Archive for February 2009


BULGARIAN PROPERTY MARKET

February 27th, 2009 — 12:06pm

The property market in Bulgaria is blocked because of the recession. The few purchases go through in the conditions of total price chaos. There are hundreds of thousands unsold apartments on the market, only in Sofia they are 115 000. Most of them are offered at unrealistic prices. There is a significant difference between the prices of the sellers and the prices which buyers are ready to pay.  In Sofia this difference is of 12 000 Euros on average.

The times of fast growth of the property market are over and only the investors who adapt quickly to the new requirements for better quality and lower profit margins will survive. Some analysts think that the normalisation of the huge profit margin will also affect other parts of the economy.

It is expected that during the recession the major buyers on the property market will be private risk investors who have free cash and the Bulgarian investors will have greater impact. Only in the last year, the share of the Bulgarian investors have increased by 37%.

The number of new planning permissions have decreased by 34% according to the National Statistics Institute.

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BULGARIAN BANKS

February 26th, 2009 — 11:08am

Companies in Bulgaria drain their bank accounts while Bulgarian banks fight for the savings of individual clients and increase the interest rates to compensate. According to analysts this is due to the lack of fresh money. In the last months the Bulgarian banks have cut financing of companies to minimum – only 240 million levs for the whole of January – thus forcing companies to withdraw their money. The other reason is tax preferences which made companies pay their tax in advance.

Some bankers do not agree with this explanation and think that companies just transfer their money from one account into another and explain this with the slow down of economy and the drop in the volume of export. These make many companies freeze their projects for enlargement and renovation. In this way they release money into their current accounts. According to some bankers some companies even put their money into personal accounts to take the benefit of the high interest rates.  The annual interest for personal accounts is 2% higher than the ones for companies and when it is a matter of 10-15 million levs this is a significant difference.

Only in January the recession and the optimisation of liquidity of the banks have led to the withdrawal of 550 million levs from the company’s current accounts and more than 170 million levs from the savings accounts. At the same time the total amount of the money in personal fixed term savings accounts has increased by 708.4 million levs. This contradicts the real abilities of households to save money. In the last year the personal savings in Bulgarian banks did not exceed 230 million levs. Svetoslav Gavriysky, the executive director of Allianz Bank, however thinks that from an accountancy point of view this is a very complicated combination and the withdrawal of money from the company’s current accounts is due to the lack of fresh credits.

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PROPERTY PRICES – REVIEW

February 20th, 2009 — 2:24pm

The price of apartments in the northern and western parts of Sofia have dropped seriously. According to analysts there are two major tendencies in the property prices in Sofia. On the one hand, only people who need home urgently buy at the moment, and on the other, only people who urgently need money sell.

The other type of buyers are those who would like to invest in property at a much lower price (up to 20%). The rest wait to see how the market will develop.

In the southern parts of Sofia, where traditionally the demand is great, properties sell at not more than 15% lower prices than the advertised ones. The prices are in the range 1050 – 1250 Euros per sq m.  Very good properties with excellent location and feature, previously unavailable, are now on the market. In these areas there are purchases and there is no stalemate. Analysts advise that now is the time to buy because bargain prices can be negotiated.

The central parts of Sofia keep high prices between 1100 and 1700 Euros per sq m. However, the offers in the range 3000 – 6000 Euros per sq m have disappeared and purchase prices do not exceed 2000 Euros. In the high class central parts of the city the prices have not decreased by more than 5%, while the decrease in the other parts of Sofia is about 20%.

In the other parts of Bulgaria, in the popular among British buyers area of Veliko Turnovo since the last months of 2008 there are no expensive properties on the market. There is a great number of newly built houses in the neighbouring villages. Many Russians bought houses in the low price bracket recently. Apartments in Turnovo sell from 350 to 700 Euros per sq m, a drop of 10 %.  Newly built apartments range from 380 to 520 Euros per sq m – a price drop of 20 – 70 Euros.  The property professionals claim that now is the time to buy period houses in Veliko Turnovo. They are always in great demand but now investors can get a real bargain.

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THE RENT GOES UP

February 19th, 2009 — 11:07am

The rent of apartments in Bulgaria is expected to increase by 10% during 2009 because more and more people prefer to rent due to the stricter rules of banks for lending.

The most popular apartment for rent are located in the central parts of Sofia and the neighbouring areas like Reduta, Geo Milev, Pliska, Strelbishte and Ivan Vazov. Concerning the size of the rental apartments the studios and the one-bedroom apartments are mostly in demand.  Depending on the location and if the apartment is furnished, it can get a rent of 350 Euros per month. In the up-market Lozenets the rent of luxury apartments is 1000 Euros per month.

Apart from the central parts of the city, Mladost and Drujba in the outskirts are also very popular. Until now, studios and one-bedroom apartments were rented for 250-350 Euros per month but from the next month is expected that these rents will increase by 20 Euros per month. Most tenants try to secure a clause in their rental contracts that their rent will not increase in the next twelve months.

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MORTGAGES AND PROPERTY MARKET

February 18th, 2009 — 11:09am

Despite the recent credit boom, Bulgaria still is in one of the last places in EU concerning the number of mortgages per capita, according to the European Mortgage Federation.

In 2008 the total amount of the mortgages in comparison to the country’s GDP is 12%, while at the same time the other EU citizens have taken mortgages to the amount of 6.1 trillion Euros or more than 50% of the total GDP of the EU. In the U.K. and Germany alone this rate is 70%.

This ratio shows how important is crediting for the EU economy. The bad debt is mainly due to mortgages. Mortgage landing has allowed 70.4% of the EU’s citizens to buy property and this ratio is similar to the one of the USA.

Despite the growth of the mortgage market in the last two years, the Bulgarian economy is still not fatally dependent on mortgages. Apart from the very low level of lending from which the boom started two years ago, the other positive factor is the high level of home ownership -  90% of the homes in the country are private property.

At the same time, the largest mortgage market is the U.K. The debt of the Brits to the banks amounted to 1.75 trillion Euros in 2007.

The high level of debt of the European citizens alongside the fact that European banks which have invested in the USA now have “toxic” assets in their portfolios are the major reasons for the growth of the crisis in Europe. The result is stagnation of the credit market – the banks’ requirements are restrictive and the price of the mortgages is high.

According to the European Mortgage Federation, in the last three months only 12% of the purchases of property in Bulgaria have been carried out with the help of a mortgage. In Sofia alone for this period, 34% of the purchases of properties have been at prices ranging from 30 000 to 40 000 Euros for properties with living area of 40-45 sq m, mainly in the less prestigious areas of Liulin, Drujba and Ovcha Kupel.  30% of the purchases of property have been at prices ranging from 50 000 to 70 000 Euros for properties with living area of 45 – 67 sq m  in the areas of Liulin, Mladost and Drujba.  According to the federation the buyers and the developers still can not adapt to the situation of falling prices and still accept prices of last year. This is why between the advertised and the real price of the purchase there is a difference of 10%-20%.  The newly completed properties sell for prices which are up to 15% lower than in 2008. The sharpest drop of prices is of off-plan properties, of prefabricated apartment blocks and of agricultural properties. In such cases in comparison with last year’s prices drop by 40%. The most insignificant reduction of the price is for newly completed properties which have received Permission for Use (Protocol 16).  Only luxury properties have kept their prices from last year and this is only in case that their owners are not desperate to sell.

According to the European Mortgage Federation many estate agencies in Bulgaria will close this year. In January alone between 150 and 200 agencies have closed down. In comparison in Spain in 2008 60% of all estate agencies have gone bankrupt.

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