Russian state rhetoric insists Crimea will be developed to become Russia’s Monte Carlo.

Middle class Russian buyers hold off on Bulgarian property purchases whilst Mr Putin encourages them to spend within the motherland, particularly Russia’s latest acquisition of Crimea. Promises of high level development, new infrastructure, bridges to the mainland, three new power stations and modern summertime resorts have caused a pause in Russian buying interest in Bulgaria. Fresh in everyone’s mind and witnessed with huge effect in Sochi, no one is in doubt of Mr Putin’s capability to deliver on his building program promises, especially when the contracted construction companies are owned by his oligarch chums.

Russian media outlets systematically report on the intention to deliver rapid modernisation of Crimea, which undoubtedly is awaited by its local residents and prospective property buyers alike, all keen to believe the promise of prosperity for the region. Lacking an affordable warm, summertime destination, 143 million Russians will be pleased to have new choices for sunshine and beaches where they can spend their Rubel and speak their language, President Putin’s Black Sea Riviera has officially been extended.

What about the costs?

Saving billions of Dollars having acquired Russians previously rented Black Sea Navy base of Sevastopol, Moscow promises to invest $7 billion in Crimea this year alone. The known natural resources of Crimea are estimated at 65.3 billion cubic metres of gas along with 44 million tonnes of oil, in addition analyst suspect that Crimea has 2.3 trillion cubic metres of gas in unexplored offshore fields in the Black Sea. When combined with the land and property Russia has simply acquired for free, the cash investment in future infrastructure is actually a minimal expense. Suddenly the business of geopolitics and so called democracy is abundantly clear.

Impact on Bulgarian coastal property?

Sun-seeking property buyers who would otherwise look to buy in Bulgaria’s Golden Sands and Sunny Beach are now very clearly considering Crimea as an alternative: no currency risk, no visas, no stay limitations, driving distance for many, almost the same climate, the very same Black Sea and possibly the same prices. Yandex (Russia’s largest search engine) reports interest in search term ‘buy property in Crimea’ up by 160%.

However, whilst buyers ponder, postpone and hold off on their Bulgarian property plans, the reality is that Crimea offers very little in the way of rival modern facilities or infrastructure: most property offers are classic communist blocks, there are currently relatively few newly built options available and there are no resorts that even begin to rival Sunny Beach. The new property offers that exist range in price between 800-1,200 euros /sqm, about double the average prices of Sunny Beach. We suspect the sudden interest will spark a new market in Crimea and comparative property projects will come to the fore, but as seen in Sochi these are likely to be rushed, overpriced and only available at prices disconnected from the true value for years to come before real market forces allow it to settle and stabilise.

Regardless of the long term Crimean property market, the immediate term interest and discussion over its prosperity has frozen Russian sales in Bulgaria. Typically one of the busiest times of year in the sales calendar, this Easter is seeing the worst performance figures since recession ridden 2009. Waves of vendors are now dropping their asking prices without encouragement in order to gain attention from the minorities of buyers who are uninterested in Crimea and are not spending the devalued Rubel. Recovery and stabilisation are unlikely until Crimea falls to the back pages or until the Rubel recovers. Unfortunately, the overall outlook by the majority of industry professionals concludes that Bulgarian holiday property values will only decrease in 2014.