Bulgaria's real estate market was starting to mature into one of slower growth and higher quality, particularly in the residential and office space segment. This is one of the findings of the latest Oxford Business Group report Emerging Bulgaria 2007 presented on October 30 in Sofia. Markets for holiday homes and retail markets were less developed but the potential for problems remained, the report said. According to Andrew MacDowall, editorial manager of the report, the retail market in Bulgaria was less developed compared to neighbouring countries mainly because Bulgaria's population was rather small. "For example Carrefour chose to enter first Romania and later Bulgaria," MacDowall said.

"Property has, in the past decade, appreciated 25 per cent or more a year, but that rate is falling into single digits - between seven per cent and nine per cent in the office-space segment in 2006, for example, compared with 9.5 to 10 per cent in 2005. The residential market is also maturing, and the only major growth story left is in holiday homes, where a cooling off still has not put yields below 10 per cent."

According to the report, it was now up to developers to make good decisions and it appeared that that many were going to do so. "Some have yet to break ground on projects announced as much as three years ago. Other developers are considering scaling back their projects," the report said.

One of the possible future scenarios of Bulgarian real estate market, according to the report, is the stylish new city suburbs featuring residential developments, malls and office park. The city centre will be mainly focused on nightlife, state offices and high-end private concerns.

OBG seems certain on one thing. "Regardless of what takes place, the pace of change in the sector is almost certain to be significantly slower in the next decade than in the past, as are returns. Which will in the coming years dip below double digits."

"We believe that the times when some foreign investor used to come, spend some money and after several months registers a good and quick profit are over," MacDowall said.

The report said that Bulgaria was moving away from being a country of corner shops and street-front boutiques to a country of malls, supermarkets and big-box retail.

The report said that Bulgaria has become so popular among foreigners that developers had essentially flooded the market with holiday homes and so far had met with little trouble in finding buyers. "Growth is expected to slow as creeping scepticism influences the market and developers have already refocused their attention on Bulgaria's mountains where there is only one saturated area, Bansko in Pirin mountain."

Asked about his view on foreigners buying second homes in Bulgaria and how attractive the country was in that sense, MacDowall said that UK citizens continued to be the leaders on Bulgarian market in terms of second homes. "You have to have in mind that, traditionally, British people tend to invest more in properties abroad than, for example, French and Germans, who are more conservative about it." As many other real estate experts have said before, MacDowall noted that Russians were the new players on the market. "We have several reasons for that," OBG editorial manager for Bulgaria Mathew Youkee said. "First Russia's economy is doing very well and we have a middle class that is taking shape very quickly. These people are looking for a way to invest their money and for cultural reasons Bulgaria seems attractive to them. Russians have a tradition in visiting Bulgaria's Black Sea coast and the similarity of the language, the Cyrillic script and the natural resources are among the factors that attract them here," Youkee said.

OBG's figures showed that in 2006 about 29 per cent of real estate sales in Bulgaria were made to foreigners, mainly British (67 per cent) and Irish (12 per cent). Other EU members have been less enthusiastic about entering the market with Germans accounting only for four per cent of sales and Italians three per cent.

According the report, it were mountain resorts that attracted the most of foreigners' attention. The Black Sea resorts such as Albena, Slunchev Bryag and Zlatni Pyasatsi were less attractive as properties in these places are considered to be profitable only in the summer.