Bulgarians are the largest buying force for Holiday Homes, Russians now just 10%

The decline of Russian interest in Bulgaria has catalysed a new phase, new prices and novel trends for Bulgaria’s holiday property market. Unlike in Sofia and key urban districts, the disproportionate volume of foreign owners in the coastal and ski resorts has prevented the currently favourable domestic forces from driving prices upward. Prices have inarguably declined along with the type of source of buyers, this brief article considers what has changed and why.

Prices have never been lower in Sunny Beach, not even in the post-recession period of 2009-2012, but why? Currency exchange is the worst enemy of the Irish vendor right now, followed shortly by those needing to sell in British Pounds: the Russian Rouble is trending at half its value from 4-5 years ago, meaning that Russian investments in Euros has effectively doubled in value providing those vendors with massive leeway in their asking prices. Irish and British owned properties priced in Pounds and Euros already at half of what they paid now need to compete against stiffer offers priced in Roubles, all of whom can afford to discount their price by as much as 50% before they begin to make a loss.

The property market is suddenly disconnected from bricks and mortar, rental returns, infrastructure improvements, European growth prospect and is now merely a physical manifestation of the currency markets, Russia’s ongoing recession and the low price of oil.

So who is buying now?

For the first time in Bulgaria’s history we do not have a single nationality dominating buyers. Certainly from 2000 -2008 this was the British followed by the Irish, then from 2010-2015 it was the Russians. Now, from the start of 2016 the single largest group buying holiday property is actually Bulgarians (35%), an unexpected fact that few foresaw. Perhaps because prices are so much lower than they were, perhaps because of healthy rental returns for those who can self-manage holiday lets, perhaps because Bulgaria’s average household income has nearly doubled in the past 10 years, or a combination of all. Either way, it’s a great source of sustainable demand, but a poor source of buyers if prices are to recover beyond today’s levels.

Where is selling?

Sunny Beach remains the most dominant region for holiday sales with approximately 30% of all transactions, 50% if considering neighbouring St Vlas, Nessebar and Ravda too. Traditionally Q1 is strongest for winter resort sales, but for 2016 these have proven to be just 15%.

What are people buying?

There remains enormous disparity between what is searched for and what is actually sold; like most markets what people want to buy, can afford and actually go ahead to purchase are all very different. The trend remains for the most searches to be for 2 bedroom apartments and detached villas, yet in reality these account for under 20% of completed sales. Partially this is due to larger properties being owned by larger investors, perhaps with less financial pressures to sell and with sufficient insulation to weather the storm. Thus, fewer comparatively lower price larger properties are available as opposed to studios and 1 bedroom apartments, which are in abundance and provide excessive choice for any buyer with a tighter budget. By far, the majority of sales remains in the lower price brackets of furnished, purpose built, resort based apartments in complexes with facilities, walking distance to beach, attractions and nightlife, typically studios and 1 bedroom properties with balconies and not on the ground floor.

What are the current price trends?

Currency shifts have enabled Russian vendors, who remain the majority owners of available stock, to sell at slashed Euro prices and still take home a profit in Roubles. The clear result is lower prices across the region. We can speculate as to why so many are selling now, but with recession in Russia showing no sign of ending and with profitable liquid investments available in Bulgaria, its easy to see why owners are offloading. Complexes that are on the outskirts of Sunny Beach, beyond the main road or towards Kosharitsa, have suffered the greatest drop in demand. Once the only sources of 1 bedroom furnished properties 700m from the beach for 25,000 Euros (2010-2015), today this budget will buy you options on the first and second line in Sunny Beach 50-100m from the beach, and much higher rental income.

The contraction in prices has drawn buyer’s attention away from the outskirts and has been refocused towards the coastal centres along the bay. Peripheral complexes such as: Sunny Day 3,  Sunny Day 4, Nessebar Fort, Holiday Fort, Bay View, Nessebar View etc have suffered notable and server decline in buyer interest. Complexes further out and clearly disconnected such as Sunny day 5 and 6, Vineyards etc, are less directly impacted as buyers for such properties had already clearly sought isolation, so whilst prices have dropped there too the demand has remained similar.

See below real examples of some property sold in April exemplary of the current market: