News

Swopping notes for real estate

The prices of recently built apartments are increasing more intensively because of the higher price of land and building materials. Office space deals are not registering significant growth. Office real estate deals are mainly rental contracts.

The REMI index was introduced in Bulgaria in September 2002 by the National Real Estate Association (NREA) with the support of the American Chamber of Commerce in Bulgaria.
However, it was another piece of information published in February that drew the attention of both real estate brokers and customers. More than 300 million leva proceeds from the sale of compensatory instruments have been used over the past three months to acquire residential property.
The fact was unveiled by Nasko Atanassov of the NREA during a construction investment forum that was held in Sofia in mid-February. He forecast that if the price of compensatory notes exceeds their par value, more holders would choose to sell and invest the money in real estate.

At present, compensatory notes trade at 75 per cent of par on the stock exchange. However, during the recent sale of shares in the Bulgarian Telecommunication Company, where they were admitted as a payment means, their price surged to 120 per cent of par value.
The compensatory notes were issued to members of the public to compensate them for property loss under communism. The notes trade freely on the stock exchange, counted at their par value of one lev each.

The boom in the construction of apartment buildings which began about two years ago will persist until the country’s EU accession, fuelled by easy access to bank loans and expectations that housing units will continue to appreciate, said Atanassov.
Another factor, except for the compensatory notes, feeding the market are the cash inflows from Bulgarians living and working abroad that are being spent on real estate in Bulgaria.
Among the revelations made by property brokers in the past month was that developing Bulgarian and foreign companies seek to buy or rent buildings offering at the same time storage, commercial and office space.

This latest trend on the real estate market in Bulgaria has already been followed by the cosmetic maker Oriflame, stationery supplier Office One Superstore and Metro Cash&Carry.
Currently, the storage facilities and the headquarters of international companies operating in Bulgaria are dislocated, which creates a major inconvenience and multifunctional buildings are most in demand. Investors either hire contractors to build such multifunctional buildings entirely for the company needs, or rent similar buildings on a long-term basis, real estate experts said.
Apart from the strong demand in multifunctional buildings there is also a strong investors’ interest in buying and renting storage facilities. The average selling price of storage facilities in Sofia, according to the web site Imot.bg, was 332 euro for a square metre in January 2005 against 295 euro in June 2004.

Ivan Vatahov