The supply of mountain and coastal holiday homes in Bulgaria increased by more than 50% in the past six months reported Colliers.

Small resorts continued to gain market share as new supply is shifting away from most popular locations.

The holiday homes market experienced significant growth in 2006. More than 26,000 apartment units were added to the overall supply in resort areas bringing the total to more than 53,000. Bulgaria has emerged in recent years as a hot spot for holiday homes.

The major factors driving demand are the EU accession and the growth of the tourism industry. The latter is supported by the ideal landscape and climate favoring both coastal and mountain holiday homes developments.

The low real estate prices compared to other countries is also a major driver. It should be noted that buyers have become more demanding in terms of quality, added services, and development features. The demand is predominantly comprised of private individuals from UK and Ireland, followed by Bulgarians living or working abroad, Russians, Germans, and Scandinavians etc.

Also a small portion of the initial demand is created by bulk purchasers who distribute the purchased units in their local markets. In highest demand are one-bedroom apartments (with size between 40 and 50 m2) and two-bedroom apartments (with size between 70 and 80 m2).

The latter complies with the prevailing consideration that buyers take into account when buying vacation homes, namely the overall investment size. Lately, some preferences have shifted towards detached and semidetached houses in compound developments.

The coastal vacation homes market also experienced significant growth in the past year. Most of the supply continues to be concentrated in the popular Sunny Beach resort area, which also includes St. Vlas, Elenite, Nessebar, Ravda, Kosharitza, and Aheloy.

The share of completed developments in the overall supply increased during the last six months.

However, new supply has started shifting to medium and smaller resorts due to the sharp increase of land property prices, the difficulties associated with land consolidation, and the market saturation in larger resorts.

The growing demand for exclusivity and privacy of the properties is also contributing to this trend. Vacation homes supply on Bulgaria’s Black Sea coast amounted to almost 35,000 units by the end of 2006, which represents a 54% increase during the last 6 months of 2006.

Mountain Resorts The mountain holiday homes market experienced significant development in the past year. Supply of homes in the mountain regions is mainly associated with developments located in Bansko. However, more new supply is expected to move to Borovetz and Pamporovo.

The reason for this is the sharp increase of land property prices in Bansko which stimulates developers to invest in other resorts. Furthermore, due to over-construction the current capacity of the infrastructure in Bansko is reaching its limits.

The overall vacation homes supply in Bulgaria’s mountain regions amounted to more than 18,000 units by the end of 2006, which represents a 53% increase compared to June 2006. Developments in the mountain resorts range from premises offering fewer than 10 units, to resort complexes featuring as many as 400 apartments.

Supply has been growing faster than demand during the last year. However, high-end sales prices of holiday apartments marked a slight increase due to newer developments initiated mainly by international developers targeting international buyers with higher quality of construction, services, and amenities.

Prices of second homes vary according to several criteria, the major ones being location, quality of holiday resort and complex facilities, and stage of completion. In general, most prices fall between EUR 800 and EUR 1,600/m2.

However, some developments are offered at levels in excess of EUR 2,000/m2. Sales prices also vary according to the development status and level of completion. When offered off-plan, second homes cost approximately 15% to 30% less than when finished. When offered during rough stages of construction, apartments are sold at prices 10% to 15% lower than the original ones.

Supply of holiday homes is expected to increase at a slower rate in the future. The share of small resorts in the overall supply is expected to grow in the years to come as popular resorts have become less attractive for developers due to overconstruction. The quality of construction, services, and amenities will also continue to improve.

The greatest potential driving forces of future demand are improvements of infrastructure, as well as of professional management services with regard to the apartments offered. Sales prices are expected to remain stable or mark a slight increase in the high-end price range as the market has become relatively mature and driven by buyers who value quality and exclusivity.

Economic growth In Bulgaria remained stable – GDP growth at the end of the third quarter of 2006 reached 6.7% year-on-year. After achieving values as low as 2.2% in September, inflation rose to 6.5% in December, thus equaling the level in the last quarter of 2005.

Unemployment rate continued to decrease steadily throughout 2006 and in the end of the last quarter reached values of 9.1% in Bulgaria. Consumer spending has increased – in November 2006 consumer bank loans increased by 4.4% against the first quarter of the year and totaled EUR 2,349 billion.

Bulgaria attracted an estimated EUR 3.6 billion in FDI in 2006 up from EUR 2.3 billion in 2005. Investments in real estate comprised 35% of the 2006 total.