Perfect to a tee

Golfers should be delighted with the number of residential developments integrated with golf courses springing up 
all over the region. The number of people interested in buying such properties is growing too and investors are looking ahead to a rosy future. But is this optimism well-founded?

Mladen Petrov

Some speak of a crisis. Others prefer to call it ‘market normalization’, while a third group talks of a ‘momentary wobble’ or ‘correction’. Regardless of the term used to describe the current state of the residential market in Central and Eastern Europe, one fact is indisputable: homes are no longer selling like hot cakes, leading to much unease among developers and investors. But a close look at the market reveals that there is one such group which has much less to worry about than others. These companies have fallen in love with a sport which is often regarded as the very quintessence of tedium and snobbery – or least they feel that they have found a promising niche. But are residential developments with golf courses really such an extravagance? Perhaps not, as developers are now competing for a market estimated to be worth USD 7 bln. Paweł Lewiński of the Golf Poland consultancy and project management company, claims that this market in Central and Eastern Europe is growing at an annual rate of between 15 and 20 pct. So all you have to do is put your foot in the door.

Swinging a golf club

Hanna Siek-Zagórska, president of the board of TS Invest, almost lives on a golf course. She stresses that: “I reject the stereotype that golf can only be played in Britain. A group has emerged in Poland, due to the social transformation, who live on a more prosperous level and who can afford regular foreign travel, but who prefer to make the best of life in Poland.” It is to satisfy their needs that golf courses of an international standard are being created. There are already 12 full-sized facilities existing in Poland, with at least twice that number of smaller courses. Excavating machines will soon be moving on to the grounds of one of these – the Sierra Ivory Club in Pętkowice near Wejherowo in the Pomerania region – to prepare for the construction of a number of apartments. Are golf players complaining about having their playing space reduced? Ms Siek-Zagórska remarks that: “Managing golf courses is not very profitable in itself. The money starts rolling in only when apartments are built on the course.”

The Sierra Ivory Apartments project is being developed on the golf course itself, to allow future tenants a fine view of the action, which can easily be reached on foot. Future inhabitants of the Valley Golf Village being constructed near Kraków, on the premises of the Kraków Valley Golf & Country Club, will also be able to take a stroll in their golf shoes. Golf magazines can be found on every desk in the Warsaw office of the project’s developer, Maexpa. The titles vary, but all are published in Poland. Joao Teixeira, Maexpa’s managing director for Poland, is convinced that “the popularity of golf can only grow in Poland, so I can only feel optimistic with regard to the future of golf-course based homes.”

By virtue of location, as well as such strong points as proximity to areas of natural beauty and distance from the roar of city traffic (although not too far away), golf courses make a good address. And there is also the presence of interesting people and security. Such projects, however, are not the usual guarded housing estates common to every city. The quality of the flats – or rather of the apartments – are just as important as that of the golf course itself. The term ‘apartment’ is used in Poland to refer to a flat bigger than 100 sqm, of turnkey finishing standard and of a price usually greater than the average for that location e.g. 
PLN 12,000 for the first stage of TS Invest’s project, whereas the average price in Gdynia is 
PLN 6,863 per sqm, according to a report published in June by Expander and Szybko.pl.

Tiger Woods could live here...

The question, of course, is who is the targeted customer for such residences? Hanna Siek-Zagórska suggests that: “Clearly you must have the soul of a golf player to appreciate such an address, but we are open to anyone who may come along. Anyone, but in particular those who have successfully passed through our selection process. We look for people with legitimate business interests.” For this project the developer is planning 455 apartments in 65 small, attractive buildings. The first and second stages will see 25 apartments built, although the investor has not yet managed to sell a single one. However, eight of them have been put on the reserved list.

It might seem to be a mistaken sales strategy for such properties to restrict the target group exclusively to golf enthusiasts, but it turns out that this is a group that it would be foolish to ignore. Sweden may serve as an example here – a country with a small population, but with more than 200 golf courses and with Swedes very willing to travel, despite having so much of their sport on their doorstep. Joao Teixeira explains why: “It often happens that in a group of 10 golfers, each one of them owns a second home in another country and they frequently lend them to each other. In addition, they are not guided by any pre-conceptions and can buy a second residence in any country whatever.” He goes on to reveal that among those who have bought homes in Kraków Valley Golf Village (166 apartments, 30 of which have been sold), apartments have been bought by some who will settle there permanently. Maexpa’s president notes that: “It is nearer from here to the emerging Kraków business district than from the city centre. We assist those who want to lease their property by helping them to find tenants and manage their property.”

...which would be fine, but failing that

People who may not be especially interested in golf can also be counted among this group. Ekaterina Kolchakova, a market analyst for consultants Arco Real Estate Bulgaria, feels that: “At the end of the day, Golf provides an excellent excuse for people to meet. Potential customers are also attracted to such projects by the reputation of the developer.”

A third group comprises temporary residents who often regard such purchases as an investment, with renting potential in mind. Hanna Siek-Zagórska of TS Invest believes that: “Residences treated as so-called second homes are becoming more popular in Poland, although I am sure there will come a point when the time spent in such a home will lengthen until it becomes the main residence.”

At the seaside and on the ski slopes

Buyers can also be found from abroad. They constitute the main target group in Bulgaria, but in Poland their potential is still not appreciated. Portuguese-based Maexpa advertises its Kraków estate through its British, Portuguese and – since recently – its Russian branches. Joao Teixeira points out that: “Paradoxically, it is easier to attract the British than Poles to Kraków. Polish customers are still under the illusion that the best addresses in terms of investment are the centres of large cities; whereas, in the case of the British, and particularly for golf players, travelling and owning a second home abroad are absolute musts.” Arna, the Warsaw developer of Mazury Residence Airpark & Marina, on the east bank of Lake Niegocin, is also counting on attracting German and Austrian customers.

Confusion on the real estate market is also evident in Bulgaria in the form of the sharp fall in the number of potential purchasers of holiday homes from Britain and Ireland. Colliers International Bulgaria’s most recent report on holiday homes for the second half of 2007 also points to a positive trend, despite the worrying figures that show falling sales: on Bulgaria’s northern coast, of particular interest to Romanians looking for holiday homes and where there are more golf and residential projects than in the south, sales slumped by only 5 pct, while the fall was around 15 pct in Sozopol in the south. Ekaterina Kolchakova suggests that: “There is just one condition – a sales offer must include more than four bare walls. Golf links and attached houses are an excellent way to promote Bulgaria as a top-shelf tourist destination. Now the days of easy earnings are over – when anything could be built along the Black Sea coast as long as it sold easily – a positive trend has started to emerge. New projects are becoming much more sophisticated, while the presence of attached golf courses automatically means a project is targeted towards a more discerning group of purchasers.”

Will buy a reasonably priced home

More than 20 golf courses are currently under construction throughout Bulgaria (110,910 sq km, population 7.6 mln). Depending on how you look at these figures, this is either quite a lot or very few. The country of the golden sands has a long way to go before it becomes a golfing power, but when you remember that such ventures have only been on the scene for about three years on a significant scale, then these figures do give grounds for some satisfaction. As in Poland’s case, the prices in such projects are somewhat higher than the average for holiday properties – EUR 1,200 on the coast and EUR 1,300 in the mountains. Golf buffs have to cough up between EUR 1,700 and 3,000 per sqm for a coastal apartment in the direct vicinity of a beach, depending on the number of available apartments or houses, as well as such additional attractions as spas, tennis courts and country clubs etc.

The Bulgarian market seems promising, but in the north of Europe dark clouds are gathering above Estonian golf courses. Lembit Kask of the Ober-Haus agency\'s Estonian branch, who happens to be a golf enthusiast, tells us why: “Estonians are for the moment not even thinking about buying a home. When you take a close look at the high costs for such developments it becomes clear why the number of golf and residential projects can be counted on the fingers of one hand.”

Green grass costs a lot

It costs between EUR 25 mln and 100 mln to develop a comprehensive golf and residential project in Bulgaria. Balkanstroy, a company which currently has three projects – including the Lighthouse Golf Resort to the north of Varna – will need to spend almost EUR 500 mln on that project alone. A full-sized golf course needs to be between 80-ha and 100-ha – but this is just for starters. Wojciech Dziewulski, board president of Sand Valley Golf & Country Club, a residential and golf course project being developed in Pasłęk in the Masurian lake district, remarks that: “The truth is that a golf course is a delightful facility which generates only a small profit on its own. What is required is a second line of business, usually properties.” This second line of business needs another 100-ha. When a suitable piece of land has been chosen, the second major cost – its landscaping – comes into the picture. The list of the world’s best 100 golf courses includes 75 created before the Second World War, without the intervention of humans and machines. Wojciech Dziewulski admits that: “Today, the land has to be shaped to give it a somewhat undulating character.” And to that must be added the cost of constructing a country club to serve as the main meeting place for club members. It costs at least PLN 2 to 3 mln to prepare a small golf course, but such projects usually require 10 to 15 times that sum. Specialists estimate that the average price of a golf course with buildings in Poland is around PLN 12 mln, plus the cost of employing western golf course designers, since there are no architects with experience in this area to be found in Central and Eastern Europe.

Where to build

The greatest interest among investors in Bulgaria is focused on plots in ski resorts, along the coast and near Sofia. But exceptions do exist – Air Sofia is investing in Sliven and Razgrad, two smaller towns that have yet to generate any substantial interest from investors and potential purchasers. Local councils are already cooperating on si