LM Legal Services Blog

It is expected that the prices of apartments in Bulgaria will reach a new bottom at the end of this year and in the beginning of the next one.  The analysts predict that the further decrease will be moderate and will not exceed 10%.  The property prices will stabilize in the first half of 2010.

So far this year apartment prices have slumped by 10% on average and the highest drop is of apartments in prefabricated blocks from the days of socialism – 12%.  The lowest drop is of finished new properties – by only 4%.

The highest decrease of the property prices in Sofia has been in the top notch areas of the Doctor’s Garden (by 33%) and in Ivan Vazov (by 17%)

Many new construction projects situated beyond the ring road of Sofia and in Manastirski Livadi have been put on hold due to the recession. At the moment all off-plan purchases have stopped.

The construction of two new shopping malls in Sofia have been stopped – Europe Mall and the Mall of the Spanish company Riofisa. Currently the rent of commercial space in shopping malls have fallen to 41 EUR/ sq m while in the central boulevards of Sofia it is 100 EUR/sq m. Big retail chains – Billa, Carrefour, Kaufland and Piccadilly – have taken advantage of this situation and have opened new shops. Analysts think that the rents will not go up before the shops start making much higher turnover.

In the first half of 2009 the rental space in shopping malls have increased by 50 000 sq m and have reached 220 000 sq m in total.  This is the reason why it is more and more difficult for their owners to find tenants for all empty spaces. In Sofia the situation is better and there almost no malls with empty shops. However in the country the situation is different. Retail centres with good location have 3% of their space free, while the others have more than 10% of their space empty.

Concerning office space, 13.4% of it in the central parts of Sofia and 20% of it in the outskirts of the city have been empty. In the central parts of the city prices are still high but in the greater center of Sofia the prices have fallen by 1.5 EUR/ sq m. In the outskirts this decrease has reached 12 EUR/ sq m or the levels of 2006.

According to specialists the freight forwarding and logistic centres and warehouses have been doing better than any other properties in the country. Their rents are the same as last year due to the fact that these properties have developed later than all other types and currently there is a demand for logistics’ space.

Reuters

Bulgaria has attracted 24 billion Euros in foreign direct investment since 2005, when the Socialist-led
government came to power, but the global crisis has hit the flows and put an end to the credit-fueled economic boom.

Economists say Bulgaria is now paying the price for not using the boom to boost productivity and encourage exports. Here are capital flows went and some major investments since 2005: (in million euros)

                       2005      2006      2007      2008      2005-08
 REAL ESTATE DEALS     533.8     1,778.0   2,505.1   1,900.3   6,717.2
 FINANCIAL SERVICES    667.3     799.4     2,112.5   1,485.9   5,065.1
 PROCESSING INDUSTRY   868.2     1,064.7   906.2     810.9     3,650.0
 RETAIL                576.9     964.5     1,237.4   796.9     3,575.7
 CONSTRUCTION          171.6     501.0     797.4     465.0     1,935.0
 ENERGY                308.5     352.4     332.5     176.2     1,169.6

AES

U.S. energy company AES.N in 2006 launched construction of a $1.4 billion coal-fired power plant, the largest investment in Bulgaria since the fall of communism in 1989. AES is also building a 270 million euro wind park.

ENEL

In 2003, Italian utility ENEI.MI started a 700 million overhaul of Bulgaria’s thermal power plant Maritsa East Three, which was completed earlier this year. Enel holds a 73 percent stake in the coal-fired plant.

AURUBIS

Germany’s copper producer NAFG.DE has invested 80 million euros since 2006 in its plant in the town of Pirdop, the second biggest in the group.

The smelter was initially owned by Belgium’s Cumerio which was taken over by Norddeutsche Affinerie in 2008. The new group then changed its name to Aurubis to reflect the expansion.

GREAT WALL

China’s largest sport utility vehicle maker, Great Wall Motor Co, has started building an 80 million euro car
plant in a joint venture with Bulgaria’s Litex.

Litex said investment in the project, which will employ some 1,300 people, would reach a total of 300 million euros at a later stage.

KBC

In 2007, Belgian banking and insurance group KBC KBC.BR acquired 75 percent of Bulgaria’s EIBank, ninth-largest bank in
terms of assets in the country at the time, in a 295 million euro deal.

ALLIED IRISH BANKS

Allied Irish Banks ALBK.I bought 49.99 percent of specialist business lender Bulgarian-American Credit Bank (BACB)
for 216 million euros in 2008.

OMAN FUND

The Oman State General Reserve Fund, which is one of the key investment institutions of the government of the Sultan of Oman, paid 185.4 million levs for a 30 percent stake in Bulgaria’s Corporate Commercial Bank earlier this year. Continue reading »

59.8 billion levs  have been held in Bulgarian banks in May 2009 which is a decrease by 437 levs, according to the Bulgarian National Bank (BNB). This is the second most serious decrease of the amount of money in the Bulgarian banks since the beginning of the year. This is mainly due to the fact that the amounts which foreign banks and other foreign credit institutions keep in Bulgaria have decreased by 390 million levs in May 2009.  Despite this the amount which they keep here is not small – 15.4 billion levs.

In comparison   personal savings total 22.8 billion levs and the total of the funds of companies in Bulgarian banks is 19 billion levs.  The personal savings have decreased by 100 million levs despite the attracting interest rates of savings. The total amount of the  money in companies’ accounts has slightly increased.

From January 2009 the level of the  money in the accounts held at the Bulgarian banks tend to fluctuate both ways on almost permanent  basis.  The most significant withdrawals took place in January and in May.  In January about 800 million levs have been withdrawn, 500 million levs of them were withdrawn by foreign banks. The Bulgarian companies withdrew 600 million levs but personal savings increased by 340 million levs.

The personal accounts have a positive balance while the companys’ accounts are in the red.  In May individuals held 22.8 billion levs in their accounts while they had credits amassing to 17.7 billion levs. The companies at the same time held 19 billion levs into their accounts but they owe the banks 32 billion levs.  On the whole the Bulgarian banking system is one of the few in the EU which is profitable. Its profit in the end of May 2009 was 402 billion levs. The liquidity index is 20.6% which means that 20% of the attracted funds in the banks can be immediately paid in cash if requested.