A shortage of supply in Sofia is likely to see prices increase by some 25 per cent during 2008, according to property market analysts Property Secrets.
The Bulgarian capital presently has a population of 1.2 million, but this is expanding as rural inhabitants move toward the city.
Furthermore, the average salary in the city is 2.5 times the national average, providing higher levels of disposable income.
In response to the pressure on housing Petar Dikov, Sofia's chief architect, has been commissioned to draw up a new master plan for the city - which is the most densely populated and built-up area in Bulgaria.
And according to Property Secrets, a lack of available construction sites in the city has forced planners to earmark almost every free stretch within the city’s boundaries for construction.
"Sofia is a favourite hot spot for property investors as it potentially offers ultra-high returns, combined with excellent long-term prospects," said Neil Lewis, chief executive Property Secrets.
"It is just at the start of its growth curve so there is plenty of room for growth."
Sofia's new plan is largely focused on expanding into suburban villages and redeveloping the industrial parts of Sofia in the north.
However, as Property Secrets explains, the conversion of this area will be difficult.
Northern districts are the least desirable and the cheapest residential areas due to the high concentration of old industry plants, pollution and lack of infrastructure
Yet, the financial rewards make the effort worthwhile. At present an apartment in Sofia can be bought for around £37,000 and a two-bed flat for £100,000 - well below other EU and central and eastern European countries.
"Sofia is about a year behind the Bucharest market, but with the announcement of these latest regeneration plans it is set for a further boom," said Mr Lewis.
"Now is the time to invest in Sofia, but you need to look for the high growth areas which are close to major employers and have good transport links into the city centre."
