Market Overview

holiday homes | first half | 2008 Market Overview | First Half | 2008 | Holiday Homes

Sa l e s Su p p l y Economic Environment H2 2007 Following a period of rapid growth in the including the global credit crisis, the shift In 2007 Bulgaria continued the past 2-3 years, a modest 11,000 apartment in client base towards individuals from positive trend in economic growth units (16 %) were added to the total supply Russian-speaking countries, Romania from 2006. For the first half of 2007 of holiday homes (represented by existing and Scandinavia. Investors are tending GDP increased by 6.4% (on yearly and under-construction properties) in the to build larger complexes, which result in basis) amounting to EUR 12.5 bln. second half of 2007. This brings the total an increased supply. By the end of 2007 approximately 50 compounds, offering Unemployment continued to decrease holiday homes inventory to 79,000 units. more than 200 units each, were under and in the third quarter of 2007 it was 6.8% of the country’s total labor force Several factors influenced the market construction. dynamics in the second half of the year, Inflation reached 8.4% year-on-year in December, and is a cause for concern

The average monthly salary rose by 19.6% mountain resorts Coastal Resorts on yearly basis, reaching EUR 217 in the Mountain resorts contributed to 35% of The supply of holiday homes in the coastal third quarter of 2007 the total holiday homes supply by the resorts increased by 16% (6,800 units) in end of 2007, marking an annual increase the second half of 2007, and contributed Bulgaria’s sustainable economic of 170% or 28,300 apartments units in to an annual increase of 65% or 50,700 development was further supported by the total (excluding off-plan properties). The units accumulated. The supply of homes EU accession which also increased the second half of the year saw moderate at the seaside is mainly linked with investors’ confidence. Bulgaria remained one of the most attractive destinations growth of 16%, still led by area with developments in the area for foreign investment, which stood at a cumulative inventory of 18,900 units – the latter accounts for more than one- EUR 11,5 bln over the past three years, with (existing or under construction). third of the total inventory. another EUR 4,7 bln expected in 2008. saw a modest increase of 5%, The market saturation in established The 10% flat tax rate on personal potentially driven by the investments in the locations has shifted developers’ interest taxation is expected to increase disposable adjacent “Perelik” ski project. Infrastructure towards smaller resorts. Examples are income, spending and saving and work for the ‘Super ’ project was and in the south, where reduce the grey economy – ultimately announced in October 2007, and brought cumulative supply has increased by 46% improving the business environment new energy to the developments in the and 31% respectively, and Byala and White and increasing corporate growth Borovets area. The over-development and Lagoon/ Topola village district in the north with new supply of close to 2,000 units Sources: NSI, BNB, National Employment Agency poor infrastructure which characterize parts of Bansko, has emphasized the need in total for the past six months. The golf to prioritize proper zoning and sufficient course projects to the north have attracted Holiday Homes highlights infrastructure investments. This is the a new wave of buyers, who expect high- case for Super Borovetz, where more than end developments with added services and The total supply of holiday homes EUR 600 million has been planned for premium facilities. by the year end marked only a 16% infrastructure investments. increase compared to the first half of The bulk of the supply in the second half 2007 with a total stock of 79,000 units. Unlike the coastal resorts, the majority of 2007 comprise mid-size developments (50-199 units), offering swimming pools, The global, financial crises resulted of mountain holiday homes supply in the in the withdrawal of a core target of second half of 2007 is still under construction recreation centers, children’s playgrounds, vacation homes – the British and Irish, (67%) with more than 65% in the Bansko restaurants/cafés and property management. compensated however by a new wave of and areas. Mid-scale developments, Still, some 35% of the market is formed by Russian-speaking individuals, fuelling with between 50 and 199 units per project, small developments, offering 20-50 units, the demand of high-end properties. continue to lead the supply (48%). and few added-value services, if any.

Well-established resorts like Sunny Beach at the seaside and Bansko in Cumulative Mountain Holiday Homes Supply Cumulative Coastal Holiday Homes Supply the mountains reached saturation. (Apartment Units) (Apartment Units) Developers are shifting their attention 60,000 60,000 towards smaller resorts or new locations. 50,000 50,000 Also golf courses and ski track projects 40,000 40,000 are adding new energy to the market. 30,000 30,000 20,000 20,000 The span of sales prices narrowed by the year end, reaching an overall 10,000 10,000 0 0 average of EUR 1,200/ m2. June 2006 December 2006 June 2007 December 2007 June 2006 December 2006 June 2007 December 2007 Source: Colliers’ Research Source: Colliers’ Research

2 Colliers International Market Overview | First Half | 2008 | Holiday Homes

Take-up of Holiday Homes Developments De m a n d in Selected South Reports Overall take-up in coastal resorts accounts for above 50%, which is mainly represented Elenite by existing developments (67%), while mountain resorts have an almost equal Aheloy absorption rate in existing and under- construction developments. St.Vlas

In the majority of the resorts, sales of vacation homes dropped in second half of 2007, triggered Sunny Beach mostly by the increased credit costs and the general insecurity in the global markets. Kosharitza

Sozopol Borovets outpaced the Bansko/Razlog area by the year’s end, staying resilient with over 60% of existing and under-construction supply being sold. Ravda

Kavarna The southern part of the seaside still leads the demand side, however new golf projects along the northern seashore, together with the increased demand from Romanian 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% buyers resulted in a lower overall decrease of Source: Colliers’ Research June 2007 December 2007 absorption rates – marked a modest 5% decline only; two thirds of Balchik area supply is under-construction, yet close to 35% of the total inventory is taken-up. Take-up of Holiday Homes Developments in Selected South Black Sea Resorts The decrease in take-up is driven by the shift in buyer profile. While British and Irish buyers prefer to purchase off-plan, the demand from Borovetz Russian-speaking markets is directed towards finished products. There is also a shift towards larger units with more bedrooms as well as higher level of services. Bansko-Razlog Area Pr i c e s The sales prices of holiday homes increased Pamporovo from a lower level (offers start above EUR

800/m2) along with a general decrease of 0% 10% 20% 30% 40% 50% 60% 70% higher price segments. Thus the average price at the coastal resorts reached levels of Source: Colliers’ Research June 2007 December 2007 EUR 1,200/ m2, while prices in the mountain resorts reached EUR 1,300/m2 on average. Location is a crucial factor in all resorts, Asking Sales Price - Coastal Resorts (EUR/m2) as well as the variety of added services, the quality of finishing, availability of furniture Re s o r t Lo Pr i c e Hi Pr i c e Av e r a g e packages and the stage of construction. Kavarna 875 1,160 1,020 Asking Sales Price - Mountain Resorts (EUR/m2) sunny Beach 950 1,140 1,050 Pomorie 1,035 1,350 1,200 Re s o r t Lo Pr i c e Hi Pr i c e Av e r a g e borovetz 1,162 1,359 1,260 nessebar 1,120 1,285 1,205 Pamporovo 1,134 1,279 1,210 golden Sands 1,135 1,570 1,360 bansko 1,273 1,526 1,405 1,150 1,699 1,425 razlog 1,315 1,526 1,420 st.Vlas 1,180 1,620 1,400 Source: Colliers’ Research Source: Colliers’ Research

Colliers International 3 Market Overview | First Half | 2008 | Holiday Homes

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The overall supply will continue to grow at a moderate pace, as the holiday Americas 129 homes market is reaching maturity. Asia Pacific 53 EMEA 85 Developers and local authorities will be more careful with new developments and their infrastructure as they would be required to meet the needs of more 62.5 million m2 under management demanding buyers. Greater client demands should result in an improvement in quality of developments and the services and amenities offered. 10,092 Professionals

Sales prices are still relatively low compared to other European countries and despite the tendency of average prices to fall when supply is too great, premium compounds in top location will maintain, if not increase, the premium sales levels.

Contact information

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