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Bulgaria Loses Appeal As A Property Hotspot Financial Times
In their search of high yields and satisfactory capital raise, entrepreneurs have set their sights on quite out-of-the ordinary destinations like the districts surrounding Mongolia's copper mines or western Canada's oil reserves, as the newer investment areas such as Cape Verde, Morocco and Bulgaria have started to overheat, a recent Financial Times (FT) report says.Rightmove.co.uk property search engine shows that interest in Bulgaria has dropped by more than one third since January this year.
Real estate prices in Bulgaria have risen by more than 30 per cent in 2007 and in the last three years alone, they have posted almost a 300 per cent growth, according to some analysts. However, after the initial boom, when property market witnessed a surge of investors, drawn by expectations of high rental yields and capital gains, Bulgaria's real estate segment came to a standstill. Forecasts of stalling price growth, difficulty in securing occupancy for some units, low rental returns have exerted an offputting effect on investors, according to Savills International real estate consultants. Another drawback is the under-developed, if any, secondary market.
Stuart Law at Assetz property investment company, says it is "nigh on impossible" for investors to resell their properties in Bulgaria. He went on to say that from this moment onwards any price growth, registered in the country could be attributed to farmhouses outside the tourist areas, which are still very cheap, as reported by FT.
Other alleged hotspots have also lost their appeal. Prices in Riga, Latvia hit similar levels to Manchester, and are now likely to come down, while property prices in Polish cities such as Warsaw could fall 10 per cent, according to Financial Times' release.
Savills consultants say that investors are also pulling out of Morocco and Turkey following a number of years of strong growth. Another area, discussed by Savills consultants, is Dubai. Currently there is a large supply there, but it is not certain that they will enjoy sufficient rental demand. Hundreds of thousands of luxury apartments are due to come on to the market in Dubai next year and developers are promising yields of 9-10 per cent. Cape Verde off the coast of West Africa is a similarly unproven market, according to Savills, as quoted by FT.
Rather than risk void letting periods and uncertain returns, investors are moving into markets where rental demand is more robust, even if this means losing the glamour of a top holiday destination. Some of the most popular markets are still very immature and are expected to see strong capital growth as well as double-digit yields for some time to come, the FT analysis said.
Judi Williams, marketing manager at Property Frontiers, which specialises in emerging markets, says the demand for rental accommodation in Mongolia and the oil producing regions of Canada is "colossal", FT wrote.
Major oil and mining companies such as BHP, Ivanhoe and Rio Tinto are opening up operations in Mongolia and sending in hundreds of executives who demand high-quality accommodation. Williams says rental yields are around 13 per cent.
Highly-paid oil executives are also flooding into western Canada. Rental occupancy is currently 99.7 per cent. Yields are around 11 per cent and capital appreciation is around 20 per cent per year. Other popular investment markets include Panama, Argentina and Sao Paulo in Brazil, where city centre apartments are generating gross yields of 15 per cent. Investors are also buying into five-star hotel villas in smaller Caribbean islands such as Grenada and Tobago, which are offering guaranteed yields for 10 per cent- plus for five years, FT reported.