According to the report of the Center for Economic Development the annual inflation in Bulgaria for 2011 was 2.8%. The predictions for 2012 are that the inflation will be between 2,5% and 3%. The unemployment for 2011 was on the average of 10,2% and for 2012 the expectations are that it will reach 10,5%. It is expected that in the fourth quarter of 2012 the Bulgarian GDP will reach its volume from the times before the recession.

The expectations of analysts are that the property prices in Bulgaria will continue to drop on average by 5%. The top prices fetch luxury properties in Varna on the Black Sea, where they sell on average for 1500 levs (760 Euros) per square metre, while the properties in the capital Sofia are in the second place with prices of 1468.10 levs ( 700 Euros) per square metre.
In 2012 the market of holiday properties will keep relying on the Russian buyers, as their interest towards properties in Bulgaria has not been affected by the recession like in the case of the Irish and the British buyers. The prices of some of the holiday apartments and houses have dropped by 50% since 2008 and this makes them even more attractive for the Russian buyers. The expectations that Chinese and Middle East investors will start buying properties in Bulgaria failed to materialize.

After his first visit to Brussels, the Bulgarian President Rossen Plevneliev said that there has not been a positive response to the demand made by the Bulgarian Prime Minister Boiko Borissov the EU to increase its financial share in infrastructure projects in Bulgaria. Currently Bulgaria pays 20% and the EU 80%. During his meeting with the German Chancellor Merkel in Berlin recently the Bulgarian Prime Minister asked that the share of the Bulgarian state decreases to 5%. Only member states with serious economic problems have received such kind of support from the EU. The Bulgarian government considers this approach unjust, as it stimulates undisciplined member states and punishes the others.

The Bulgarian Ministry of Finance has issued state bonds to the value of 35 million levs (18 million Euros) with maturity date in seven years time and a coupon of 4.45%, which shows increasing trust of the investors. The bonds were bought by banks (about 36%), pension funds (48%) and insurance companies (13%). The coupon of the state bonds is much higher when a country is experiencing financial difficulties like Hungary ( 10,04%) or when its economy is booming like Turkey (5,74%) and Poland (5,05%).

The Bulgarian government has approved the draft amendments to the Law for the Forests and has sent them to the parliament for voting. According to the draft amendments more than 100 state owned companies that look after the forests will be allowed to cut and sell timber. Until now only private companies have been doing this after participating in tenders. There will be preferences for strategic partners of the state in the tenders for the production of timber.
The amendments shall make the regulations concerning the process of constructing skiing slopes and lifts pretty lose. The current obligatory requirement to exclude the plots of land where the skiing slopes and lifts will be positioned from the forestry fund shall not be in force any more. However, this shall not apply to plots of land where wind power turbines will be constructed.

This year the citizens of Sofia and the companies based in the Bulgarian capital must think twice before deciding to delay payment of their property tax. Sofia Municipality has focused on collecting debt from individual tax payers whose unpaid property tax exceeds 1000 levs and from companies owing more than 50 000 levs. Until now the emphasis was on collecting tax from the large debtors. Only in 2011 Sofia Municipality has collected more than 90 million levs of old debts which was an increase by 20% in comparison with 2010. The largest debtors were the Chief Mufti with 629 000 levs, Sofia Outlet Centre with 579 000 levs and Limex City with 267 144 levs.

The prices of large properties in Sofia have dropped sharply. Only in the area of Oborishte where the most expensive properties in the capital are located, prices have increased by 4% and start at 923 Euros/sq.m. , reaching 4331 Euros/sq.m. At the same time in the affluent area of Lozenets the property prices have dropped by more than 1/5 in the last two years. The lowest price there is of 816 Euros/sq.m. The most serious price drop – of 23% – in the expensive areas of Sofia is in Beli Brezi. More than 700 apartments located in affluent central areas of the city have been put on the market.

After its accession into the EU in 2007 Bulgaria had the right to keep in force its existing laws concerning the purchase of a second property by citizens of EU member states and citizens of states signatories to the European Economic Area Agreement (EEAA) for five years.

This term has practically expired on 1 January 2012.

Those citizens of EU member states and citizens of states signatories to the European Economic Area Agreement (EEAA) who legally reside in Bulgaria are in theory excluded from the above rule.

Concerning the purchase of agricultural land, forests and forestry land by citizens of EU member states and citizens of states signatories to the European Economic Area Agreement (EEAA) Bulgarian laws preceding the accession into the E.U. should be in force for seven years after the accession of the country into the E.U., i.e. until 1 January 2014.
The above restriction does not hypothetically apply to self-employed farmers and agricultural producers, who are citizens of EU member states and who would like to settle in Bulgaria. They should be treated like Bulgarian citizens concerning purchasing all types of property in the country.
For your reference please look at the text The Treaty of Accession 2005:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2005:157:0104:0128:EN:PDF

The Daily Telegraph has published the ranking of The Global Property Guide Europe’s Top Places to Invest in Property. The Bulgarian capital Sofia took 17-th place overtaking Prague (18), Paris (20), Lisbon (22) and London (26). According to The Global Property Guide, the positive feature of Sofia is the pro-landlord rental market. The negative feature is that the rental yields are poor – 4,19% – the transaction costs are high, the rental income tax is moderate and the corruption is strife. The capitals of many other Balkan countries feature better than Sofia. Ljubliana, Slovenia’s capital is in place 14, Bucharest, the capital of Romania, is in place 12, Zagreb, the capital of Croatia is in place 5, Istanbul is in place 4 and Skopje, the capital of Macedonia is in place 2.

The differences in the standard of living among the regions in Bulgaria continue to grow despite the European funding. The poorest regions – the North-Western and the Northern Central ones – continue to lag behind the rest of the country. At the same time Sofia receives the largest share of the European funding per capita according to the National Strategy for Regional Development 2011 -1015 of the Bulgarian government. The North-Western Region which includes Vidin, Montana, Vratsa, Pleven and Lovetch is getting poorer. According to the National Statistics Institute the GDP in this region was 5576 levs (apprx. 2250 Euros) per capita in 2009 or 62% of the average for the country. At the same time the richest region in Bulgaria – the South-Western Region which includes Sofia – had GDP of 15 610 levs (apprx. 7800 Euros) in 2009. In comparison the GDP per capita in the North-Western Region in 2000 was 90% of the average GDP for the country. The situation in the Northern Central Region that includes Veliko Turnovo, Gabrovo, Russe, Razgrad and Silistra is similar. The GDP per capita there in 2009 was 5942 levs (apprx. 2450 Euros).
In the North-Western Region only 59.3% of the people from the age of 20 to the age of 64 are employed. In the North-Central Region this proportion is 60.5% while in the South-Western Region it is 71.6%.
Instead of attracting Euro-funding, the poorest regions in Bulgaria receive much less European money in comparison with the capital Sofia. The North-Western Region has attracted only 512 levs (250 Euros) per capita, the North-Central Region has featured a little bit better, attracting 691 levs (345 Euros) per capita, while Sofia has attracted 2164 levs (1800 Euros) per capita.

Analysts expect that 2012 will be again the year of the buyers. Most buyers will be first-timers. The hope is that those who have savings or free money will be bold enough to spend them on properties because of the attractive prices.

The property prices in Bulgaria will continue to fall in 2012, however the analysts do not dare to give forecasts about the amount to which the prices will drop. The expectations are that the buyers and the tenants will dictate the property prices. Most of the buyers of holiday apartments and houses will be Russian, while the buyers of all other types of property will be mostly Bulgarians.  The expectations are that in 2012 cheap properties not exceeding 55 000 Euros will be in demand.  Although the number of the property sales in 2011 has increased by 30% in comparison with 2010 unlike a year ago, now the buyers are spending mostly on cheap properties.

Concerning the survival of the construction companies, the European money will be of prime importance for many of them.  In just one year the income of the construction industry has shrunk from 11.7 billion levs to 9.9 billion levs in 2011. Big companies will focus on the construction of apartment buildings and private investors will commission them for the construction of individual buildings. The construction of big shopping centres will continue.

The money from the European programmes will be spent for the reconstruction of hospitals, schools and cultural monuments.  The greatest amount of the European money will go for the development of infrastructure.  Some of these projects have to be completed in 2012.

The Bulgarian Economy will grow of only 1.5% in 2011, according to analysts. Earlier forecasts predicted a growth of 2.6%. However, the expectations are for a decrease of the export and a negative impact on the labour market.
The slowing down of the growth of Bulgaria’s GDP is due to the negative perspectives for the Euro zone economy and the expected sharp drop of the investment in Bulgaria in the third quarter of 2011.
The analysts expect additional decrease of the balance of the corporate sector. The export which has been the stabilizing factor of the Bulgarian economy is expected to shrink and to put under a risk the already stabilizing labour market.
It is expected that Bulgaria will avoid the second recession because the balance of the public sector remains strong, while the export demand is steadily decreasing, although it is far from the sharp drop experienced in the beginning of 2009. The growth of the Bulgarian economy is expected to return to normal levels in two-three years time.

According to the analysts, there are three tendencies concerning the commercial property market in Bulgarian in 2012.
The first one is that the number of buil-to-suit industrial centres has increased due to the increased volume of outsourcing of light industrial production from Western Europe into Bulgaria. Bulgaria is attractive with low taxation and low cost of labour.
The second tendency is that the relocation of companies into newly build office centres has intensified due to the fact that the owners offer 5 to 7 year rental contracts at attractive prices and this allows the companies to cut costs during the recession.
The third tendency is that six new shopping centres are under construction throughout Bulgaria and of them three will open in 2012 – Bulgaria Mall, Paradise Centre and a new mall in Bourgas.

The Bulgarian National Statistics Institute has announced that from July to September 2011 the Bulgarian GDP has increased BY 0.3% in comparison with the previous quarter of 2011. In comparison with the same period of 2010, the growth is by 1.6%. Nevertheless, the Bulgarian economy is slowing down. In the first quarter of 2011 the growth of the GDP was 3.3%, while in the second it was 2%. According to the analysts in the beginning of 2012 the growth will slow down even more it will not enter into a recession.
In the last year the productivity of the Bulgarian economy was one of the best in Europe – exceeding 7%. Partially this was due to the lost of jobs, partially to increased production. The National Statistics Institute has announced that in the first quarter of this year the Bulgarians have increased their productivity by 5.9% on an annual basis. The highest increase was in industry, while the worst was in agriculture.

In 2011 the market of agricultural land in Bulgaria went back to the levels before the recession. 1 200 000 dka of land have been sold and only in July 124 000 sales took place. In 2008, which was the best year before the recession, in 122 000 deals were sold 1 240 000 dka of land.

The average price of the land is 345 levs (170 Euros) per dka, for comparison in 2010 it was 320 levs (160 Euros), while in 2008 – 350 levs (175 Euros).

According to analysts, agricultural land proved to be a stable asset in Bulgaria and this has attracted investors.

Due to the debt crisis in the Eurozone, the demand for mortgages in Bulgaria has shrunk. The size of the average mortgage has decreased in October 2011 in comparison with September 2011 according to the Bulgarian National Bank. The number of the repaid mortgages has exceeded the number of the new mortgages. This is the third decrease in the number of the new mortgages since the beginning of the recession. The previous two decreases took place in January 2009 and in January 2011, as the first month of the year is traditionally bad for lending. In the last three years only the number of the new mortgages has been steadily rising by about 2% on annual basis.
This third decrease was minimal – by only 340 000 levs (about 170 000 Euros) – but according to analysts it shows the decrease in the demand in the last two months. However, it occurred exactly at the climax of the active crediting season when banks are most active. The reason is the deepening debt crisis in the Eurozone.

The bad and the restructured credits reached 9.022 billion levs ( 4,5 billion Euros) or 22% of the credit portfolio, non-inclusive of the overdrafts. The increase in the last month was by 222 million levs (111 million Euros) due to the increase of the bad business credits by 172 million levs reaching 5.6 billion levs (2.7 billion Euros). The size of the unpaid or restructured mortgages is 1.7 billion levs and of the bad personal credits – 1.5 billion levs .
The total size of all credits lent both to businesses and individuals is 51.8 billion levs (25 billion Euros).

According to the property analysts 40% of the property buyers in Bulgaria are prepared to pay between 50 and 80 000 Euros for their purchase. They are the largest group of property buyers in the country. In the second place (23%) are the buyers ready to pay between 80 000 and 120 000 Euros and in the third place (again 23%) are those under the 50 000 Euros margin.
According to the official statistics 40% of the sales have been of properties that cost from 30 000 to 50 000 Euros, followed by a group of properties (24%) that cost between 50 000 and 80 000 Euros. Although apartments under 30 000 Euros are the least in demand, the actual sales of such properties are 14% of the total number of the sales. The sales of apartments with prices exceeding 120 000 Euros are 7% of the actual sales which is equal to the number of enquiries for properties within this price margin.
Concerning rent, almost 60% of all enquiries were for apartments that rent for less than 250 Euros per month, of them 40% fall in the 150-250 Euro margin. However, the highest number of rental contracts (66%) is signed for properties that rent between 250 and 500 Euros per month. In the second place (17%) are those that rent for more than 500 Euros per month and in the third place (17% again) are properties renting for less than 250 Euros per month.

The Mail On Sunday, 20 November 2011

A group of Britons who faced arrest and threats of violence during a two-year dispute over the ownership of flats they had bought in a Bulgarian ski resort have finally won their case.
The 70 investors have gained access to the apartment block in the former Communist state as well as securing the title deeds to their flats, which they had purchased for £6 million.
The resolution of the dispute is considered so significant that Britain’s most senior diplomat in the country will attend a party next weekend at the All-Seasons leisure complex in the town of Bansko, 120 miles south of the capital Sofia.
The owners were denied entry after an influential local businessman took over the entire development and refused to hand over the keys.
The Britons staged a mass break-in to seize possession of the block but in a series of court cases their pleas for justice were ignored.
Financial adviser Paul Hassall, from Horsham, West Sussex, who was arrested twice by Bulgarian police during the campaign to get the flats back, said: ‘The British Consul says this is the first time a group of British victims of property crime in Bulgaria have united and won their case.’

The Bulgarian parliament passed the Bugdet 2012. According to the budget the growth of the Bulgarian economy in 2012 will be 2.9%. However, according to the National Statistics Institute the Bulgarian econcomy has slowed down in the last quarter of 2012. The Bulgarian GDP has not changed in the period July – September 2011 and has increased by 1.3% on an annual bassis. Usually the summer months are considered very good for the Bulgarian economy because of the expected income from tourism. The expectations were that slump of the European markets will affect Bulgarian economy in the autumn, however this has happened much earlier. The Bulgarian government is prepared to revise Budget 2012 in case that the situation gets worse.

According to the forecasts of analysts about 350 Bulgarian company will go bankrupt in 2011. In comparison with 2010,this is an increase by 100%. The number of unpaid invoices have increased by 20%. In just a year the period of the delay in the payment of invoices have increased from 78 days to 105 days.

This tendency has lead to the increase in the number of companies collecting debt. Only four years ago there were only 10 major companies operating in this field, mainly foreign subsidiaries. Now their number is 65, quite a high figure for the size of the Bulgarian market.

The Bulgarian Ministry of Agriculture will start selling the state owned land in order to pay the direct European subsidies promised to the farmers for 2012, according to the Bulgarian Minister of Agriculture Miroslav Naydenov. Subsidies to the value of 570 million levs (apprx. 235 million Euros) were promised to the Bulgarian farmers but in the Budget 2012 only 340.1 million levs (apprx. 170 million Euros) have been planned. There is danger that the money for the payment of the direct European subsidies for land will not be sufficient. Another option for the Bulgarian government is to cut the state subsidies for the tobacco producers, which for the next year come to the total of 150 million levs (apprx. 75 million Euros).

According to the budget forecast of the Bulgarian government for 2012, the incomes from privatization will be about 300 million levs (approximately 150 million Euros). This is a serious decrease in comparison with the forecasts for 2011 for 450 million levs (approximately 225 million Euros). At the moment only half of the expected income for 2011 has been received, mainly from the sale of Bulgartabak Holding for 100.1 million Euros to a company financed by the Russian VTB Bank Group.

The Bulgarian Minister of Finance Simeon Diankov commented that he is optimistic that all the planned income for this year from the privatization of state companies will be received due to the privatization of the state shares in two of the three major electricity distribution companies in Bulgaria. The state holds 33% of the electricity distribution companies and the Bulgarian government shall put these shares on the Bulgarian stock exchange in November 2011. The expectations are that the expected price for these state owned shares will be between 70 and 150 million levs (approximately 35-75 million Euros), a much lower price than the price achieved during the privatization in 2004, when the Austrian EVN paid 271 million Euros for 67% of the electricity distribution companies in Plovdiv and Stara Zagora.

The European Commission officially asked Bulgaria to amend its rules for claiming V.A.T., as they discriminate against tax payers who operate within the EU. If Bulgaria fails to amend them, the E.C. will inform the Court of the European Union.
In Bulgaria in case of audit, V.A.T is paid back only after the completion of the audit. The deadlines for auditing companies that operate within the E.U. from Bulgaria is twice longer than the deadlines for the auditing companies operating only in Bulgaria. If companies operating in the E.U. would like to claim their V.A.T. back before the completion of the audit, they must present a bank guarantee or security for twice longer period of time.
The European Commission has claimed that the reqrequest to change the rules is the second stage of the procedure for breaching the Euro directives.

In comparison with the second quarter of 2011 the property prices in Bulgaria have dropped by 0,8% according to the National Statistics Institute., mostly in 20 regional towns. The highest decrease was in Smolyan – by 4,7%, followed by Yambol – 4,25 and Pleven by 3.7%. The average property price for the country in the third quarter of 2011 was 901.32 levs/square metre. The highest prices were in Varna – 1 493.33 levs/square metre, Sofia – 1456.48 levs/square metre and Burgas – 1184.41 levs/square metre.

The number of property sales in Bulgaria has increased for a third consecutive quarter in comparison with last year – 54 997 sales in comparison to 46 968 sales in the same quarter of 2010. The total number of the property sales in 2011 so far is 157 273, while in the whole of 2010 they were 182 376.

A Greek bank group has predicted that the Bulgarian economy will slow down due to the debt crisis in the Euro zone and the negative prospects for the recovery of the European and the US economies. The Eurobank EFG Group announced that in 2011 the growth of the Bulgarian GDP will be 3,5%. In their forecast for 2011 the predicted growth of 3,2% of the Bulgarian GDP has been revised to 2,9%.

According to the Greek bank group the Bulgarian economy is slowing down, despite being above the average levels for the EU in the last quarter of 2011. The major drive of Bulgaria’s growth is the export, but in the second quarter of this year, its volume has decreased in half in comparison with the first quarter. The Bulgarian export shall continue to decrease due to the worse conditions on the EU market – the main market of the country.

On the positive side the domestic demand is gaining speed and the investments have increased. According to the forecast the investments will keep increasing because of the privatization programme of the Bulgarian government and the improved use of the European funding. Bulgaria, according to the Eurobank EFG Group has not been affected by the debt crisis and has remained stable financially, and its credit rating has improved.

The Bulgarian Finance Ministry has prepared drafts of the amendments to the Law for the Personal Taxation. According to them, the taxes will be calculated only in levs, not in stotinki and employees who have two jobs and two employment contracts will not need to fill in tax return declarations.

According to the new amendments, profits from gambling and from the stock exchange will have to be included in the annual tax return declarations.

The creation of the Law for the Public-Private Partnership has been prolonged more than the creation of any other Bulgarian law. On the one side there is no urgent need for this law, as most of the activities in its scope have been covered by other laws. On the other hand the Law for the Public-Private Partnership in Bulgaria has always caused doubts for corruption and the discussions about this law have always created negative emotions.
Now the draft is in the Bulgarian parliament. The public-private partnership has the potential to be applied in serious infrastructural projects like the construction of motorways or airports, as well as services like education and health. The distinctive feature of this law is that according to it the state or the municipalities will pay private companies for the provision of services just like the private bus lines in the cities. However, the difference is that this will be for the period of a few decades.

The internet statistics of Yandex, the Russian equivalent of Google, show that the Russians used the phrase “property in Bulgaria” in their online searches and Bulgaria was topping the list of their searches of properties abroad.  This is not surprising as the Russians have bought more than 200 000 properties in Bulgaria in the last four years.

The prices of apartments in Sofia have decreased by 1/3 since 2008 due to the recession. If four years ago a one-bedroom apartment in the Bulgarian capital could sell for 78 302 Euros on average, at the moment it sells for 54 073 Euros. Only in the last year the prices have dropped by 9,78% .

However, according to the Land Registry, the total number of the sales in the first half of 2011 was only 102 276, in comparison to 73 867 sales in the same period of the last year. This is an increase of 27,78%. Most of the sales, about 25%, have taken place in the biggest Bulgarian cities: Sofia, Plovdiv, Varna, Burgas and Stara Zagora.