Developers stay optimistic

The residential market is yet to progress

Somewhat out of touch with global financial issues and foreign buyers’ chill, developers are still the active side on the first and second home markets. Some of them reckon that the strong market development will follow in the next 2-3 years, especially in the urban residential segment.
"Supply in Sofia has grown by 40% compared to last year. While in 2003 we had only 2,000 apartments on the market and 5,000 in 2007, this year we expect this number to grow to 8,000 units," said Rosen Plevneliev, General Manager of Lindner Immobilien Management.
The General Manager of Winslow Developments, Ivan Mekushin, agrees that the country has still a way to go before the residential market peaks. He considers that both demand and supply have prospects to grow, mostly because of the low basis they have started from.
The General Manager of Spanish developer Martinsa Fadesa, Pablo Losada, alarmed Bulgarian developers to work upon the actual market requirements and not on expectations.
Besides problematic infrastructure, land price is also an issue that comes to the fore. All this makes projects more expensive some business plans inefficient.
According to Liron Or, of Engel East Europe, a residential development company in Eastern Europe, the problem with high land values roots into the fact that prices are formed on the basis of buildable square surface. Vendors boost prices to their maximum levels, which do not quite correspond to whether the market needs that much space.
Restricted lending will probably reduce the number of projects of poor quality and riskier developments as there will be a wide scope of projects to select from.
"The combination of more proper investors and more cautious financial institutions will bring prices back to normal levels," Mr. Plevneliev said.
Although foreign investors are active in the domestic residential market, they mostly influence the holiday homes one. After some very successful years of investing in Bulgaria, UK buyers seem to show less interest since the beginning of 2007. A slow-down and oversupply are also observed. Russian buyers, however, are a flicker of hope for the recovery of the segment.
The Executive Director of Bulgarian Land Development, Dimitar Savov, said Romanians and some Central European buyers also started to take interest in the holiday home market. Bulgarian investors, however, are still very few.

Pablo Losada, Martinsa Fadesa:
Now the major problems on the market are high land prices and local investors’ inflated expectations. The only way to tackle speculation is to obtain correct information about the zoning process from municipalities and public authorities.

Liron Or, Engel East Europe:
Because of speculative land prices, many investors refrain from buying. They think they should end up producing products of poor quality in order to make profits. On the other hand, customers go for better quality and materials, they want views and all these features require new approach to development.

Ivan Mekushin, Winslow Developments:
Developers in Bulgaria create locations and thus attract other developers to certain areas. Municipalities should be responsible for the development of new zones although this responsibility currently rests with developers. However, this is unlikely to happen in Bulgaria.

Rosen Plevneliev, Lindner Immobilien Management:
There are areas in Sofia where developers ask crazy prices. I do not understand how it is possible to pay 2,500-3,000 euro per sq m for a building that, although claimed luxury, if one had taken a detailed look at it, it would not had been what it should. I believe that the time when Bulgarian buyers will have a better choice of properties will soon come.

Dimitar Savov, Bulgarian Land Development:
We are now witnessing the market’s rearranging as a result of which only the largest and most serious players will remain. We should strive for beneficial cooperation between municipalities and developers so that projects would be successfully completed.

Milen Todorov, MSI Developments:
Planning is most important in a project. Proper location, quality and suitable concept are the essentials, which investors opt for and which are vital for their profits. Nowadays, buyers tend to be more sensible than they used to be two years earlier. Yes, there have been some mistakes done, but Bulgaria still remains one of the cheapest destinations in Europe.

Joseph Halbherr, ACR Hotel Experts:
If we try to look deeper into the value of a property, it can be created only by providing proper products and better services. We can be competitive only if we offer quality and products similar to those in other countries, but at lower prices. Properties have to meet buyers’ lifestyles and quality of life and services they need. And if they decide to sell the property they should be able to make reasonable profits. 

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