Investments in real estate properties provide their owners a return in two main forms – capital gain from the appreciation of the property and rental yield.
Provided the steep increase in real estate property prices over the last few years and the crisis on the global and the real estate property markets, investors will most likely start to pay more attention to the rental yields.
Real estate property prices in Bulgaria's regional cities rose by an average of 17,06% in the first half of 2008, compared to the corresponding period of 2007, the results of a survey carried out by Address real estate agency shows.
Rousse, Plovdiv and Veliko Tarnovo saw record high growth in real estate prices over the period. Sofia ranks fourth with a 21-percent increase in real estate prices over the first six months of the year.
The average price of the properties was highest in Sofia at 1,094 euros per sq. m. Varna followed with an average price of 1,031 euros per sq. m.
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*Data by Address
It is only logical the rental prices to reflect the movement of the real estate property prices. The increase in rents, however, depends to a great extent on the growth in the household incomes.
The table shows that the growth in the rents in the four biggest cities lags considerably behind that of real estate property prices.
*Data by Address
Real estate property prices in Sofia went up by more than 20% in the first half of the year, while rents rose by a mere 3% over the period.
This may be put down to the fact that rents in Sofia are traditionally higher compared to the other cities, which have been bridging the gap lately. The fact that Burgas saw the highest growth in rents in the first half of the year may be put down to this trend as well.
The fact that real estate prices growth outpaces considerably that of rents causes concerns among analysts about the future of the sector, against the backdrop of the outflow of foreign investors.
The negative effect of this phenomenon are the declining rental yields. The insecurity of a capital gain, provided the negative conditions on the international markets and the declining rental returns may worsen additionally the situation on the market, which most likely will result in a considerable slowdown in real estate property price growth in the second half of the year.
Burgas saw the highest rental return of 6.75% in the first six months of 2008 among the four major cities in the country.
Plovdiv followed with a rental yield of 6.35%. Varna and Sofia ranked third and fourth with 5.9%. and 5.7% rental yield, respectively.