As the 2011 summer draws to a close it is possible to offer preliminary analysis of recent property market movements. New sales trends can be seen across the Sunny Beach region, the impact of which is directly relevant to vendors who are looking to sell their Bulgarian properties now or in the near future. This article describes the changes in current demand and considers the reasons behind it, the key difference between Russian buyers and British/ Irish owners and their resultant property choices.
It is widely reported and commonly accepted that the significant majority of buying demand is from Russia and ex-soviet states such as Armenia and the Ukraine, meanwhile the vendors are largely from the UK and Ireland. In our experience, very few sales happen for Bulgarian developers / vendors at this time and as such the market is now dominated by international resale rather than for ‘new / offplan’ properties. Whilst prices are down by as much as 50-60% from their peak, buying trends are now very different from before and this is likely to explain why a property is or is not selling at the current time.
Despite great effort and vast marketing expense, there is currently a minimal level of demand for central Sunny Beach properties; less than 8 in 100 enquiries ask for apartments in the main built up area. Although this encompasses a considerable range of quality and complex types, the overwhelming truth is that Russian demand is seldom interested in buying there. Much more common is the request for waterfront properties, or at least those with a sea view in the quieter, lower density, more family orientated zones. St Vlas, Nessebar and Ravda are the repeatedly sought after locations where good properties can again be considered as liquid assets (when available at the market price). Areas such as Pomorie, Aheloy and Sarafovo come notably further behind, but still ahead of central Sunny Beach.
We have seen the stabilisation property price that fit current demand, i.e St Vlas marina side properties for 600 Euro /sqm, meanwhile those in central Sunny Beach fail to attract attention at 450 Eur /sqm, thus continued price decline and increased availability in that area is inevitable.
Because almost all vendors are from the UK and Ireland they share many mainstream cultural norms. Most were driven by the same key motives of buying cheap in a purportedly emerging market for investment purposes, to make money from rental income and achieve growth in value. As such, purchase decisions were made according to fiscal aspects of the property as a priority rather than the aesthetic appeal, views, comfort, longevity, quality etc. Very few owners actually use their properties, many have never seen them at all.
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The Russian demand is naturally keen to always pay the best price, there is no doubt that the middle market that Bulgaria caters for is a long way from the rumours of oligarchs and multimillionaires; average budgets are 35,000 -55,000 Euros and seldom more. Rarely are these buyers interested in rental income, growth or future potential value, nearly all Russian buyers are purchasing a lifestyle product to use and treat as a second home and never solely for investment. This means that the specific property has to meet the personal requirements, desires and tastes of the buyer and that this always comes before the cost. Whilst price, rental income and expected growth are relatively easy to feature on a spreadsheet, compare and sell (which largely formed the process for selling to the British and Irish), it is not the same methodology for the Russians. Outright blind buying does not exist, almost all come for viewings and many come several times before finding what they want. This pushes up the cost of selling and means that any one property is likely to be seen many times before finding a new owner who wants to pay for it.
Beyond these properties being second homes, the Russian demand often views such acquisition as future family security. Frequently regarded as a doorway to life within the European Union, Bulgaria does not only offer a nearly comprehensible language, affordable property, similar culture and sunshine, it also offers extended visa rights to those who own property and thus extended time within the EU. Our experience shows that almost every buyer also enquires to achieve fulltime residency, many proceed and attempt to achieve a ‘right to reside’ despite the expense, in many cases it can be 10% of the property value per person.
Nearly every Russian enquiry specifies ‘not ground floor and not top floor’. Although many owners paid high prices for ‘penthouse’ views, the reality is that top floor locations are tough to sell to Russians (and Bulgarians alike) as they not considered so desirable and worth less according to their tastes. Whereas the Brits typically find Victorian loft conversions and top floor locations endearing, generations of Russian communist style blocks with notorious leaky roofs, damp and intruding sloppy ceilings have been a catalyst for the opposite opinion. The result is that top floor properties often sell for less, much to the dismay of current owners. Ground floor is a similar story and whilst generally acceptable to most holidaymakers for a week at a time, Russian owners buy to spend 3-6 months at a time and thus often rule out ground floor straightaway.
The enormity of the buyer’s market that is the Bulgarian Black Sea at the moment means that no matter how particular a buyer’s demands and requirements, for sure they will have multiple options, a healthy choice and competitive selection at low prices. Unfortunately, this is the reality of the Bulgarian proeprty market at the current time.
The vast majority of listed properties in Bulgaria are advertised at a price of the owner’s choosing. In many cases this is because the agency is only selling ad space and not properties, thus the price is whatever will keep the owner happy, in other cases the price is set by ‘what the property owes’ the owner. Neither have any connection to the reality of actual achievable sale price, both are determined by personal desires rather than actual demand and market forces. The result is a vast ocean of overpriced adverts which never sell and only serve to confuse new owners who come to the market and use them for comparison.
It is worth keeping in mind that any advert/ website you might see in English is only there to attract more British and Irish vendors, not Russian buyers. Don’t be fooled by self-professed pricing, certainly no agents are investing their own money into marketing your property in Russia if it is not at the real market price, what would be the point.
Many vendors make the mistake of considering their property from their own point of view with a bias towards believing it was their best choice at the time of purchase, thus someone else must agree and pay for it. A fair point of view if you are assimilated with the likely buyers your property, but unfortunately when the demand is from a vastly different culture, buying for very polar opposite reasons with wildly different motives and thus so are their tastes and subsequent property choices. The obvious truth is that one’s personal opinions of properties mattered (as far as sales go) when deciding which property to purchase, however as an owner and a vendor these opinions are irrelevant and surpassed by those who are spending today.
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