The month of April brought news that the prices of real estate in Bulgaria continued their increase in the first quarter of 2006.

Housing prices in Bulgaria rose in Q1 by 4.7 per cent from the level recorded in the last quarter of the previous year, the National Statistics Institute (NSI) said on April 25.

The NSI data covers the prices of sealed apartment purchases reported by Bulgarian real estate brokers in the country's 28 regional centres.

The average apartment price in the first quarter of 2006 was 806.1 leva (411 euro) a sq m, up from 769.7 leva (383 euro) in the previous quarter.

Apartment prices in the capital Sofia were the highest at 1313.7 leva a sq m, or 2.2 per cent up from the last quarter of 2005.

Varna, a major Black Sea port and holiday destination, was second with apartment prices of 1237.8 leva a square metre, up three per cent from the end of 2005. Bourgas, another Black Sea port and resort city, came third with average housing prices of 1198.3 leva a sq m, up 1.4 per cent.

The sharpest rise in housing prices in the first quarter, 51.5 per cent, was registered in the Danube town of Vidin. The town was recently struck by floods due to the rising level of the river, which would probably negate some of the positive change in the next months of this year.

Lovech in central Bulgaria saw a 19.5 per cent rise in average housing prices and the Danube city of Rousse posted a 15.3 per cent growth in apartment prices.

Statistical data of the real estate company Address, one of the largest in Bulgaria, showed a drop in the prices of vacation apartments at the southern Black Sea coast around the city of Bourgas. This comes as no surprise, for brokers have long been forecasting segmentation in the prices of holiday property along the entire Bulgarian Black Sea coast.

The Address data showed that in March 2006 there was a general drop in the prices of those properties which in July 2005 were in the lowest price group. There was a serious increase in the cost of luxury apartments in the region in early March 2006.

The resort of Primorsko was the only place where luxury prices dropped and the other ones were on the rise.

Bulgaria's accession to the European Union will have an impact on the players in the real estate market in this country. Luchezar Bogdanov from the independent analytical company Industry Watch made this forecast on April 26.

He was addressing a discussion entitled Scenarios for Bulgaria's EU membership and their impact on public finance, investment environment and economic growth.

Foreign investors in real estate in Bulgaria are currently divided into two groups - the first invest in property with purely speculative motives, while the second group consists of those who wish to keep their property or reside on it.

In contrast to other South East European countries, in Bulgaria the number of foreigners in the first group is significantly larger, which, according to Bogdanov, is the first signal for a forthcoming change. As soon as these investors find that speculation will no longer bring them serious profits, they will immediately switch to other markets, Bogdanov said.

He believes that those who plan to reside in Bulgaria should know when the country will join the EU. Also important for them will be to know where a precautionary clause will be imposed on the country in the justice and home affairs field.

A large portion of the domestic demand for property in Bulgaria is covered by money from Bulgarian emigrants. Bogdanov pointed out an example with the town of Sliven in southern Bulgaria, where, according to a survey, about 85 per cent of the newly built apartments are being bought by Bulgarians working and residing abroad.

If Bulgaria is integrated in the EU as fast as possible and with no precautionary clauses, easier migration to member states with higher incomes could be expected, which would enable the influx of more investment money in Bulgaria from emigrants, Bogdanov said. Such a development, in his view, will give another boost to the growth of the real estate market and the entire economy.