An unsaturated market, characterised by relatively low prices and salaries, low land prices and poor environmental protection.

These were among the points made about factors influencing the property market in the Balkans, in a presentation by BDSP chief executive Sinisa Stankovic at the Balkan Real Estate Conference, Bulgaria, Romania, Serbia (Balrec).

The conference was held in Sofia on May 17 and 18.

Stankovic, in a SWOT (strengths, weaknesses, opportunities, threats) analysis of the market, said that it offered many opportunities. Existing building stock was in poor condition, so a lot of new buildings and refurbishment of existing ones was needed.

Threats to the market included corruption, rapid increases in prices and salaries, brain drain and poor enforcement of planning and environmental legislation.

Trends on the market included improvement of the quality of design and construction; an increase in prices; an influx of professional developers into the market; and improvement of the environmental quality and protection.

Stankovic said that the market in the region was in need of proper facility management and property management companies. The market needed to use resources such as water, fuels, electricity, responsibly. The future was in environmentally sensitive developments, he said.

The conference was focused on business opportunities in the property market in Bulgaria, Romania and Serbia, and included presentations on building regulations, the quality of construction, administrative assistance and project management in the three capital cities.

Petar Dikov, Sofia’s chief architect (the equivalent of a town planner) said that competition between the countries had turned into competition between their major cities.

Competition was driving the development of the local markets, but also the co-operation between them.

Sofia is to focus on the development of several major zones.

The central city was developing rapidly in terms of infrastructure, Dikov said. New parking areas were needed, and were being built, and the city metro underground railway was being extended.

Dikov said that Sofia could be compared only to Italian and Greek cities in terms of archaeological findings, and this provided great opportunities to develop historical and cultural tourism, but was also generating many problems.

In south-western Sofia, the Akropolis project, through which the former Shesti Septemvri factory will be turned into a large mixed-use complex, was an example of how an old industrial facility could be turned into a modern and attractive development, he said.

Lyulin neighbourhood, with its 300 000 residents, and Mladost neighbourhood, where Business Park Sofia is situated and another large business development is on its way, will be developed as the main business axes of Sofia. They will provide for hundreds of Class A office spaces.

Sofia’s ring road area will provide for high-class residential developments such as gated complexes. Many services centres will be put up for the needs of the area’s residents and business people.

Northern parts of Sofia are earmarked for the development of leisure facilities. There is a large project by Spain’s Ferry Group, the building of Kuttina Sport Centre, a 1752 decare satellite village close to Sofia with a championship-level golf course, international golf school, green park areas and luxury residential and commercial areas.

Tsarigradsko Chausse is a main axis, in the Sofia, Plovdiv direction, the only freeway-style roadway in Sofia. Its nearness to Sofia Airport and the future Tishman project made it even more important, he said.

Developments in the Vitosha Mountain area had been extremely inappropriate. Improvements to ski and accommodation facilities were to take place, Dikov said.

Sofia mayor Boiko Borissov told the conference that Sofia and Bucharest had walked a very long and difficult way together.

Borissov said that he warmly welcomed Belgrade and hoped that it would soon become the capital of an EU country.’And this would be logical’ he said.
He said that “unfortunately” Sofia took up more than 60 per cent of the total amount of investments in Bulgaria.

"I say 'unfortunately' because the city just can’t handle it," Borissov said.

Sofia’s population had grown to more than two million. Every year a further 100 000 people came to live in the capital city. Developers were coming up with office, retail and residential projects, "but Sofia needs parking and transport infrastructure, we need green areas, playgrounds, parks, ecologically friendly developments. And we lack such projects".

All participants in the conference said that the three neighbouring countries already faced a serious problem, or were on the verge of facing, a shortage of construction workers.

Representatives also agreed that infrastructure was the worst problem in the three capitals.

Michael Lloyd of Romania’s Baneasa Developments said: "In Romania, transport is a great problem’. Everyone has a car and developments are spread all over, so everyone is moving around. If you’re coming to Bucharest, please, take a bicycle".

Slobodanka Prekajski of the Belgrade Land Development Public Agency (BEOLAND) said that the Serbian capital city wanted to "catch up with the future".

Towards the end of 2006, Serbia adopted a new constitution. This enabled the start of the restitution process and privatisation of land.

Bureaucracy was a big problem, Prekajski said.

He said that Belgrade had a beautiful setting on the banks of two rivers, the Danube and the Sava. The city, which had a population of about two million people and a city budget of 550 million euro, had a government that was modern and "very open-minded’"

Belgrade’s master plan was adopted in 2003. Three hundred detailed zoning plans were produced afterwards, and the master plan was undergoing changes.

He said that Belgrade remained the Eastern European city with the best road and rail road connections. New ports and marinas were about to be developed on the Danube riverbank.

The New Belgrade, built in the 1950s had seen rapid development in the past 10 years. Developments covering a total of about 10 million sq m are to be built.

Prekajski introduced some of the largest projects: Dortsol, a mixed use park with business, retail, amusement and entertainment facilities; Kosantsivtsvec Venec, an office and residential development, and new bridges, and a new cargo port on the Danube waterfront. The number of new flats planned for completion by 2021 is 75 000.

The land ownership issue was a very serious hindrance to the property market development in Serbia. Land is divided to several categories: public construction land (state owned); land with right of use; another form of ownership is leasing unbuilt land for construction for 99 years; this land is in the focus of investors; ownership of agricultural sites; an investor can buy agricultural land in the hope of changing its purpose in future to use it for construction.

A building site in Belgrade can be acquired in various ways, including through real estate agencies or the State Privatisation Agency; the Belgrade Land Development Public Agency is in charge of plots larger than 800 sq m that can be leased for 99 years; the municipality is in charge of leasable plots that are less than 800 sq m. There are nominal monthly leasing fees.

Marius Turcanu of Pricewaterhouse Coopers Romania said that Bucharest is the driver of the real estate market in Romania. The city provides 15 per cent of national GDP and attracts 55 per cent of all investments.

Turcanu mentioned some of the major projects that will take place in Bucharest, including the Esplanada project, Lipscani project and Green Belt Bucharest.

The office market had been the first that started to develop, and now was doing so at a steadily increasing pace. Average rents in the city vary from 13 to 19 euro a sq m. Rental yields are decreasing steadily and are in the range of seven to 7.5 per cent. The total area of offices planned for completion in 2007 is 350 000 sq m.

The existing stock on the retail market is 613 000 sq m. The retail market is characterised with very high prices, 90 to 120 euro a sq m for a small unit and 40 to 60 euro a sq m for large ones. Rental yields in the sector are decreasing steadily.

The residential market is flourishing the most. Prices are already approaching the levels of those in Western European countries. Prices of luxury properties are in the range of 2500 to 3000 euro a sq m.

Desislava Leshtarka of PropertyWise reports for The Sofia Echo