Lapping up the luxury

Earnings are on the rise in Sofia and Varna, and now people who are looking for new homes have higher expectations. The word ‘luxury’ has a number of meanings on the Bulgarian real estate market, but the first European-standard residential estates are already in the pipeline

Mladen Petrov

The Bulgarian property market is buzzing with news of new investments. Yet a quick study of what is on offer reveals that, apart from the many projects for the more popular lower to mid-range and improved standard flats, there are very few real deluxe apartments available. Marketing campaigns for the ‘home of your dreams’ are keeping the market on its toes, but the promised luxury is usually just an advertising gimmick.

Luxury Bulgarian style

Any attempt to determine whether a house or apartment falls into the deluxe category is quite impossible, if only because this market segment is only just emerging. What is called a luxury apartment is frequently classified as just ‘superior’ standard in the West. Vesela Ilieva, director of the Unique Estate agency that specializes in the sales of top-shelf properties notes: “Such is the current state of the Bulgarian luxury properties market that the criteria differ from those in other countries. But interest in such apartments and houses continues to rise. In short, offers in this segment are bound to be made in greater numbers and, in their wake, the definition of what luxury means will finally crystallize.”

Nikola Stoyanov, managing director of Lux Imoti agents, has noticed the first changes in developers’ approach to this issue: “Serious and experienced investors are beginning to appreciate the potential of this segment. They have sufficient background to carry out such projects compared to small companies looking for a fast profit.” In fact there is already a small number of Bulgarian companies, such as Artex, Fairplay International, Krit, Planex and Bord, which have projects in the deluxe properties segment, in Sofia and Varna first and foremost.

Sky-high rents

The growth in the earnings of young Bulgarians will soon help to swell the numbers of those seeking deluxe homes, shown by the currently soaring prices. Around a year ago, the cost of 1 sqm in newly constructed buildings in Sofia, which could be classified as deluxe, according to Bulgarian standards, amounted to an average of EUR 2,000; whereas today the price is EUR 3,000 – and even EUR 4,000 for 1 sqm is not uncommon. For comparison, according to data published on the imoti.net website, the average price for 1 sqm of housing in Sofia in March was EUR 1,080, while in a recent report from Reas and Jones Lang LaSalle (entitled ‘Residential Markets in Central European capitals’), Sofia led the field in terms of rising residential prices. Prices in Bucharest, Prague and Warsaw rose last year by 20 pct, while in Sofia they surged by almost 45 pct. The report stresses that despite more intense activity from Sofia’s developers, what is on offer remains limited, with the popular segment clearly dominating.

Since the supply of new investments remains small, those who are looking for an apartment often turn to the secondary market where real gems can sometimes be found. Those who are on the look out for something more luxurious can sometimes come across them in Sofia’s prestigious quarters, such as the Lozenetz district and the area around Doktorskata Gradina, where – we have been given to understand – “no price is too high”. Outside the centre, such districts such as Yavorov, Ivan Vazov and the vicinity of the Medical Academy, arouse considerable interest.

Few and far between

The most luxurious homes on offer can be found in Sofia and Varna. In Sofia, Unique Estates is selling apartments in 10 deluxe projects, at the price for 1 sqm starting from EUR 2,500. Lux Imoti claims that there are 20 top-shelf projects in the capital, mainly in guarded estates. Maximilan Mendel a consultant employed by the Reas consultancy agency, concurs that a luxurious apartment in Sofia does not necessarily mean the same as a deluxe apartment in Warsaw; nevertheless, he is looking to the future with a great deal of optimism. He comments: “The market in Sofia certainly has growth potential and there are going to be more luxurious projects. The question is – when? It took Poland 15 years to achieve truly luxurious standards, but Bulgaria and Romania will make up for lost time much faster. A rise in supply could be possible within 2 to 5 years, and even sooner should developers find there is a huge demand for such products.”

Pay and demand

The requirements which potential customers set developers are just the same as in other countries: classy location, easy access to the city centre (there are also many who actually prefer being in the city centre), low-rise, size, high finishing standard, pleasant neighbours, attractive surroundings and security. Assen Makedonov, Adis real estate agents’ managing director, offers this summary: “Location is all important for potential customers. In Sofia, deluxe properties often stand alongside dilapidated blocks and buildings, while the infrastructure also often leaves much to be desired. The districts which boast a good infrastructure are besieged by developers to the extent that green areas are starting to be swallowed up. Buildings are erected so densely that the original fine views are being blotted out. And an area without greenery is no longer attractive for deluxe apartments.”

Fenced, guarded estates have become something of a substitute for luxury in such conditions. A report drawn up late last year by the independent research company Industry Watch on deluxe properties, reveals that only one in five closed guarded estates in Sofia and Varna even approach the standard of luxury homes (i.e. access to tennis courts, golf courses and medical centres, as well as comprehensive maintenance of the estate). However two- and three-room apartments often dominate in such projects which, according to Industry Watch, go to show that these are rather a lower-shelf investment. It comes as a surprise to learn that four-room and larger apartments make up only 6 pct of all homes sold in fenced and guarded estates. Customers can expect a higher standard of finishing and equipping of their apartments, but only with an additional charge.

Sofia’s Zlota 44, or perhaps a house?

The fashion for apartment tower buildings has not yet hit Bulgaria. The first projects to develop luxury tower blocks are currently at the planning stage, but aim to bestow a new quality to the residential market – in a similar way to Warsaw’s Zlota 44. The first is the BLD Sofia Tower, a 13-storey apartment building to stand alongside the 5-star Kempinski-Zografski hotel in Lozenetz. The developer, Bulgarian Land Development, has set the initial price at EUR 3,500 per sqm. Although construction has not yet begun, the waiting list for apartments already amounts to 80 people.

The number of single-family projects is far greater, especially in Sofia. It must be stressed at this stage, that single-family houses and terrace buildings are all classified as dream homes, and are springing up at tremendous speed on the city’s outskirts. Patience is required when looking for such a suburban home, since the city’s infrastructure remains poor. Those who are not bothered by being stuck in traffic jams and driving on bumpy roads will find more such estates in districts such as Boyana, Simeonovo, Dragalevtzi, Malinova Dolina and Krastova Vada. The cost of 1 sqm of space in a new home is around EUR 1,200-1,500 but, as Vesela Ilieva of Unique Estates points out, a tempting price is not always the most important factor. She goes on to add that: “We encounter people who get annoyed because their property does not differ from the remaining houses in the complex and feel sure they have paid too much. In short, a large number of our customers look for something unusual, not necessarily in a guarded estate.”

On the ski slopes and the beach

Market researchers have also classified some locations outside Sofia as attractive. Some holiday homes in mountain and seaside resorts, such as Bansko, Slantsev Breg and Nesebar, offer ‘luxury’ in the true meaning of the word. Most of these projects have not been built with the greatest attention to quality, since the intention was a quick sale. But there are exceptions in the shape of really exclusive tourist facilities. Their high standard means the property owner can expect much greater rents, especially from foreign tourists. But Nikola Stoyanov, of Lux Imoti, argues that: “Another difficulty arises here. Some resorts continue to be one great building site, while the cramped distribution of the houses drives away many customers.” Sozopol on the Black Sea can serve as an example, where the construction of a complex of 77 single-family houses is under way, the price of one of these as much as EUR 1.5 mln. Other top-shelf offers cost around EUR 1.2 mln. It has also to be stressed that the two most expensive houses have already been sold, while a further two are reserved.

Those looking for a luxury spot on the Black Sea would find nothing outside Varna. Prices are slightly lower for new investments than in Sofia and rarely exceed EUR 2,000 per sqm, with closed estates arousing significant interest. This year and next we will see mostly closed estates being completed in Varna that are currently under construction. The most exclusive addresses for such investment, where penthouses of 250 sqm may be purchased, are: Sea Garden in the city centre, the Briz and Vazrazdane districts and the emerging estates near such resorts as Golden Sands. Analysts are of the view that top-shelf properties will continue to appear in Varna but it is highly improbable that their prices will rocket at the same rate as in Sofia.

The dreaming remainder

The remaining larger cities apart from Sofia, Varna and a number of highly popular mountain and seaside resorts, have little to show at present in terms of new apartments and luxury houses. The strong economic growth of medium-sized cities such as Burgas and Russe suggests that the first luxury projects will also be developed there. Nikola Stoyanov hopes that: “The remaining cities will also grow gradually. I feel sure that in around 8 to 10 years the Bulgarian luxury property market will be functioning more effectively.”

But it will take some time for that to come to pass, although the signals from the market indicate that developers should start tackling the issue now. n