Property firms expand in Balkans
Greek real estate firms continue to boost their presence in the Balkans. They now are focusing their interest on the newest European Union members, Bulgaria and Romania. Their distinct advantage is the cheaper land available, at least by Greek standards, and an increased demand for higher quality housing as the two countries’ per capita income increases at a rapid pace. Property prices are still low enough to ensure large future profits, as demand appears to be very strong. Moreover, with the accession of these two countries into the EU, business risks have declined significantly. In all, these markets offer the best alternative for Greek housing developers, especially since the enthusiasm for development in the Greek market has waned significantly. Following industries Greek real estate firms have followed in the steps of industrial groups, although their investment in the Balkans dates only from 2004. The latest move is the signing of an agreement by Lamda Development, a Latsis Group company, to buy Bulgarian company TIHI. The latter’s main property is a 6,300-square-meter plot in Sofia, Bulgaria’s capital. Lamda Development plans to build 30,000 square meters of office and retail space on that plot. Lamda is paying -13 million for TIHI and its total investment will exceed -30 million. Beyond that investment, Lamda is also investing -10 million in a luxury housing project on a 1.1 hectare plot in a Sofia suburb. Work on a 28,000 sq.m. commercial building in the center of Sofia is scheduled to begin soon. This project is a joint -25 million investment with Greek construction company GEK, whose property portfolio in Bulgaria is as important as Lamda’s: It is planning a housing project in the capital’s Boyana area and a commercial building on Bulgaria Avenue. The GEK group has also acquired, for future development, a 1.45 hectare plot in Sofia’s ring road and is about to sign agreements for two more plots near Bulgaria’s border with Turkey and Greece. In Romania, GEK is about to enter the logistics market, having acquired a 6.35 hectare area just outside Bucharest. In the Bucharest housing market, the Greek firm with the strongest presence is Arcon Construction, which is developing four housing complexes. The lack of quality housing and increasing demand for it are the reason for such intense activity. Two of the complexes, with a total area of 13,000 square meters, are located in the best areas north of the city center and the other two, of a total area of 9,500 square meters, are located in the city center. Houses in the better area will sell for -1,900 per square meter, a very good price for Greek investors, given the potential for appreciation. Also present in the Romanian market is Elmec Sport, the first «non-traditional» real estate company in the Balkans market. Elmec, a commercial chain, is about to start building a commercial center in Craiova through Bucharest-based MicroCom DOI. This investment will cost a total of -80 million and Elmec’s stake, through its subsidiary Elmec Romania SRL, is expected to be at least 30 percent. When completed, by the end of 2009, the «Craiova Mall» will have a total area of 122,000 sq.m., spread over four levels. Elmec also owns a 1.25 hectare plot in Bucharest’s Otopeni area, along the main road to the airport but development plans are still at an early stage. The property market in Bulgaria and Romania offers great opportunities for individual investors, at a time when high prices in Greece limit upside potential. In Sofia, sale prices for newly built apartments start at -1,000 per square meter in the Iztok area, while at Ivan Vazov, they start at -1,300 per sq.m. In Doctor’s Garden, the Bulgarian capital’s best area, houses sell for -1,700–2,000 per sq.m. Beyond these areas, there is significant construction activity in areas such as Lozenets (with prices ranging from -1,550–1,900 per sq.m.), Borovo, Livadi and Vitosha. Rents are around -7 per sq.m. in Doctor’s Garden and -4–6 in other areas, although some luxurious apartments may fetch as much as -10 per sq.m. Continued high demand ensures that yields in the Bulgarian market remain high, at about 7-10 percent. Holiday homes The holiday housing market is also expanding at a rapid rate. Demand is not limited to seaside areas around Varna but extends to mountain resorts, such as Bansko, which is the equivalent of Arachova in Greece. Of course, Bansko is still much cheaper, with sales prices ranging between -650 and -1,650 per sq.m. In Pamporovo, prices per square meter range between -600 and -1,500 and they are marginally lower in Borovets. In the seaside areas by the Black Sea, housing supply is growing at a fast pace. According to property agency Colliers, more than 22,500 units are under development, a 25 percent rise on 2005. The most popular area is Sunny Beach, with houses selling for -600–1,600 per square meter, although the most luxurious units are to be found in Sveti Vlass, with prices up to -1,800 per sq.m. In Golden Sands, prices start at -600 per sq.m., going all the way to -1,700 per sq.m. However, if you can buy a house under construction, prices are 10-15 percent lower. The most expensive are small projects that provide the most isolation and quiet for their occupants. In Bucharest, prices of newly built houses are significantly higher than in Sofia. Demand there is almost as high, but wages and land prices are higher. In the Romanian capital’s most desirable areas, prices usually range between -1,500 and -2,300 per sq.m. plus value-added tax. The highest prices are in northern Bucharest, the most expensive being the Mircea Eliade area, where prices exceed -3,000 per sq.m. Even in the city center, the prices of the (rare) land plots have taken off recently and now range between -1,000 and -1,400 per square meter.
