High prices and high risks – what is the real estate market in Varna facing?

The demand does not meet the supply, shaking the real estate market in Varna.

Property prices are at their peak, although fewer transactions are recorded – this is part of the dangers weighing on the real estate market in the Bulgarian seaside capital. Varna has the lowest growth in transactions – 4.3% according to Yordan Yordanov, managing director of real estate agency “Nov Dom 1”. The demand is high, but the problem lies in the fact that the properties do not meet the conditions. Varna residents are interested in larger properties – new construction. Building permits are becoming increasingly difficult to obtain, and the market fails to meet the needs of buyers.

What else is causing the decline in property transactions in the third largest city in the country? What is the quality of the properties offered by new construction and is overbuilding considered a major issue?

During the second quarter of 2024, local administrations in the Varna region have issued permits for the construction of 180 residential buildings with 1,087 apartments, which is 15.1% less compared to the previous quarter, and investors are facing limited opportunities for development.

At the same time, the Municipality of Varna has been delaying the implementation of the most emblematic project for the city of Varna in the last 30 years, namely the first skyscraper in the city, which is planned to be the second tallest building in Bulgaria and is intended to be built in an unattractive area in the central part of Varna, known for its old communist buildings or gray buildings constructed between 1989 and 2008.

Refusal of Energo to connect newly built residential buildings to its network

A construction entrepreneur from Varna has been denied by the electricity distribution company to connect newly built residential buildings in the Vuzrazhdane district of Varna, reports BNT. The distribution company cites the exhausted capacity of the nearest substation “Varna North” as a reason. Connecting new properties will deteriorate the service quality and jeopardize the electricity supply to other consumers. However, the problem is not isolated, but actually affects a large part of Varna’s territory, and there are no actual electrical capacities for new buildings. At the same time, such capacities are not being built. This problem, however, is a time bomb waiting to explode now!

Building large facilities takes time and must first be approved by the Electricity System Operator (ESO). A scheme has already been proposed for the “Varna-North” substation, but a specific opinion is awaited in this case.

Decreasing building permits and building stock outlook

The issue of overbuilding is crucial for major regional cities, led by Sofia and Varna. In order to cool down the trend, municipalities are issuing fewer and fewer building permits. In the second quarter of 2024, compared to the same period of the previous year, permits for new residential buildings decreased by 4.9%.

The city of Varna also shows a significant decline. In the second quarter of 2024, local administrations in the Varna region issued permits for the construction of 180 residential buildings with 1,087 housing units, which is 15.1% less compared to the previous quarter, and investors are limited in their offerings.

This, in turn, hinders the work of brokers and investors. According to Yordan Yordanov, larger properties are being sought in Varna and Sofia compared to previous years, with increased interest in residential properties in gated complexes. Buyers are mainly interested in new construction, and if the demand does not match the properties offered, a market imbalance is observed, which is expected to explode property prices.

The real estate market extends its dynamics and development not only in the capital. Transaction activity has been booming in Plovdiv, Varna, Burgas, and Veliko Tarnovo in recent years. The lack of vision for the future is a major problem in the provinces, leading to instability in the Real Estate sector. In such a period, we cannot afford to operate in the market with an unclear and unstable strategy. “New Home 1” is among the leading real estate agencies in the country. With its 2 offices in Sofia and 2 in Varna, it ensures a stable position in the market and successfully implements a sustainable mechanism for property investment, guaranteeing 13% or more profit for the investor. The agency buys at below-market prices and allows its clients to benefit from the better terms and lower value it negotiates. Trust and a clear strategy are key priorities for active players in the real estate market.

The real estate market in Varna is facing significant challenges. High prices and decreasing number of transactions are a result of the mismatch between supply and demand, difficulties in obtaining construction permits, and refusals from the electricity distribution company to connect new buildings to their grid. These are among the main issues for investors in the region. These factors lead to market imbalance and hinder the work of brokers and investors, requiring a clear and stable strategy for the future.