Residential and vacation properties in 2008 within Bulgarian economic environment

In 2008 the last year's strong growth in housing prices in Bulgaria will repeat. First year of European Union membership for the country led to growth of household incomes from one per cent in 2006 to three per cent in 2007.

But yet these figures does not take into account 56 per cent of Bulgarians - the old-age pensioner, the poor, residents of small towns and villages, for whom the rate of rise in incomes was slower. At the end of 2007 the inflation was estimated at 12.5 per cent. Bulgarian National Bank (BNB) announced increased consumer price inflation had dampened consumer confidence about 2008. Also worrying were the BNB figures on the growing current account deficit. Current account deficit was pushed to 18.5 per cent in January-November 2007, from 12.5 per cent of the previous year because of rising imports, powered in part by increasing consumer borrowing. In the first 11 months of 2007 imports added up to 18.9 billion euro, while exports were 12.3 billion euro.

The strong growth in Bulgaria's housing prices in 2007 would not be exactly the same this year. The apartment sale prices in 2007 in Sofia had gone up by 25 per cent, the highest growth in the past three years. In Varna on The Black Sea, there was 20 per cent growth, reaching an average 852 euro a sq m. This year that residential property price all over the country would increase by 10 or 15 per cent according to the forecasts. Currently, the average price a sq m for residential property in Bulgaria is 737 euro.

The shortage of land in cities where developers wanted to build led to ample compensations to land owners in the form of apartments being offered in return for selling their land or property to open the way for residential developments.

In 2007 tourism and real estate made 60 per cent of foreign direct investment in Bulgaria. That is 20 per cent higher than 2006 but is expected to grow at a lower rate this year, about 10 per cent. For 2007 the foreign direct investment in Bulgaria amounts at about 5.3 billion euro.