BULGARIA'S real-estate market has become more mature, with still-rising prices but gradually dropping returns on investment.

This is the main conclusion made by the participants in this autumn's Real Estate Expo held in Sofia from October 21 to 23. The exhibition, first held a year ago, has turned into the largest such show in the Balkans.

No sharp rise in property prices is expected in the Bulgarian market next year, real estate agents said at the exhibition.

The market is balanced and is gradually evolving into a customer market, especially the market in residential properties and holiday homes. The return on investment in the sector is 12-13 per cent compared to 6.8-10 per cent in Western developed countries. Even if prices go up, the increase will be a small one and due to expected inflation.

There is an imbalance only in the office and industrial estates market where demand exceeds supply. That is why this segment of the market is rather investor-driven. Only there, a more visible price increase is expected in 2006.

Bulgaria and Romania are South-Eastern Europe's leaders by profitability in office and industrial property. The figures are 9.5 per cent and 10 per cent for Sofia and Bucharest respectively.

Bulgaria and Croatia are the undisputed leaders in the region in the market of holiday homes.

As far as the market of commercial estates is concerned, supply is coming close to demand, real estate agents said.

More than 100 leading developers, real-estate agents and financial institutions took part in Real Estate Expo this autumn 2005. Projects in the design and development phases, worth more than a billion euro, were shown to the visitors.

The largest part of the projects presented at the expo was holiday villages and single properties. Most of them are on the Black Sea coast, but a significant increase in supply has been registered also in winter resorts Bansko and Pamporovo.

The exhibition also outlined the development trends for the residential properties market in Sofia, the capital. Builders, investors and real-estate agencies have been signalling in the past year that due to the lack of free terrain in the centre of the city, construction work has moved to the suburbs, an example being the expensive ones on the slopes of Vitosha Mountain.

However, the underdeveloped infrastructure and communications there are gradually turning into a serious problem for projects' completion.

Another important conclusion was that Bulgaria's residential property market had not yet become attractive enough for largest foreign investors. Brokers pointed to countries like Poland, Hungary and the Czech Republic, where big Israeli investors, for example, were building residential complexes with 100 or more apartments, with the aim of managing and renting them out.

National Statistical Institute (NSI) data published on October 21 showed that Bulgarian housing prices in the third quarter of 2005 rose by 2.9 per cent compared to the previous quarter of 2005.

The average housing price rose to 751.50 leva a sq m between July and September, up from 730.50 leva in the previous three-month period.

The prices are expected to keep rising at the existing pace in the forth quarter, and the year to end with prices 5-7 per cent higher compared to end-September. The growth will be driven by price rise of the construction materials, the higher fuel prices and the increased wages in the sector.

In August alone, prices of non-metals and construction materials rose by 24.8 per cent year-on-year, while oil product prices in the country rose by 14.85 per cent between May and August, the latest NSI data showed.

In the third quarter, housing prices were the highest in Sofia at 1256.80 leva a sq m, a rise of 5.8 per cent compared to end-June.
The Black Sea city of Varna was second, at 1192 leva a sq m, down by 4.5 per cent. It was followed by the second largest coastal city, Bourgas, at 1142.20 leva a sq m, representing a 2.6 per cent growth.