

I wrote in the blog (http://blog.good2004.biz) about a new smaller apartment complex that is being developed by an associate of ours.  The complex is called “Hypnotic” and is located just off Nessebar’s South Beach. It will be available in late 2008/early 2009.  The English-language website is being prepared now (it’s not yet on-line, look for it by the end of August) at http://www.HypnoticBeach.com or just HypnoticBeach.com in most web browsers.  We will be investing in the project, and suggest that you should too.  Just tell them that you came to them via the website.  They will pay for your flight (from Europe) if you organise the trip through them and subsequently buy one or more apartments.  Buy now and lock in an attractive price!

Conclusion

Is the glance off the rose?  Definitely NOT!

P.S.

By the way, while we were in Nessebar, we stayed in a 1-star guesthouse with full meals for only €12 (BGN 24) per day per person.  There was no TV and no A/C and no minibar and no elevator (3rd floor), but it was close to the beach (150 meters), with parking (sort of), in the centre of Nessebar, and the fixed menu food was basic but nourishing.  We walked a lot, had time to visit with each other, to exchange thoughts about the day’s happenings in a “balcony party” most evenings, and I didn’t spend a lot of money on junk food!  I recommend this as well if you don’t need one of the mod cons mentioned above!  One shopping note: English- and particularly German-language books are almost the same price there as in the UK/Germany!

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Here we go again!  (end February 2007)

Elena and I were again in the Nessebar area the second half of February.  It was amazing to see the amount of construction going on!  Part of the crush must be due to the construction stop during the tourist season.  This is from the beginning of June through the end of August in most areas, but in some, to mid-September.  The rest of the construction is undoubtedly due to the popularity of the Nessebar Black Sea resort area, plus Bulgaria's new membership in the European Union (and the good weather while we were there).

We found the real estate market to be more fractured than before, with a much wider variety of properties available at varying "trim" levels (basic to luxury, bare, partially furnished, luxury furnishings, etc.).  Prices appear to vary from €800 to €1000 per m² (€75-90/ft²⁾ for a bare apartment close to the beach (or another tourist attraction) to as much as €1800-2000/m² (€165-185/ft²) for luxury-level furnished apartments.  Sizes seem to be trending towards smaller units as well (helps keep the total price down). 

To give an idea of the development of land prices in the area, Elena and I looked at a property in Ravda (the village next to Nessebar heading towards Bourgas) that had been offered to us in 2004.  In 2004, it was about 20 dekares (2 hectares or about 4 acres) of flat land with nothing on it except a few goats.  The attractive part was that it was parallel to the beach, and right next to the existing village, meaning that installation of utilities would be relatively easy.  The price was €35/m².  This year, we almost could not find where it had been!  The area has developed so much that all we could see was hotels along the beach and apartments and villas on the land itself.  It appears that the land today would sell at €350-500/m² (if it were for sale).

In other matters, we found a new development project that, at least for us, is quite exciting.  In itself, it's not so fantastic - another beach apartment project - but this one promises to be very good quality and still value for money.  The project is located on the South Beach of Nessebar, 5 minutes by car or public transportation from the main shopping district in New Nessebar, and only about 150m (500 ft) from the beach, with excellent access.  It will have its own pool and consist of about 40 apartments on three floors with small shops and medical practices on the ground floor.  In order to maintain our transparency, we have no financial interest in the project, but we have reserved three apartments for our own use.  We are also doing their website.  The manager and one of the owners of the project is our lawyer and one of our local real estate advisors.  We know the people, and expect a first rate job.  We will have the link to the project as soon as the website is online.

Take a look at some of the new clippings above.  The ones about "Natura 2000" are quite interesting.  Also, if your interest lies in the direction of small farms or houses in small villages, not necessarily on the Black Sea, contact us.  We have access to many such opportunities.  

We did not have the time to look into the situation between Sozopol and the Turkish border this trip.  We hope to cover this area in our next visit.

If you have questions or would like to discuss the present situation, or participate in our business, or become a client, please contact us at our contact coordinates.

Until next summer, 

Elena and Craig

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Elena and I were in Sofia and the Bourgas-Nessebar area towards the end of the summer, and things in the resort areas haven't changed much from last year.  The major differences are that things are a little more peaceful since the construction stop was in force in most places for the tourist season.  

Prices are still escalating, but the rate of escalation appears to be easing a little.  The changes now tend to be more on a contant Euro increase, rather than a constant percentage increase.  This still allows LOTS of room to make money in the real estate market!  Helping out in this area is the situation in Sofia, where the market seems to be stabilising (see the articles from 11 September and 2 October above).  A stable market there will reduce the amount of Bularian "loose" cash that is available to invest in the resort areas.  However, the driving force in the resort areas is not just Bulgarian, but also foreign investors who want a piece of the action for themselves, either as a resort apartment, or in some cases as a retirement home.  There are some communities along the coast where the predominant language is English or German!  Check out the clipping from 1 June above for some of the reasons that we expect the market to continue to grow!

Another interesting item is that the makeup of the tourists coming to the coast seems to be changing somewhat.  Many of the "new" tourists are from the Balkans rather than western Europe.  As an example, Nessebar/Sunny Beach is attracting tourists from south-central and western Roumania.  For these people, the Bulgarian coast is closer and warmer than the Roumanian coast.  As affluence grows in eastern Europe, it seems reasonable that there will be more and more people from the "neighborhood".

The newest trend in the Bulgarian real estate market (and in other eastern European markets as well) is serious commercial developments similar to those familiar in western Europe.  The clipping above from 27 July is just one example of what's happening in this area.  There are also major developments in farming districts, where lands are being consolidated to provide the basis for extensive business farming (for example, new vinyards covering 100's of hectares = 1000's of dekares).  These developments are also being pushed by the REITs (real estate investment trusts).  These operations are just not staffed to cover thousands of small developments.

For another trend, please take a look at the property listed as Beach of the Year. 

We were not able to look into the properties between Sozopol and the Turkish border this trip.  We hope to be able to cover this area in our visit next winter.

If you have questions or would like to discuss the situation, or participate in our business, or become a client, please contact us at our contact coordinates.

Elena and Craig

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"Amazing" is still the operative word!  (end February 2006)

Real estate in resort areas and large cities in Bulgaria is still a hot investment!  Elena and I were in Sofia, Sozopol, Nessebar, and Bourgas in January-February, and the situation as we see it is as follows:

In the Bourgas/Nessebar/Sunny Beach area, apartments have jumped to around €800-€1300/m2 for first row locations with a reasonable ocean view, finished except for furnishings and air conditioning.  Sozopol is about €100-150/m2 below that level.  The interesting thing is that essentially none of these apartments are intended as residential property by the buyers.

Some basics (again): 

Our opinion (February 2006):

We feel that the situation is not going to change significantly for the coming 3-5 years.  The year-on-year growth rate may diminish somewhat in terms of percentages, but the gains in absolute numbers (Euros) will still be very satisfying.  We do not feel that the hotel room situation will have a serious impact on the apartment market.  Buyers appear to be investing for their own pied a terre on the beach, regardless of whether they intend to rent it out or not.  This is especially true for Bulgarian residents (nationals and ex-patriots), primarily from Sofia.

Improving tourist transportation (new carriers and additional flights by existing carriers at Bourgas and Varna) will help increase the tourist room sales per season, and many tourist associations are pushing to have the season recognised as not automatically ending at the end of August.  We agree with this idea.  From our point of view, the tourist season for swimming and beach use stretches from early May through the end of September, more so in the south (centering around Bourgas) than in the north (around Varna).  As an example, we were able to eat comfortably outdoors most of our trip in the last week of January/first week of February (although it got VERY cold after we left!).  A potential winner from this could be the relatively isolated and undeveloped beaches south of Bourgas, approaching the Turkish border.  We intend to look into this area this coming summer.

If you have questions or would like to discuss the situation, or participate in our business, or become a client, please contact us at info@good2004.biz. 

Elena and Craig

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We thought it was amazing last year!  (20 August 2005)

The real estate situation on the Black Sea, as well as in Sofia and the other cities in Bulgaria has not cooled off, it's still blazing hot!  Elena and I were in Bulgaria in mid-July, and determined that the unit prices on the Black Sea have jumped again!  Our semi-scientific price comparison system (newspaper adverts, personal contacts, agencies, personal impressions, etc.) indicates that the following has happened since we started watching the prices in winter 2003/2004.  Note that the Bulgarian Lev is pegged to the German Deutsche Mark 1:1, and hence to the Euro at 1.955830 - our table uses 2:1 for simplicity without distorting the situation.  Since the end of last year, virtually all real estate prices on the Black Sea have been denominated in Euros, payable in Leva or Euros (or other currency).

As you can see from the table, the market has not cooled down!  The situation with foreign ownership has been clarified in the mean time, and very simply, is as follows:

If the link does not work, please contact Good 2004 for a more detailed legal explanation if necessary.

There are of course varying opinions concerning the "bubble" and whether and/or when it will burst.  The opinions seem to indicate, although with no great consensus, that the bull market will last at least for two-four years after Bulgaria joins the EU (planned for January 2007).  This is because it is supported by tourists who want their own piece of earth - or at least an apartment - in the fantastic Black Sea resort area.

Our plan of action at this point is to concentrate in apartments for short term gains, and in other land-based items for growth.  A mixed portfolio can help cushion the shocks, if any come along.

Some additional news links: (see top of the page)

Again, let us hear what you think!  Respond to us with comments, questions, or just interest for further contact at info@good2004.biz.

Elena and Craig

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Addendum (20 February 2005)!

After the meetings of the Bulgarian Parliament, it has now become apparent that the situation is somewhat more under control than before.  It appears that the formation of new companies by non-Bulgarians for acquiring real estate will be limited or prohibited until 2012 under new national law established last week.  Since Good 2004 Ltd. was established in 2004, we appear to be exempt from this regulation.  More to come....

Meanwhile, some news links:

http://www.globes.co.il/serveen/globes/docview.asp?did=908380&fid=942

http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_

view&newsId=20050419005919&newsLang=en

http://www.eubusiness.com/afp/050218113757.8fk1yl05

http://www.sofiaecho.com/article/real-estate-appreciating/id_10669/catid_23

http://www.novinite.com/newsletter/print.php?id=44865

Again, let us hear what you think!  Respond to us with comments, questions, or just interest for further contact at info@good2004.biz.

Elena and Craig

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We have just completed a trip to the Black Sea coast with the objective to determine what pricing trends are at the present time.  We were shocked!  The local property owners have found out that the market is alive, and growing rapidly.  The result at this time is that most, if not all, of the less expensive properties (more or less under Euro 100'000) have been taken off the market.  We approached three or four owners in various locations with the intention of acquiring their properties, and were told that they had re-considered, and are going to hold the properties for another two years (until 2007, when Bulgaria is scheduled to enter the European Union). 

In addition to this, the attitude has extended from the existing coastal vacation towns to small villages many kilometers from the coast.  In one small village about one hour south of Bourgas and about 8 km from the coast, the people have stopped talking about land prices in Bulgarian Leva (the Leva has a fixed exchange rate of 1,95 Leva per Euro), and are now talking land prices in Euros at a minimum of Euro 35 per square meter!  A property including a house and about 1000 m² (one "decar" in Bulgaria) sold for only BGN 14'000 (about EUR 7'000) in December 2004.  The next village (with a distant sea view) has already gone to Euro 40 per square meter with the only negotiation possible being upward for better views!  These prices represent an increase of more than 100% since December, when the same lands were going for 25-30 Leva per square meter!  In all cases, the prices today are essentially independent of any buildings on the property.

Current opinion inside and outside Bulgaria is that the increase in prices will hold for another 5-7 years.  This means that future real estate prices in Bulgaria will be out of sight even before the country joins the EU.  The only major downside potential that we can see at this time is if something happens to delay or stop the entry of the country into the EU on schedule in January 2007.  The social downside of this situation is that even the upper middle class Bulgarian will be put completely out of touch with real estate ownership; it will become financially impossible for him to buy property in the future.

Let us hear what you think!  Respond to us with comments, questions, or just interest for further contact at info@good2004.biz.