LM Legal Services Blog

Mortgage interest rates offered by Bulgarian banks have reached their peak in November. According to the specialists the increase of the interest rates have stopped rather then the lending of new mortgages itself. Most of the banks have tightened their conditions last month and the largest mortgages now cover not more than 75% of the price of new properties in the big Bulgarian cities, while in smaller towns they do not exceed 65% of the price. Concerning apartments in prefabricated blocks from the days of socialism, mortgages do not go over 60% of the price.  At the same time, the number and the size of the new mortgages have decreased in November.

The notaries at the Black Sea reported that the number of deals have decreased  sharply in comparison with last year. In the last 2 wees there have been days without a single purchase. The purchases for investment have almost stopped. Only people who need cash urgently sell. In such cases prices drop dramatically up to three times.

Purchases are made only of home to live. They have drop by 50% in Kavarna, while in Balchik by 10%.  Concerning the plots of land, the tendency is similar. Only agricultural land sells.  In some cases prices have fallen from 20 to 5 Euros per sq.m. due to the lack of buyers.

It is expected that the average price of properties in Sofia will drop by half. Six months ago the middle class apartment used to sell for 1300 Euros per sq.m., while now it sells for 1000 Euros per sq.m., but there are only a few buyers on the market. This trend suggests that within six months the prices will fall to 800 Euros per sq.m. At the moment this is the price for an off-plan property in the up-market Manastirski Livadi district.

The panic due to the global financial crisis, the outflow of foreign investors and the high mortgage interest rate by all means shall have a long term effect on the property market. It is expected that alongside the falling prices, the quality of the construction and of the finishing will increase due to the competition. Completely finished apartments are already on offer and it is expected that developers will come up with new customer orientated payment plans.

Thousands of newly finished apartments remain unsold in Sofia. Developers try to negotiate with potential buyers and offer different incentives only to sell their properties. Many of those who bought as investment try to sell their properties with a small profit or without a profit, just to get their money in cash. They even offer higher commissions to the estate agents in order to sell. The few buyers on the market tend to wait longer before making a purchase and expect to receive more for their money.