Bulgaria - Building & Construction

EU Accession

Accession negotiations with Bulgaria have now been completed in all subject areas. The European Council of June 2004 expressed the hope that Bulgaria is ready, and accession talks started in October. It is anticipated that Bulgaria will be welcomed into the European Union in 2007 as a new member state. The Commission’s annual progress report will state whether the country would be capable of fulfilling all the obligations of EU membership upon accession. Bulgaria is a member of NATO.

Market Profile

The size of Bulgaria’s market for building materials is a function of the number of annual starts of residential, commercial and industrial facilities, plus the extensive renovation of older buildings, together with the many plans for major government-funded infrastructure development including buildings, roads, ports, airports, bridges and boarder crossings. This in turn is a function of the condition of Bulgaria's economy and the ability of the government and private companies and individuals to finance projects.

Reflecting the Bulgarian economy, the building materials market, including both commercial and residential, has increased significantly since 1999, which was a boom year with a growth rate of 22% and has increased year in year in similar terms, as Bulgaria’s economy has expanded.

There are thousands of building materials suppliers in Bulgaria. In the Sofia region alone there are about 4,000 building and construction companies registered. The construction and building sector is now one of the busiest in the country. The strong and growing demand for construction materials for housing, commercial and industrial projects is expected to continue through the next decade.

Residential Construction

The ongoing privatization of Bulgaria's construction and building industry will open the way for new building technologies to become established on the Bulgarian market. The Ministry of Regional Development and Public Works plans to privatize more than 90 percent of the existing construction companies, and wants to see more foreign investment in those companies in the form of joint-ventures or other partnerships.

Good opportunities for British companies lie largely in the residential sector. At present, the vast majority of imported housing materials is used in the single-family housing market, including summer homes for wealthy Bulgarians, although the multi-family market also has good future potential. There is also a pent-up demand because of the lack of investment in physical infrastructure including residential construction during the past ten years since the end of the Communist period.

For example, for a population of about 8.5 million people, the number of completed dwellings during the years 1997, 1998, and 1999 were only 7,452, 4,942, and 8,643 respectively. The ratio of single family homes and apartments in multi-family buildings is 1:6.

Demand for residential building materials will also increase because the purchasing power of potential buyers is also expected to grow, due to the expansion of Bulgaria’s economy and the accompanying rise of personal incomes.

For these reasons, the number of Bulgarians who can afford to buy a two-bedroom apartment of 70 square meters is going up. Another contributing factor is the anticipated decline of the current mortgage interest rate.

The Bulgarian market is very receptive to foreign housing materials. Many Bulgarian companies are looking for new high tech products and technologies. The number of inquiries from Bulgarian businesses wanting to import E.U. building products is increasing. Some home builders are starting to use the

European-style platform-frame wood construction and prefabricated housing. They prefer them for their different styles, superior energy performance in Bulgaria’s climate, soundproofing, tight insulation and air tightness, earthquake resistance, and price-competitiveness compared to the old products.

To better penetrate the Bulgarian market, it is important to understand the differences between Bulgarian and British lifestyles.

Land availability and the design of houses must fit local tastes and needs. Differences in lifestyles are predetermined by the economical, social and cultural factors.

Differences in land availability are determined by the newly created, market-driven economy in Bulgaria and the growing real estate market.

Local tastes are dominated by the desire of nearly each Bulgarian to possess a single-family house. The needs of the average Bulgarian are driven by the possibility of owning a bigger home and the ability to afford rising electric and heating costs.

Commercial Construction

In addition to residential construction, substantial opportunities lie in the commercial and industrial sectors. The former privatization funds are offering for sale industrial buildings to small and medium sized enterprises as well as land parcels between 4,500 and 9,000 square meters. Many of these buildings will need expensive major renovations, which is why many investors prefer to acquire vacant land or to scrap and build.

Specialized building materials will also be needed for the extensive renovation and construction of hotels, especially as the Black Sea summer resorts and mountain winter resorts which are privatized by sale to largely foreign investors.

Other factors which will affect the demand for building materials over the next several years include plans for the reconstruction of the airports, ferry terminals, hotels, bridges oil ports, roads, rail terminals and power plants.

Best Sales Prospects

Products which will have a very strong market position include floor and wall coverings and accessories, suspended ceilings, wood panelling, insulation, adhesives, cements, coatings, wooden and vinyl doors and windows, door and window components, iron and aluminium components, metal and vinyl siding, paint and seals, electrical wiring, pre-fabricated building modules, flooring, bathroom furnishings and accessories, kitchen furnishings and cabinets, plumbing fittings and pipes, sanitary plumbing, taps and fittings, ceramic tiles, roofing shingles, tiles and bricks (materials and components), heating and ventilation equipment, water and sewerage equipment, construction machinery and steel buildings and fabrications.

Competitive Situation

Imports account for 36% of Bulgaria's market for construction materials.

Bulgarian builders and architects are generally more knowledgeable about the advantages of imported housing building products, and they are the ones who usually make the decision to import. For builders and construction companies, the important criteria used in determining which products and from whom they purchase are price, quality, brand recognition, variety in design, delivery lead time and after sales service.

Domestic Production

Bulgarian production accounted for about 64 percent of the building materials market in 1999 but products are far behind European standards.

Using inexpensive labour, Bulgarian companies produce basic building materials such as cement, limestone, and bricks. But they do not make any high-tech value-added products, and so cannot play any competitive role within the market in terms of quality or technology.

Third Countries Imports

Imports from third–country suppliers will grow over the short term because of the strong interest among Bulgarian builders and end-users. Therefore, E.U manufacturers should develop advertising and promotional materials to acquaint Bulgarian builders and homeowners with the advantages of E.U. housing products.

End-user Analysis

There are three main user groups of imported building materials:

Governmental and municipal entities.
Private-sector building and construction companies.
Retail end-users.

Bulgarian end-users of construction materials are interested in obtaining high-tech products and technologies such as energy saving products, HVAC and energy management systems, manufactured and modular homes and security systems.

Other important factors affecting purchasing decisions for building materials are quality, low price and after-sales service. Bulgarian home builders and architects are generally more knowledgeable about the advantages of imported housing building products than home buyers, and they are the ones who usually make the decision to import.

Small- and medium-sized private sector companies work mostly as subcontractors and home builders. For home builders, the important criteria used in determining which products and from whom they purchase are price, quality, brand recognition, variety in design, delivery lead time and after sales service.