'British house prices might be in the doldrums, but isolated hospots around the world are bucking the trend.
Bulgaria has again topped Knight Frank’s quarterly global house price index, confounding market fears of
oversupply. It has reigned supreme at the top of the table since the second quarter of last year and notched
up annualised price growth of 31.5 percent in the first quarter of 2008 — far above a worldwide average of
6.1 percent.' reuters 30th May

What do people think?

Hi Ka,

Thank you for your post and for bringing up one of our favorite topics; Sofia!

There is still high demand for new, good quality housing in the Bulgarian capital as a lot of the old stock is of poor quality. I cannot comment on Knight Franks figures but the fact they show growth rubber stamps this as a great emerging market - just what Property Secrets promote themselves on!

I will speak to our analysis team later today in order to get some figures on demand and undersupply of middle and upper class housing. In the meantime, if you have any questions, please feel free to contact me.

Kind regards,

Martin
pdm@propertysecrets.net

I know about 4-5 people all trying to sell now in Bulgaria. It is changing from a sellers market to a buyers market.

Obviously you cant base a whole market movements on a sample of 5 people. However where property investment from UK punters has fallen by 40% as a whole then Bulgaria will obviously feel the effects.

I think when the new figures come out I think you will find that the market has turned, or at least is slowing very quickly.

I was reading the other day that the big German funds are avoiding Romania and Bulgaria like the plague since they consider the prices are now getting too high. But then there are always exceptions to the rule - which im sure Property Secrets will successfully track down those deals.

Hi Richard,

Are your friends trying to sell in Sofia or the Coast?

Martin

Three of them are coast, the other 2 are less friends but aquaintences and I am uncertain where they purchased, - but I will ask.

Best chance of selling is to target the Russian market - it seems they are near to overtaking the Brits in overseas property speculation.

When talking about Bulgarian property market most people have in mind holiday resorts as they have been aggressively marketed to foreign investors. I think is crucial to remember when talking about Bulgaria’s property that we’re talking about 2 different markets – holiday resorts (the coast and the mountains) and cities.

The holiday resorts are now going trough some serious problems including lack of re-sale market (and exit strategy) and falling prices. It has been always market driven by agents on high commissions and foreign buyers – predominately British and Irish encouraged by low prices and advertised high rental yields (turned to be unrealistic due to oversupplied). Russians are becoming more active, but in my opinion among them are fewer speculators as Russians usually buy holiday homes not investments (the Bulgarian coast has been always for them one of the traditional holiday destinations).

The cities are totally different markets, markets driven by locals. We believe that among Bulgarian cities, Sofia has the highest potential for further price growth – it is the strongest economically city in the country and leader recipient of FDI flowing into Bulgaria. Here middle class is growing in numbers and the demand for new apartments is very strong as the housing stock in Sofia is predominantly poor quality (panelaks) and the housing shortage is estimated for some 80,000 units.

At the same time prices are still relatively low (off-plan don’t exceed €1100/ sqm) if compared to other CEE capitals (in Warsaw for example new build costs on average €2500/ sqm), which indicates potential for further price growth. We can see prices in Sofia growing at good pace.

According to the Statistical Office (the only official price index in Bulgaria) secondary property market in Sofia grew by 35% in 2007. Our research shows that new builds increased 25% in 2007 and similar growth could be expected in 2008.

As we have two different markets in Bulgaria, price growth figures on national level are meaningless (as in most property markets).

Anna

What typical gross and net yield can be achieved in Sofia?

The problem I have with investing in CEE at the moment is finding anywhere with a good enough yield to make it worthwhile.

Tom

Investing in the CEE is more about capital growth, the yields all seem to be lowish but the returns a few years down the line should be excellent.

Regards


Jason

Jason,

my point is how can a property on a yield of around 4.5% gross/ 3% net yield (i.e. the latest Czech deal) produce any further capital growth?

The reason the yield is so low is that the property has already gone up significantly in value. this would mean that future capital growth over the next few years will be low- Unless the rental is increasing significantly to match the capital growth per year (i.e. at least 30% which I very much doubt it).

I live in Dublin and yields are possibly the lowest in the world at 3%. What happened? A crash. Prices are already down around 20% and still falling.

Yield is everything. find me a yield of 7% or higher in CEE and I would invest.

Tom, are you thinking of investing anywhere at the moment, would be interested to know where......

on the subject of rents, you get amazing yields in amsterdam, I have a 120% mortgage fully covered with profit, but I guess that is counter balanced by slow growth......