Colliers Residential Report

Residential real estate Market Overview sofia  |  January 2012

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residential REAL ESTATE Market | sofia | january 2012

Mid-plus and high-end market

Sofia market shows high investment potential due to the insufficient supply of quality residential properties.

Colliers Sentiment Survey at the end of 2011 observes the latest residential trends in Sofia’s market. The survey was conducted among persons in a key professional position as managers and executives.

• Managed communities complexes located in Sofia outskirts are the most preferable by potential buyers of mid-plus and high-end properties. The central part of the city is no longer priority as the demand factor.

• Buyers are becoming more demanding about quality of life that the environment could provide. Green areas, high-quality construction, neighbors and infrastructure are the key drivers when selecting a home.

Supply Sofia mid–plus and high-end market segment currently consists of 5 700 residential units concentrated in 39 residential projects.

This amount includes projects consisting of more than 50 units (apartments/ row houses/ single houses), both finished and in the final stage of development.

The map below shows distribution of Sofia’s residential projects. The majority of offered projects are located in the suburbs areas as

Simeonovo, Dragalevtzi, Boyana, Malinova Dolina, Kambanite and also around main boulevards like Cherni Vrah and Simeonovsko shosse. For that reason Pancherevo neighborhood for example attracts investors as a potential location for large residential projects.

Many of the projects are developed as socalled compounds (or gated communities), located in Sofia outskirts and mostly along the main boulevards in the southern part of Sofia.

The main advantages of such location are well developed infrastructure, fast connection to downtown by the ring road and other main arteries; professional property management, the lack of air pollution, traffic jams and noise; proximity to the mountain and green recreation areas around.

Moreover the compound complexes offer quite specific and outstanding atmosphere thanks to other amenities as kids playgrounds, swimming pool and kindergarten. Gated communities create vital community life.

Depending on location, quality of construction, infrastructure and the overall environment, compounds could be classified as high–end, mid-plus and mid residential projects.

Capital The genuine supply of high-end and mid-plus projects is small compared with the overall stock on the market, and could be considered as a niche. The vacancy in this segment is approximately 18% for 2011 that is a decrease of 2% compared to previous year. In addition, no new projects have entered high-end and midplus residential pipeline in 2011. For 2011 the absorption of mid-plus and high-end residential units is approximately 7% from the vacant stock. This indicates that the current stock is gradually absorbed and the available supply is diminishing.

From a mid-term perspective, the investment and development potential of the residential market in Sofia remains high. This is due to the insufficient supply of residential properties that meet latest buyer’s requirements, as well as the positive perspective for stability and improvement of the Bulgarian economy.

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residential REAL ESTATE Market | sofia | january 2012

Demand Demand is concentrated primary in the southern neighborhoods of Sofia (including Lozenetz), and in properties at the foot of Vitosha mountain. The most pronounced buyers’ requirement is the proximity to a main boulevard, offering fast and convenient access to the city downtown.

Colliers’ Sentiment survey shows also that 50% of the respondents prefer the newly built compound complexes, followed by complexes with newly built apartments (32% of respondents). Fig.1.

Top five features as the most important demand drivers are: neighborhood (56%); good quality of construction (53%); price (53%); availability of parking space/garage (43%) and green areas/parks (42%).

Fig.2 represents that Buyers are becoming more demanding about quality of life that the environment assures.

During the last year in high-end and midplus segment most of the residential properties were sold completely finished. Moreover most of transacted units were spacious apartments with two and three bedrooms and family houses.

The Sentiment survey describes also the typical profile of a buyer, who is Bulgarian national at age 26 – 45 years, working at the middle -management level or often is self-employed.

Colliers’ internal analysis indicates that compared to last two years more buyers are prone to use a bank loan as finance source when planning to buy new property. Figures show that purchases in high–end and mid-plus segment were completed mostly at prices above 150,000 EUR. This clearly indicates that the segment is stable and attracts buyers, who are looking for a quality property that meets their requirements despite of higher prices.

With the positive signs for stability of the Bulgarian economy, demand of mid-plus and high-end residential real estate is more likely to grow. The diminishing supply on one hand, and the increasing absorption on the other, will bring the market to gradual supply shortage. And therefore could create attractive opportunities for future developers.

Fig.1 Which are the most preferred residential projects at the moment in Sofia?

Newly built residential projects in compounds in Sofia

50%

Newly built residential projects in the Sofia suburbs

32%

Newly built residential projects in the Sofia central areas

27%

Old built residential projects in the Sofia central areas

19%

Other

7%

0%

10%

20%

30%

40%

50%

60%

Fig.2 6 –  most important

5

4

3

2

1  – least important

Neighborhood/ district Price Quality of execution Parking space/ garage Infrastructure/ roads Green areas, kindergarten 0%

20%

40%

60%

80%

100%

120%

Sales prices

Forecast

The asking prices of high-end and mid-plus residential projects remain unchanged compared to 2010. The price range for properties in this residential properties segment varies according to location, availability of green areas and additional amenities, quality of construction and developed infrastructure.Buyers are trying to obtain the maximum benefit with the available resources, looking for value-added services (like discount of notary tax or additional parking space). Actual deals are sighed with discounts of approximately 10-15%.

Currently, offered sales prices within the highend and mid-plus segment provide quite broad range, typically between EUR 850 and 1600 per sqm (including VAT). Main priceforming factors are location, quality, concept, additional amenities offered within the project and the environment.

»» Both the diminishing supply and the increasing absorption create a good opportunity for new developments in high–end and mid –plus segment; »» Prices of high-end and mid-plus segment for properties with good location and well developed infrastructure are expected to remain stable; »» Demand is expected to continue to increase as the global and respectively the Bulgarian economy will face a slow and gradual recovery.

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Business Park Sofia, Build. 7B, 2nd floor, 1766 Sofia, Bulgaria main: +359 2 976 9 976 | Bulgaria@colliers.com | www.colliers.com This report has been prepared by Colliers International for general information only. Colliers International makes no guarantees, representations or warranties of any kind, express or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from.

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