On February 25, Bulgaria's Directorate for National Construction Supervision (DNCS) started reviewing the legality of completed and ongoing construction along the coastline. The DNCS inspections will continue until March 7. Despite this, most estate agents do not really believe in the expediency of the measures.

According to the Spatial Planning of the Black Sea Coastline Act, which entered into force on January 1 2008, all illegal buildings on the beaches should have been voluntarily bulldozed within a month of the law coming into effect. The DNCS should then have placed demolition orders on any that had not been. However, this could only have been achieved if all the relevant bodies did their work properly, Regional Development Deputy Minister Savin Kovachev said. A similar process was started in 2002/03 but many of the demolition orders were still going through court proceedings. Kovachev said that the ministry was facing a pile of lawsuits over buildings that fell partially within the boundary of the coastline area and partially in an adjacent area. The situation did not install confidence in the market that any of these measures would stop the worrying trend of over-construction.

Roumen Draganov, head of the Institute for Analysis and Assessment in Tourism, said at a news conference that about 30 000 second homes, mainly apartments, were still looking for buyers. This was being driven by the fact that a number of hotel owners on the Black Sea coast were redeveloping their hotels into holiday apartments in an attempt to at least realise part of their investments and minimise their losses. It was particularly evident at Zlatni Pyasutsi (Golden Sands), estate agents said. There was no shortage of examples at Slunchev Bryag (Sunny Beach) either, said Dobromir Ganev, manager of the Foros estate agency. Market experts said that a similar thing was also happening in the mountain resorts such as Bansko.

The trend was blamed on over-construction at resorts, the intense competition in the tourism market, the increased time it was taking for investors to see a return on their investments in hotels and the tighter lending conditions.

Anastasia Sivkova, marketing and sales director with Ambassador Tours, the company managing the newly emerged Ehotels chain, reported that foreign interest had shifted from traditional seaside resorts to less common locations, in rural and mountain regions, that offered opportunities for alternative tourism. Tour operators had already seen a decline in the bookings for the coming summer season.

Levon Hampartzoumian, CEO of UniCredit Bulbank, said that the bank was unlikely to finance a coastline hotel. Yields on seaside holiday developments had fallen to three to five per cent a year, and in some cases below this, he said.

The combination of these facts raises the question: what is happening in the holiday property market, is this just a normal phase of the business cycle or is a crash likely in the near future?

The seaside holiday property market has relied on foreign investors for many years. Developers based all their plans on the mainly British and Irish buyers and built units geared for this market, assuming that the demand would be there forever and they would continue to make huge profits; they did not have a back-up plan in case this source dried up.

Since British and Irish investors have withdrawn from the market, driven by the global credit crunch, developers have seen levels of returns plummet as the market was flooded with low-quality apartments. In response, they have turned to the Russian, Scandinavian, Greek and Romanian markets, which have, at least temporarily, offset the decline in British and Irish interest. However, it remains to be seen whether this will be a sustainable strategy in the medium to long term.