Hotels and the plots of land suitable for warehouses and plants are often offered to Russian investors at prices that are up to 40% higher than their real market prices. Many Russian companies monitor the property market in Bulgaria and when properties at real prices appear on the market they immediately buy them. There is serious Russian interest towards plots of land in the area of the resort of Kamchia but most of the properties on offer are unattractive and without any infrastructure. Many Russians buy holiday apartments about 60 000 Euros believing that they can acquire Bulgarian citizenship easier.
Published in The Economist
In a rough region
Once Bulgaria hoped to be like Greece; now it just hopes to survive
ACCORDING to Ivan Krastev, a Bulgarian analyst, optimistic forecasters had the big hope 20 years ago that Bulgaria might become like Greece. That is to say, “moderately democratic, but moderately corrupt”. Now, he says, they hope that Greece may become like Bulgaria: poor, but financially disciplined and not making too big a mess for others.
So far Bulgaria has weathered the economic and euro crisis. Unemployment has crept up to 12%, but that is half the levels in Greece and Serbia. Over a million Bulgarians are thought to live abroad, working especially in Spain and Greece. Some have lost their jobs and come home, but the value of remittances sent back through banks has actually risen. In 2008 the official figure for remittances was €694m; last year it was up to €774m.
Bulgaria’s GDP grew by a modest 1.7% in 2011 and is expected to slow this year. A recent study suggests that as much as 30% of the economy is unrecorded. Bulgarians are also miserable. A poll by the Open Society Institute found that more than two-thirds of them expect the economy to stay the same or deteriorate in the next 12 months; and fully 56.7% find the situation in the country “unbearable”.
Bulgaria is the poorest country in the EU. Average wages are €3.50 an hour and average monthly salaries are just €360. As 10% of Bulgarian exports go to Greece and Greek banks hold 40% of all loans, it is hardly surprising that Bulgarians are on edge. What makes them especially nervous, says Vassil Vassiliev, a businessman, is their past experience that, whatever happens in western Europe, “comes here a year or two later.”
Mr Vassiliev sends organised groups of workers to other EU countries, especially for seasonal work. He worries that political pressure on companies to replace his workers with the domestic unemployed could affect his business and thus Bulgaria’s economy. Mr Vassiliev thinks the country needs a plan to steer away from excessive dependence on the euro zone.
In one area the market is already changing. The crash of 2008 left huge numbers of unsold holiday flats along the Black Sea coast. When the builders went bust, many of these ended up in the hands of banks. Since then, middle-class Russians have been buying them, says Tzvetelina Borislavova, a banker left with thousands of flats.
Many Bulgarians who do not like the government of Boyko Borisov, a populist prime minister (who once lived with Ms Borislavova), fret about fraying democracy. Parliament has become a “rubber stamp”, complains Borislav Tsekov, an analyst, echoing a belief that business lobbies secure laws favourable to themselves. Several thousands took to the streets recently to protest against a law on forests that was welcomed by builders of ski resorts. The government is backtracking.
Perhaps most worrying is the state of the media. Mainstream newspapers are owned by banks or powerful companies. There is little investigative reporting. Advertising by the government and by state-owned companies is a big source of revenue for newspapers; because of that, self-censorship is the order of the day, argues Valeri Tsenkov, an editor. But Nikolay Mladenov, Bulgaria’s foreign minister, says that what he finds most annoying is “the continual decline in the quality of journalism”. He does not see the link with self- censorship.
According to the Bulgarian Inland Revenue Agency about 177 million levs (85 million Euros) have been declared as income from rent of property. The total amount of the declared income that also included the income of free-lancers was 587 million levs or 290 million Euros. In the second largest Bulgarian city Plovdiv, despite the recession, the highest capital gain tax for 2011 was paid by an estate agency and it exceeded 425 000 levs (270 000 Euros). The second highest capital gain tax for 2011 was paid by yet another estate agency. The twenty richest Bulgarians have declared incomes from work that amassed 16 million levs (8 million Euros).
According to the Land Registry, the property sales in the Bulgarian capital Sofia have increased for a second consecutive quarter reaching 3324 sales in the first three months of 2012. On the average in Sofia have been completed 37 sales per day – an annual decrease of 8.8%. The property prices in the capital have increased on the whole and now properties in Sofia are more expensive than properties in Varna, Bulgaria’s Black Sea capital, where for years property prices have been the highest in the country. The average price in Sofia is 1 453.30 levs (appr. 750.5 Euros)/square metre, while in Varna it is 1439.00 levs (appr. 740 Euros)/square metre. In third place are property prices in the second largest Bulgarian city on the Black Sea – Burgas – 1158.83 levs (appr.592 Euros)/ square metre.
According to leading Bulgarian banks, the value of the properties owned by Bulgarians has decreased by 3 billion levs (1.6 billion Euros) to 208 billion levs (106 billion Euros) in the last quarter of 2011. At the same time the savings held in bank accounts have increased by 1.4 billion levs and at the end of last year they have reached 30.9 billion levs (16 billion Euros). The debt of the Bulgarians has decreased and currently is under 52%. The loss from investments in shares has increased to 285 million levs (190 million Euros) at the end of 2011, an all time record.