LM Legal Services Blog

The forecasts for a slow down on the property market in Bulgaria came true – it is back to the levels of 2004. The number of deals with real estate have dropped by 35% in 2009 and stopped at 200 678. This drop was deeper than the one in 1997 – 1998 when the country experienced hyperinflation and bank crisis.

According to the Land Registry the hysterical purchases of apartments in the big cities has died away and the drop in the number of purchases  in Sofia, Varna, Plovdiv and Pleven has dropped lower than the average for the country. In the capital Sofia this number has dropped below the lever of 2004 when the purchases were 28 837.

The market in the Black Sea resorts and in the agricultural areas of the country is fairing better than in the rest of the country during the recession. In Nessebar on the Black Sea there were 6461 deals in 2009 which is only by 23% lower than in 2008. In Dobrich the drop is even lower. The interest in agricultural land in the area has remained the same.

In the last quarter of 2009 the first signs of activity have appeared on the rental market of office space in Bulgaria. Analysts claim that this was due to the efforts of the owners to stimulate prospective tenants with bonuses like rent free periods and payment of the relocation. The much lower rents of newly built offices proved to be a good incentive for many companies to relocate.

The expectation in 2010 are that the size of the unoccupied office spaces will continue to grow due to the large number of new offices that are expected to be offered on the market. In the last quarter of 2009 new offices with total area of 38 200 sq m entered the market. In 2008 their total area was 65 900 sq m. The largest projects have been planned to be completed in 2010 and thus the expectations are that by the end of the current year the newly finished office space will total 360 000 sq m.

In the end of 2009 the office space in Sofia exceeded 1 million sq m of which 80% were situated on the main boulevards and in the outskirts of the city. The completion of about 460 000 sq m of office space has been delayed or frozen.

The rent was 13.50 EUR/sq m for offices class A in the last months of 2009. The average rent for the same period of 2008 was 17 EUR/sq m. The offices of class B and C are offered at 8 and 4 EUR/sq m respectively. It is expected that these levels will remain the same in 2010.

The yield from first class office space in Sofia stays at 11%.

In 2009 the Russians have spent 11.3 billion USD to buy second homes abroad, according to the review of the department for properties abroad of the Russian estate agency DOKI. Properties in Bulgaria are the most popular among Russians and 21% of the clients of the agency have been interested in buying second homes in Bulgaria for the average price of 42 000 Euros. In second place are properties in Spain, where 17% of the clients of DOKI are prepared to pay on average 178 000 Euros. In third place are properties in Turkey at an average price of 50 000 Euros which attracted the interest of 12% of the clients of the Russian agency, closely followed by properties in the USA and Israel.

Another Russian estate agency MIEL – Distant Property Management revealed similar statistics. Again properties in Bulgaria are the most popular ones among Russians, followed by properties in Turkey, Spain and the Ukraine. This estate agency has divided their clients into three groups. The first one consists of young people under the age of 35 who buy studios and one-bedroom apartments in the price range 25 -70 000 Euros. They prefer Bulgaria in first place, followed by Egypt and The Czech Republic.

The second group are married couples at the age of 35 – 45. The look for one- or two-bedroom apartments for the price of 70-80 000 Euros in Monte Negro, Bulgaria, Spain, Germany, Italy and Turkey.

The third group consist of wealthy people above 45 who spend at least 250 000 Euros. They do not have specific preferences about the location of their property.

Almost 28% is the decrease in the number of deals on the property market in Bulgaria annually. This number is different in the different parts of the country but only Sofia and Varna have similar statistics. 72% of those who would like to buy a property in Sofia and Varna are prepared to pay not more than 40 000 Euros. In Plovdiv and Bourgas the buyers are prepared to pay not more than 25 000 Euros.

In 2009, 42% of the buyers paid in cash and 37% of the sellers had financial difficulties, not necessary inability to pay their mortgages or bad credits. In 2009 most of the buyers bought newly built properties and only 12 % of them have bought prefabricated apartments. The most active buyers were between 26 and 35 years of age.

Prices of properties in Sofia and in Plovdiv have dropped by approximately 17% in the third quarter of 2009 in comparison with the same period of 2008. The average real purchase prices of apartments in Sofia are similar to the ones at the end of 2007 and in the beginning of 2008. The prices of properties in the Bulgarian capital have reached their climax in the third quarter of 2008.

The situation is similar concerning office space. In the third quarter of this year the index of the average prices of offices, warehouses and shops has dropped by 26 on an annual basis. The market price of office space has reached its peak in the last quarter of 2008.

In Plovdiv the average property prices are close to the those at the end of 2007 and the beginning of 2008. Their peak similarly to Sofia was again in the third quarter of 2008.