The first panel discussion of the Balkan Real Estate Conference (BalREc) and the Balkan Property Exhibition (BalPE), which traditionally gather the major real estate players in the Balkans, was held today.

The participants in the panel also addressed the issue as to whether there is a real estate market bubble in Bulgaria. They underscored that a market bubble is usually present when the supply considerably outpaces demand.

Participants in the panel discussion included Martin Gikov of UniCredit, Emil Stanev of Hypo Alpe Adria, Nicholas Spiro, director of DTZ for Central and Eastern Europe and Krassimir Katev of Prima Capital Management. They share the opinion that there is a market bubble as regards to holiday properties, especially along Bulgaria's Black Sea coast and in the mountain resorts, where supply considerably exceeds demand and UK and Irish buyers are withdrawing from the market.

When it comes to land and investment projects there is also a certain market bubble, according to Krassimir Katev. The high prices and the unrealistic expectations of the buyers, as well as the lack of interest by the sellers, resulted in the lack of major deals in the recent moths.

The condition of the market for office space, where new 500,000 m2 of space will be launched in 2010-2012, is also not very good, according to Katev.

The declining levels of return on investment have made foreign investors much more cautious, especially against the backdrop of the global real estate market crisis.

The participants in the panel discussion expect that the growth rate of real estate prices will slow down considerably in the next few years. The speculative investments in such properties are considered to a great extent as a good protection against inflation.

The prices of real estate properties, however, have reached unreasonably high levels, especially in the big cities and in Sofia, which makes them unaffordable, provided the tightened lending conditions.

At a sales price of 1,500 euros per m2 and a monthly rent of 500 euros, the return for the investors from residential properties stands at 4-5%, which is unsatisfactory and makes them rely only on the capital gains from the appreciation of the properties, which is quite insecure.

A 5-percent decrease in the prices of residential properties would be very healthy for the market, according to Katev, as this, coupled with inflation and the increase in income, would make residential properties much more affordable.

The participants in the forum expressed their concerns about the commercial properties, which currently enjoy brisk demand.

A total of 12-15 large-scale commercial centers are expected to be launched in Sofia alone in the next few years, which presents a serious possibility for supply to exceed demand.

It is better for investors to shelve or to give up some of the projects that are at an initial stage and to focus on the core projects in their portfolios, specialists say. A similar trend may already be witnessed in neighboring countries, such as Romania for example.