COVID-19 impact on Bulgarian vacation property market

 

COVID-19 impact on Bulgarian 

vacation property market

Coronavirus has pushed the demand of vacation properties up.

Houses & villas have growing share in sales compared to apartments

This is the most recent statement of the three biggest real estate agencies, mediating in the majority of housing transactionin the country. As number one reason for this trend is pointed the simultaneous need of social distancing, family comfort and being close to nature during the health crisis. 

The short term rental market`s figures also confirmed an increasing preference of travel-makers for entire homes with private yards outside the urban areas. Airbnb and other similar platforms claim a significant increase in mid-term rents due to remote working policies. 

Prior to this year`s coronavirus pandemic, the short-term rental industry had just wrapped up a half-decade sprint of nearly 300% total growth driven by travelers seeking more affordable and unique experiences (1).  The global vacation rental market size was valued at USD 87.09 billion in 2019 and is expected to expand at a compound annual growth rate of 3.4% from 2020 to 2027(2). Major force in boosting the growth were millennials. Their preferences for low cost, additional privacy, kids and pets friendly nature predetermined the investments into apartment units. Today, COVID-19 and the government measures for limit the spread of the virus led to some changes in demand. Increasing number of families with kids, extended stay rental terms and preferences for accommodation in homes with private yards in resorts or rural areas are the new tendencies worldwide. The growth in small scale investments in purchasing single houses and villas already indicated the new trend. How big investors and developers will respond to these changes in demand we will see earlier in the last quarter of 2020.

In Bulgaria,

in the last few years the tourism, including the vacation rental segment flourished. According to the statistics of the National Statistical Institute in January and February 2020 the total number of night stays and the income from them grew by over 18% compared to the same period in 2019.The growth of night stays of residents exceeded the one of foreigners with 6.6%. 

However, on March 13th 2020 a state of emergency was declared and the success of the summer season was questionable. The majority of flights and early bookings were cancelled. Observing the government anti-virus measures the Bulgarians have been staying, working and studying at home for the next two months. In May, with loosening the lockdown people started to make short escapes from their homes, mostly choosing secluded accommodations in mountain resorts. In July and August small family hotels, guest houses and other similar places for short-term rentals worked at full capacity. Even more, some of the summer resorts, not so popular among the foreigners registered a growth of up to 20%(3). Some of the big hotels in the biggest summer resorts, which mainly rely on foreign tourists and may hardly meet the requirements for social distancing and hygiene, remained closed for the season, while the short-term rental segment was over-performing. At the end of the season it is clear that the domestic consumption was the main driver of the hospitality industry as accommodations in houses and villas were at the top of wish lists. A trend of extended stays was also registered due to remote working policies of many companies. Many people spent most of the summer at the Black sea or in mountains.

Whether the trend in recent months for increasing demand of houses in resorts and suburbs will last for a much longer time than the pandemic or whether the current way of living will turn into the “new normal”, has no precise answer, but it is a fact that the coronavirus has accelerate the happening and expansion of some new attitudes. The latest statistics for efficiency of the work force worldwide made the management of leading companies to reconsider the need of 40-hours working week. Some of them (IBM division in Bulgaria, for example) reduced the working week even before the health crises, others allowed remote working for certain jobs. The dynamic urban living amplified the human need to be close to nature and escapes for the weekends drastically increased in the last few years. Shor term rental industry is one of the fastest growing as well.

This make us believe new developments for houses with yards in suburbs, resorts and even rural areas will be in the focus of investors.

Of course, we all remember the financial crises from 2008 and we expect, investors and real estate buyers to evaluate the location and project potential very carefully. Year round activities, proximity to amenities and facilities, fast internet and delivery of essential goods will be crucial. 

1. Source: COVID-19 impact on hotels and short-term rentals, August 10,2020, STR premium data benchmarking, analytics and marketplace insights for global hospitality sectors (https://str.com/whitepaper/covid-19-impact-on-hotels-and-short-term-rentals-airdna)

2. Source: Vacation Rental Market, Market analysis, 2020, Grand View Research (https://www.grandviewresearch.com/info/about-us) 

3. Source: Ministry of Tourism (https://www.tourism.government.bg/bg/rss)