The Bulgarian Ministry of Finance has issued state bonds to the value of 35 million levs (18 million Euros) with maturity date in seven years time and a coupon of 4.45%, which shows increasing trust of the investors. The bonds were bought by banks (about 36%), pension funds (48%) and insurance companies (13%). The coupon of the state bonds is much higher when a country is experiencing financial difficulties like Hungary ( 10,04%) or when its economy is booming like Turkey (5,74%) and Poland (5,05%).

The prices of large properties in Sofia have dropped sharply. Only in the area of Oborishte where the most expensive properties in the capital are located, prices have increased by 4% and start at 923 Euros/sq.m. , reaching 4331 Euros/sq.m. At the same time in the affluent area of Lozenets the property prices have dropped by more than 1/5 in the last two years. The lowest price there is of 816 Euros/sq.m. The most serious price drop – of 23% – in the expensive areas of Sofia is in Beli Brezi. More than 700 apartments located in affluent central areas of the city have been put on the market.

The Daily Telegraph has published the ranking of The Global Property Guide Europe’s Top Places to Invest in Property. The Bulgarian capital Sofia took 17-th place overtaking Prague (18), Paris (20), Lisbon (22) and London (26). According to The Global Property Guide, the positive feature of Sofia is the pro-landlord rental market. The negative feature is that the rental yields are poor – 4,19% – the transaction costs are high, the rental income tax is moderate and the corruption is strife. The capitals of many other Balkan countries feature better than Sofia. Ljubliana, Slovenia’s capital is in place 14, Bucharest, the capital of Romania, is in place 12, Zagreb, the capital of Croatia is in place 5, Istanbul is in place 4 and Skopje, the capital of Macedonia is in place 2.

According to the analysts, there are three tendencies concerning the commercial property market in Bulgarian in 2012.
The first one is that the number of buil-to-suit industrial centres has increased due to the increased volume of outsourcing of light industrial production from Western Europe into Bulgaria. Bulgaria is attractive with low taxation and low cost of labour.
The second tendency is that the relocation of companies into newly build office centres has intensified due to the fact that the owners offer 5 to 7 year rental contracts at attractive prices and this allows the companies to cut costs during the recession.
The third tendency is that six new shopping centres are under construction throughout Bulgaria and of them three will open in 2012 – Bulgaria Mall, Paradise Centre and a new mall in Bourgas.

In comparison with the second quarter of 2011 the property prices in Bulgaria have dropped by 0,8% according to the National Statistics Institute., mostly in 20 regional towns. The highest decrease was in Smolyan – by 4,7%, followed by Yambol – 4,25 and Pleven by 3.7%. The average property price for the country in the third quarter of 2011 was 901.32 levs/square metre. The highest prices were in Varna – 1 493.33 levs/square metre, Sofia – 1456.48 levs/square metre and Burgas – 1184.41 levs/square metre.

The creation of the Law for the Public-Private Partnership has been prolonged more than the creation of any other Bulgarian law. On the one side there is no urgent need for this law, as most of the activities in its scope have been covered by other laws. On the other hand the Law for the Public-Private Partnership in Bulgaria has always caused doubts for corruption and the discussions about this law have always created negative emotions.
Now the draft is in the Bulgarian parliament. The public-private partnership has the potential to be applied in serious infrastructural projects like the construction of motorways or airports, as well as services like education and health. The distinctive feature of this law is that according to it the state or the municipalities will pay private companies for the provision of services just like the private bus lines in the cities. However, the difference is that this will be for the period of a few decades.

The Bulgarian Ministry of Justice has prepared the draft for new amendments to the Penal Code which focus on fighting corruption crimes committed by foreign officials, according to the Deputy Minister of Justice Daniela Masheva. Mrs. Masheva underlined that Bulgaria is not an isolated example of a country where such crimes ocurr.

The deadline for re-registration of companies in Bulgaria will expire 38 days ago. In practical terms this means that all companies registered in Bulgaria prior to 2008 (when the new Commercial Register started working) will have to submit documents for re-registration. All companies failing to do so will be terminated by the State authorities and their owners will be required to cover the expenses for the proceedings.

Unlike some websites who claim that this should be done before June 2010 in fact there is enough time to complete the procedure but in any case this matter requires urgent attention from anyone who has a company in Bulgaria registered before 2008 and especially if this company owns property in Bulgaria (apartment, land, house, etc).

Should you wish to use our services for re-registration of your company in Bulgaria please do not hesitate to contact us for a quote.

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.

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.

The average decrease of  property prices in Bulgaria is by 23% in the first six months of 2009. There are areas of the country and especially cities where due to  overpricing, now the decrease is exceeds 30%. The expectations of analysts are that by the end of the year prices will decrease further by 5% to 15%.

The most significant price decrease in the capital Sofia where the prices of newly built developments in the area of Obelya have dropped by more than 40%. The lowest price drop is in Student Town – by only 10%. In the affluent Lozenets and Iztok where the price exceeded 2000 Euros/sq m in 2008,  now there is a decrease by 1/3. The decrease is similar in Liulin and Ovcha Kupel. In the down-market Banishora the lowest price of newly built apartments is 390 Euros/ sq m.  The lowest prices are in the southern and the eastern parts of the city because there many apartments have been bought off-plan as investment and now they have been completed and put on the market.

In the first half of this year buyers preferred mostly one-bedroom apartments not exceeding 50 000 Euros per sq m.  In the last month two of every ten buyers have purchased in the end a bigger and more expensive apartment than planned in the beginning due to the lower prices.  The number of owners who sell their property to buy a bigger one has increased, as the difference in the price is lower than ever.

In most cases buyers used their savings for the purchase of a property, while 44% of them have taken small mortgages or even consumer loans. 32% of the buyers who took mortgages have problems repaying them regularly but only 17% of them cannot repay their mortgage at all.

Village houses with big yards sell even under their value around Veliko Turnovo, Pernik, Sliven, Haskovo and Yambol, as owners just want to get rid of them. In smaller towns the purchase of property is rarely for the purpose of investment but mainly it is in case of change of the marital status and the recession is felt stronger on the property market. Unemployment is growing faster and first time buyers are very cautious.

According to the British estate agents Knight Frank by 31 March 2009 the property prices in Bulgaria have increased by 3,3% annually and in the first three months of 2009 they have decreased only by 1,2%, which puts Bulgaria in ninth place in terms of property price growth.

The information provided by the Bulgarian National Statistics Institute (NSI) shows that in the first quarter of 2009 the property prices have fallen by 12,4% and by 8,4% on annual basis. According to NSI from January to March 2008 the properties in Bulgaria cost on average 1299,9 levs (650 Euros) per sq m. In the first quarter of this year this price has fallen to 1190,7 levs (just under 600 Euros) per sq m. If the information of the NSI is taken into account, then Bulgaria will be in the top ten shrinking property markets.

In the first quarter of 2009 the property prices in 32 out of 46 countries world wide have fallen. The most serious price decrease has been in Singapore, Dubai and Latvia. In Latvia alone the prices of property have been steadily falling in the last two years and only in the last 12 months they have fallen by 36%. In Dubai the prices have fallen by 40% only in the last three months. The short term forecast is that the recession will continue at least until the end of 2009.

Jessie Hewitson, The Observer

Back in 2006, Andrew and Pat Pryce decided to buy an investment property in Bulgaria. With retirement looming, they were hoping for rental income to supplement their pension, and a flat they could eventually sell on at a profit. When they read on the internet about the Mechi Chal mountain lodge in Pamporovo, advertised by overseas property agent Someplace Else as “the most exclusive in Bulgaria’s booming ski resorts” and offering a guaranteed rental yield of 7% a year for the first three years, they put down a deposit of £19,485.

It was a year later, in 2007, that they had the first inkling that something might be wrong. No one was asking them for more money, and there seemed to be no evidence that building was taking place. By 2008, they were so concerned with the lack of progress that they went to Bulgaria and drove around Pamporovo to investigate for themselves.

“We couldn’t see any sign of the development,” says Andrew. “On a second visit we attempted to locate the agency’s Bulgarian office in Plovdiv, but found it inhabited by another company.”

Having lost faith that the development would ever be built, the Pryces asked for their deposit to be returned. They say Someplace Else agreed to this more than a year ago but, despite being promised the money on three occasions, they have received only £2,000. They have now consulted a lawyer.

The Pryces are not alone. Since January 2008, the Association of International Property Professionals (AIPP) – a voluntary organisation with 376 members – has received 116 formal complaints from buyers unhappy about purchases abroad.

The number of people who have lost money in projects around the world is likely to be far higher than most realise, partly because nobody is keeping a record, and partly because those who have lost money are too embarrassed – and upset – to talk about it.

John Howell, senior partner in the International Law Partnership, specialising in overseas property purchases, estimates that 20% of those who have bought off-plan in the past two years are likely to run into “significant difficulty”. According to AIPP estimates, in 2007 193,600 of us bought property in the 10 countries most favoured by British buyers. This means more than 38,000 may be in hot water from just a single year’s overseas property purchases – and some may not even realise it yet.

The collapse of Churchill Properties Overseas alone meant about 340 investors, mainly British and Irish, lost deposits worth an estimated £4m. The company, which sold property in Estonia, Cape Verde and Goa, went into “voluntary liquidation” last summer.

Out of pocket

Another high-profile company, Bulgarian Dreams, closed at the end of 2008 and is currently being investigated by the City of London Police economic crime department. It is impossible to know exactly how many of its investors – who have bought in more than 40 developments in the eastern European country – have been left out of pocket.

Some of the estimated 100-150 investors who, like the Pryces, bought off-plan apartments in the Mechi Chal lodge, are leaving desperate posts on property forums and seeking legal action to get their money back.

Ben Mason, a partner of Someplace Else, says the delays have been caused by the local water authority rescinding permission it had previously granted. He is hoping to get it reinstated. “Providing this happens in the next two months, we can get the first phase finished by December this year and the second phase completed by December next year,” he says.

Mason admits the development is hard to find, but claims that the foundations are in place for phase one, many of the houses have been built off-site and when they do get water permission, the Bulgarian office will reopen.

As for the Pryces’ deposit, he says: “Due to the current economic climate, it has taken us longer than we expected to make this refund from the UK … however, there is no question of the Pryces not receiving the balance of their deposit, with interest, over the next few weeks.”

Howell notes that the developers in trouble are not typically local but British would-be Donald Trumps, and new to the game. “Many of these developers probably started off with good intentions but soon got in over their heads,” he says. “Whether it was fraud or bad economic times is a moot point, frankly, because the end result is the same: people lose money.”

Bad lands

Derek Smythe (not his real name) is more than aware of his predicament, and resigned to losing the £30,000 he invested in 2006 into a company that promised to buy land in Montenegro, get planning permission, build and sell on.

“Since investing the money, I’ve had virtually no communication from the directors [both British],” he says. “There’s no evidence that the money was used to purchase any land at all – I have absolutely no idea what happened to it. It’s been pretty miserable – and the worst thing is, it’s all my fault as I didn’t ask enough questions.”

The sums of money being lost are vast: Howell recently met 70 people, mainly Britons, who had sunk an average of €80,000 (£70,000) into a troubled development in Bulgaria.

He also has clients who regret buying in Dubai. “The problem is that all the major building companies belong to the royal family, and you won’t find a lawyer who will sue.”

The range of people losing money this way spans class, gender and age: young, old, working class, middle class, the gullible, the naive and the greedy are all suffering alike.

“I’ve got clients who are working-class people who invested the £20,000 equity they had in their home, and high-flying professionals who frankly ought to have known better,” says Howell, adding that one client who got stung was a partner in a chartered accountancy firm.

Many of these problems would not have happened if the investors had sought the advice of a good lawyer – something that many of the people interviewed for this article bitterly regret not doing.

Expat Properties Plc created for the purpose of buying land, is the first plc of this type in Bulgaria which has returned its license. The general shareholders meeting will take place on 8 June 2009 when it is expected that the shareholders of the company will take the formal decision for its liquidation. It is also expected that the shareholders will give a deadline of 6 months for the liquidation and will choose a receiver. The last deal of Expat Properties Plc was on 16 April 2008.

The planning permissions for apartment buildings which have been issued in the first three months of 2009 have been by 40% less than in the same period of 2008, according to the National Statistics Institute. 1470 projects have received planning permissions from January to March 2009. They are for 6530 apartments with a total area of 895 173 sq m. The number of the apartments has decreased by 49% and of the total area, also by 49% in comparison with the same period of 2008.

79 office buildings, as well as 978 other type of buildings – industrial, etc – have received planning permissions. The number of administrative buildings is by 21% less, while their total area has increased by 21%. The number of all other types of buildings has decreased by 36% and their total area has decreased by 44%.

The only tendency that continues into 2009 from the same period of 2008 is that the major part of the planning permissions for new apartment buildings have been issued in the large administrative centres of the country -
Burgas – 185, Sofia – 182, Varna – 170, and Plovdiv – 158. The number of newly planned apartments in Sofia is 1340, in Varna – 1 305, in Burgas – 896, in Blagoevgrad – 668 and in Plovdiv – 537.

Jack Fagan, Irish Times

AROUND THIS time of year, the newspapers are generally packed with large ads for overseas real estate. That has been going on for over a decade but, in recent years, Bulgaria and other former Eastern Bloc countries have been particularly active in targeting Irish buyers who had a reputation for being big spenders during the Celtic Tiger years.

These overseas property ads are rarely, if ever, seen any more simply because Bulgaria’s real estate boom has turned to bust and Irish and UK buyers are fleeing due to rapidly falling values and the rising number of uncompleted developments.

Other former Eastern Bloc countries are suffering the same fate.

Bulgaria became a particular favourite for many Irish investors because holiday homes were frequently available at half, or even one-third, of the price of similar properties on the Costa del Sol. Attracted by unrealistic promises of exceptional returns, Irish investors had no hesitation in borrowing heavily to buy cheap buy-to-let homes.

Dublin mortgage agents say that, because of the refusal of Irish banks generally to fund property investments in Bulgaria, many purchasers released equity from their homes or Irish-based property investments. Others used hot money in the belief that the Revenue had enough on its plate in tracing second homes and investments in Spain, France, Portugal and other popular destinations without traipsing through the former Eastern Bloc.

“A great deal of the money invested in Bulgaria never appeared on the radar. It would be hard to trace,” says one of Dublin’s largest mortgage lenders.

Tom McGrath, a Dublin solicitor specialising in the overseas residential markets, says that a combination of naivety and greed led many Irish people to buy up to five properties in Bulgaria with the intention of “flipping” them on before they were completed to make a profit.

Any number of estate agents had recommended this as a fool-proof way of making money but the reality was different and they have been left “with properties that they do not want, cannot sell and cannot afford to complete on”.

The market in Bulgaria is over-supplied and pretty well on the floor. Real estate agencies say that at least one-third of the 2,200 foreign-owned holiday flats in Bansko – one of the country’s top ski towns – are on the block again, often at half price.

One media report has suggested that some Black Sea hotel owners have offered their debt-laden businesses for sale for €1 – grim news for tourism, Bulgaria’s top foreign investment sector.

The property market in Bulgaria, like Ireland, has had a hard landing. Construction firms have been laying off workers and, with bank borrowing getting more difficult, many developers are finding it increasingly hard to complete schemes.

McGrath says that promises of guaranteed rent from developers are often unfulfilled and these properties were overvalued in the first instance to take account of this arrangement.

Investment in the property sector, which accounted for 30 to 40 per cent of GNP in the past few years, brought an immediate profit, says local economist Tihomir Bezlov: “Real estate for Bulgaria was like oil and gold for other countries.”

The same could probably be said of Ireland but, unlike Bulgaria, there was never any suspicion here that the industry was being used to launder money from criminal proceeds.

Bulgaria’s authorities have admitted they cannot prove where the money that fed the boom came from. Could some of the proceeds of the Northern Bank robbery in Belfast in 2004 be in the Black Sea? There’s a thought.

Now is the best time to buy a property. the property prices have dropped significantly and there are no expectations for further decrease, according to large estate agencies. The average decrease of the prices in Sofia since the beginning of 2009 is 6%. The price drop is more significant – of up to 15% – in affluent areas where the prices have been unreasonably high during the property boom, like the Doctor’s Garden in Sofia, as well as in areas with bad infrastructure. By the end of the year prices will drop further by 5-6% but not more, say analysts. Even if there are further price reductions, buying property now will be profitable in the long run. Buyers can naturally wait a bit longer but it is not sure how much of their money will be eaten by the inflation.

The development of the property market in the next few months will depend on the economic recovery and on the job security of the buyers. According to bankers, many governments work toward the increase of the amount of cash in their countries so the increase of inflation is a normal consequence of the recession. As Bulgaria is in the conditions of a monetary board, the inflation is imported and it is a sign of the recovery. However, the recovery will not be felt before the middle of 2010. In this connection, prices will fall further but only of properties which are of lower quality or those belonging to developers who are now experiencing cash problems.

The number of new buildings in Bulgaria in 2008 was 2926 which is an increase of 8,5% in comparison with 2007. Most buildings have been made of concrete and steel, according to the National Statistics Institute. The average area of a newly built apartment is 78,2 sq m, while some years ago it was 80,6 sq m. The largest average apartments are in Gabrovo and Dobrich – 121, 3 sq m – while the smallest ones are in Pernik – 54,1 sq. m.

Unlike earlier expectations the market of luxury property in Bulgaria has also experienced price decreases. Rich buyers bargain and refuse to pay the high prices for top properties in the Bulgaria. As result prices of luxury properties have dropped by 1 million levs on average according to market analysts. The most striking example is a luxury apartment close to the National Theatre in Sofia which appeared on the market last year with asking price of 2 million Euros. The total area of the apartment was 253 sq m and this was the top price for the country – of 7905 EUR per sq m. The apartment is located in a listed building constructed in 1912. A year later the seller has dropped the asking price to 1,5 million EUR or 5929 EUR per sq m.

At the same time the price of a house close to Perla Hotel in Dragalevsty has dropped by half a million Euros to 2,5 million EUR. The total area of the three-flour house is 900 sq m and it has 7 bedrooms and six bathrooms as well as inside pool, jacuzzi and sauna.

Another striking example of a price decrease of a luxury property is in the affluent suburb of Plovdiv – the village of Markovo. A year ago this property, with total are of 2417 sq m used to sell for 2,5 million EUR. In the last few months its price has dropped to 2 million Euros.

The estate agents expect a real drop in the number of purchases of holiday homes at the Bulgarian Black Sea resorts. Some expect a decrease of 20%, others a much higher drop of 40 – 50% in comparison with last year.

If in previous years most of the buyers were British, now it is expected that the market will be 100% Russian. However, the devaluation of the Russian Ruble means that despite that fact that Bulgaria is one of the most popular destinations for the purchase of second homes, it is likely that the property market will shrink by 40%. Some estate agent even think that the boom of the Russian market was last year and this year the results will be less encouraging.

Property prices of holiday homes at the Black Sea have dropped by 20% and for the new season and now they start at about 650 EUR per sq m.

The mortgage applications in Bulgaria have increased by 20% in April in comparison to March 2009. They are mostly young professionals who work for foreign companies and have good incomes. They would like to take advantage of the good prices and think that it is worth paying higher mortgage interest. Most of them have savings which can pay for 50% of the price of the property that they would like to buy and answer to the stringent requirements of the Bulgarian banks which do not lend higher than 50% mortgages.

In connection with this and with the decreasing property prices, the average amount of the mortgage in Bulgaria has fallen down to 35 236 EUR, levels typical for the summer of 2007.

The Bulgarian property market has entered into a constant slum and it is expected that the earliest in 2011 it will pick up, according to developers, analysts and estate agents.

This conclusion is based on the expectation for a deep recession in the country in the next two years. Prominent business analysts think that the recovery of the property market in Bulgaria entirely depends on the economic development of the country. The boom of the property market coincided with the economic boom. However, now the forecast of the IMF for Bulgaria is most worrying – recession in the next two years, high unemployment and shrinking of the spending. Traditionally, the economic process in Bulgaria lags behind the one in the developed Western countries. Only in case that Bulgaria starts using the European funds properly and more companies from Western Europe relocate in Bulgaria by 2010 the country will reach the lowest point of the economic recession and the economy will start moving upwards.

According to some analysts the property market in Bulgaria will reach the bottom by the end of this year. The professionals are of the opinion that it is more important how the Bulgarian property market will start moving rather than when. It seems that the Bulgarian government does not have priorities and the economic recovery will be long and difficult. Around the world the property markets will recover with a different speed and at different times. The huge property markets in the USA and the UK give clear signs to the investors that the prices have become attractive and the expectations are that by the middle of the year there will be an increase in the number of purchases.
Developers operating in Bulgaria have raised their voices to request a more open business environment during the recession and clearer rules concerning their relationship with the state. They outline as a serious problem the behaviour of the electricity, water and heating suppliers which are huge monopolies. The suppliers do not invest in infrastructure but wait for the developers to build it and then buy this infrastructure from them, nobody knows when and how. The developers request that the state regulates these relations.

The number of new shopping centres in Europe which will open in 2009 be about 40% lower than the forecasts made a year ago. In 2010 it is expected that this number will be even lower and the total area of the new shopping centres will not exceed 7 million sq m. These will be the lowest figures in the last five years.
Due to the recession in Europe alone the construction of newly planned shopping centres totaling 7 million square metres will be put on hold.

In 2008 in Europe 310 retail centres with a total area of 9 million sq m have been completed. Most of them were in Russia where the growth was 23% and the total area of the newly completed retail centres was 1,65 million sq m. Turkey was in the second place, closely followed by the U.K., Spain and Romania. In terms of percentage, the highest increase was in Bulgaria – 76% and in Romania – 63%.

It is expected that the current recession will have the most powerful effect in Turkey, Russia and the Ukraine. A year ago 58% of the project took place in these countries, but now only 22% of the new shopping centres are completed in these countries.

According to the IMF report about Bulgaria, 3,5 billion BGN from the planned budget income will not be collected in 2009 due to the recession. This will mean automatic activation of the so-called 10% rule – shrinking of the expenses of all ministries and government agencies by 10% in order to achieve an annual budget with a small profit.

The current IMF mission in Bulgaria aims to establish the economic situation in the country. The most dramatic development is the inability to collect VAT to the value of about 3 billion BGN from the initially planned amounts. The most optimistic forecast of the National Revenue Agency is that the VAT collection will be 5% less than the planned for 2009 or an amount exceeding 110 million BGN, which still will be an increase of 6% in comparison to last year.

Generally, the tax collection might increase by 12% in comparison with last year.

Concerning the collection of Capital Gain Tax, the optimistic forecast underlines that 14% or 360 million BGN will not be collected. Still the collection of Capital Gain Tax will be 2% more than last year.

According to the IMF report, the decrease of income will force Bulgaria cut the budget expenses to the value of 1,7 billion BGN in 2009. The state expenses must be cut, as well as the salary increases, because the economic growth in 2009 will slow down to 1%.

The decrease of lending and of the foreign investment will lead to the shrinking of sales in the country. This in combination with the decrease of property prices and the possible increase of the number of bad debt might lead to shrinking of the economy and a negative GDP growth of – 3,5%, according to the pessimistic forecast of the IMF.

Bulgaria has a budget surplus but it can easily slide into a budget deficit of 1.5% of the GDP, according to the Italian Unicredit Group. The recession in Bulgaria is inevitable and will last 2 years, say the analysts. According to the expectations, the country’s economy will shrink by 3% in 2009 and by another 1% in 2010. It is expected that the budget will move from 3% surplus in 2008 to a 0.4% deficit in 2009 and a deficit of 1,5% in 2010.

The inflation is expected to fall to 3.5% for 2009 and to 1,8% in 2010 – which will be one of the few positive effects from the shrinking of the economy. The other positive effect will be the decrease of the current account deficit.

The most serious problem of Bulgaria is the sharp decrease of the foreign investment in the country which is expected to lead to a high unemployment exceeding 10%. It is expected that the unemployment will reach 12% in the next year.

The foreign investment will be 50% less than last year – from 16.7% to 7.5% of the GDP.

402.6 million Euros is the total turnover from merging and acquisitions in the first three months of this year, which is a decrease of 18.2% or 72% less than in the first quarter of 2008. The recession has hit the merging and acquisitions in Bulgaria. Only 32 M&A have been completed in the first three months of this year. In the same period of last year there were 136 deals to the value of 3.5 billion Euros.

The decrease in the first three months of 2009 still can not give a clear idea about the market situation later during the year. The prices of companies have dramatically decreased and the number of deals has shrunk by 1/3 on annual basis. The analysts still think that the situation is not that bad. In March the number of the deals has increased which might be a sign of recovery at the end of 2009.

For the first time in four years there are clear signs that the interest towards holiday homes in Bulgaria has decreased. The major buyers on this market – the Irish and the English – have stopped buying. The estate agents now joke that the result of this crisis is exactly what the greens have been striving to achieve – there is no construction in the resorts whatsoever.

According to the analysts, the slump has come as a natural result of the wish of the developers to constantly increase the number of foreign buyers, taking advantage of the low prices. At the moment there are no buyers at all and many developers sell their properties well below their value. Those few developers who have free cash despite the recession do not want to invest in the overdeveloped Black Sea and mountain resorts. There the property prices have dropped so much that a studio costs as much as a new middle class car. Despite this, there are no buyers. The supply on the holiday property market is 80% higher than the demand. There are thousands of sellers and no buyers. There is no secondary market due to the low rental income.

40 000 Euros can buy you a furnished one bedroom apartment in Sunny Beach. Most buyers receive not only discounts but also fitted kitchens, furniture or at least laminated floor.

In Bansko the situation looks similar. A one bedroom apartment of 80 sq m, situated close to the gondola lift costs 38 000 Euros. Further away from the lift in the direction of the central parts of the town price fall and for 30 000 Euros investors can buy an apartment of 64 sq m. Completed furnished apartments sell for about 600 Euros per sq m.

Although the holiday homes market has reached new lows, the analysts believe that in long term there will be good prospects for its development. The recession itself has lead to to preservation of the nature and this will eventually attract new buyers and tourists. On the other hand the recession has brought new lower prices of materials and labour. Many companies which got involved in construction because of the high profits are now going bankrupt. The developers are becoming more careful and there are expectations that the new projects will be of much better quality and with better location.

Regardless of the fact that the British and Irish buyers have lost interest towards the Bulgarian market, the analysts expect that soon Russians, Poles and Scandinavians will start buying in great numbers in Bulgaria. However, they look for different products and it seems that what has been built for the British buyers will not satisfy them. The holiday apartment or house will be less important than the environment, the peace and quiet, and the services on offer.

Construction projects in Bulgaria exceeding 2,5 billion Euros have been put on hold because of the recession. There are a few large projects, which do not have problems with financing. The fear of bankruptcy and the lack of free money is the reason for the investors to give up their plans for big projects and to sell their business. Some developers are prepared to sell parts of their future developments at lower price just to be able to finish their projects. On 2 April 2009 they met with Russian investors at a business meeting organised in the Russian capital Moscow. There were different projects on offer – holiday homes, residential homes, power plants, regulated and unregulated land, concrete buildings and whole residential areas. However the accent was on holiday homes and golf courses throughout Bulgaria.

Apart from the Russians the other type of investors interested in Bulgaria are those from the Middle East. Some of them are prepared to put on hold their projects in their home countries in order to buy at low prices attractive projects in Europe and in the USA.

The number of purchases of property in Bulgaria is expected to increase in the summer according to analysts. However, there will be no growth unlike the last two years due to the lack of fresh money and the stricter rules for lending of the Bulgarian banks. The prices of properties in Bulgaria are expected to decrease by further 15% by the end of the year.