Almost 28% is the decrease in the number of deals on the property market in Bulgaria annually. This number is different in the different parts of the country but only Sofia and Varna have similar statistics. 72% of those who would like to buy a property in Sofia and Varna are prepared to pay not more than 40 000 Euros. In Plovdiv and Bourgas the buyers are prepared to pay not more than 25 000 Euros.

In 2009, 42% of the buyers paid in cash and 37% of the sellers had financial difficulties, not necessary inability to pay their mortgages or bad credits. In 2009 most of the buyers bought newly built properties and only 12 % of them have bought prefabricated apartments. The most active buyers were between 26 and 35 years of age.

In the last months the highest price of a property purchase in Sofia was 3000 Euros per sq m. This is half of the top prices paid for luxury properties two years ago.  The owners of expensive properties sell them now for two reasons – some experience financial difficulties, others think that with the money from the sale they will make a better investment.  According to the statistics the owners with financial difficulties are only 17% of the sellers and all of them are keen on dropping the price of their property.

Buyers ready to spend about 500 000 Euros are rare and they have a very good choice at the moment. The advertised prices of luxury properties are up to 200 000 Euros for apartments and about 600 000 Euros for houses in the affluent areas of Sofia. The actual purchases are carried out at much lower prices.  Buyers are prepared to pay between 120 000 and 150 000 Euros for a luxury apartment and about 500 000 Euros for a house. At the moment properties offered at prices exceeding 1 million Euros can not be sold as prospective buyers very rarely view them.

Only 12% of the buyers of luxury properties actually buy with the intention to make this property their home. 53% of them think that this is the right time to make a long term profitable investment. The rest have different reasons for buying like increasing the number of children in the family or achieving higher social standing.

According to estate agents the recession on the market of luxury properties came with a delay of about three months, possibly due to the optimism of the people with money. Then it crushed. The property market’s stability of the last months is less likely to cause price increase. This is not good news of owners of luxury properties as they expect to sell within a time limit. The reason for this is that more than 90% of the luxury properties are sold furnished and the furnishing loses its value in time thus affecting the price of the property.

The location of the property continues to be a key factor in the choice of property. The most popular affluent parts of Sofia are still the Doctors’ Garden, Lozenets, the luxury enclaves along Bulgaria Boulevard and the outskirts of Sofia in the south, right in the foot of Vitosha Mountain.

Analysts believe that once the recession is over, the luxury properties will increase in price faster than the other types of property.

By Kevin Rose, The Independent

As property prices fall across Europe, the chance of owning a holiday home abroad may never be better. And with sterling struggling against foreign currencies – touching a six-month low against the Euro on Thursday – it may be wise to get moving sooner rather than later. But where are the bargains?

Latest figures suggest that old favourites France and Spain are regaining their popularity with buyers of holiday homes. But the picture is not so positive for investors wanting a sizeable return on their purchases, with some former European hotspots now looking decidedly chilly.

According to overseas mortgage firm Conti, 31 per cent of the enquiries it has received so far this year have been about property in France, while more than a fifth were about Spain. Clare Nessling, director at Conti, says buyers are sticking to areas they know and trust, and turning their backs on more adventurous territories such as Bulgaria, Turkey and Dubai.

Spain is maintaining its popularity with UK holiday home buyers as prices have fallen heavily due to an oversupply of properties on the market. In some cases, prices in the Costa del Sol have plummeted by 40 per cent since the peak in 2006/7.

That means for those who have always dreamed of buying a place in the sun but been put off by the cost, now is the time to take a look.

The glut of properties on the Spanish market has led one UK firm to launch a service specifically to try and find buyers for “distressed” properties, typically repossessions, probate or part-exchanged properties.

The online property company, whitehotproperty.co.uk, is currently marketing around 4,000 distressed properties in the popular tourist destinations with – in some cases – sizeable discounts. In one example, a four-bed, two-bathroom duplex apartment in Torrevieja has been reduced to €118.400 (£102,068), a 27 per cent discount on the original asking price.

Similarly, a three-bedroom villa with a pool in a tourist hotspot such as the Costas can be bought for €400,000. It would have cost around €650,000 at the height of the market three years ago.

Stuart Law, chief executive of international property investment firm Assetz, puts the British homebuyers’ continued interest in Spain down to its proximity to the UK, its sunny climate and an abundance of sandy beaches.

The addition of relatively low property prices means Brits are in a good position to buy in Spain – so long as they don’t expect investor-grade price rises. With supply outstripping demand, the situation is unattractive to the professional property developer reliant on solid returns over a relatively short period.

Law says: “Spain is a very difficult place to be buying from an investment point of view, particularly if you are keen on covering all of your costs with rent. Oversupply is impacting the rental market and the exchange rate isn’t helping.

“If someone has set their mind on a holiday home that they are not going to rent out then Spain is ideal, and the very problem that would cause an issue to an investor is what is helping push prices down. There is massive choice, and also some very good pricing.”

However, although Spain may have plenty of appeal, the European continental property market as a whole has not yet recovered. The Netherlands, Denmark, Slovenia and Slovakia have all seen double-digit house price falls over the second quarter of the year.

But the leading horror story is Bulgaria. The former hotspot in the Balkans is now a no-go area for lenders and buyers alike, with its land registry data showing that real estate transactions crashed by 35 per cent year-on-year in the first half of 2009.

Land prices in the previously fashionable Black Sea area fell by an average of 40 per cent in the first eight months of 2009 compared to the same period in 2008, according to the International Real Estate Federation in Bulgaria. All of Bulgaria’s major cities and seaside resorts, including Sofia, Varna and Samokov, as well as winter resort Borovets, reported falls in the region of 50 per cent over the same period.

Stuart Law cautions Brits to avoid Bulgaria at all costs. He says: “It’s just horrific; where is the bottom of the market? Our question has always been ‘why would you bother?’ There are so many better places, either closer, nicer or just as cheap. Comparing Spain to Bulgaria… there really isn’t any choice. Spain ticks almost every box and is much closer and easier?”

He suggests that if potential holiday homebuyers want to go further afield, they should consider the US, where some bargains can be found. “Anybody who has ever aspired to own a holiday home in Florida and hasn’t looked recently is going to be genuinely shocked by what they could get. We’ve seen Orlando townhouses in prime resorts at €50,000-€70,000.”

One reason that many are avoiding Europe at the moment is the state of the pound. Over the past two years there has been unprecedented volatility in the currency markets, with the value of sterling fluctuating by over 30 per cent against the euro. The pound currently buys around €1.1, with many currency analysts predicting that parity will occur very soon.

Stephen Hughes, a director of Foreign Currency Direct, fears that sterling is “collapsing”. He argues that currency traders are agreeing on one thing: “sterling is likely to fall fast and far.”

With further falls probable, what should existing or potential European homebuyers do to protect themselves? Mark Bodega, a director at currency broker HiFX, recommends that people looking to buy abroad should consider a “forward contact”. “This allows you to buy currency now and pay for it later,” he explains. “You will need to pay a 10 per cent deposit now and the 90 per cent balance upon the maturity of the contract, but it allows clients to lock into an exchange rate for up to a year.”

Julian Cunningham, from international estate agents Knight Frank, advises British sellers on the continent to reduce their asking prices. He says: “The savvy vendor is passing on any currency gain to the potential buyer in the form of a reduced asking price. But without passing on a certain percentage of that gain to the potential purchaser, it makes it a lot more difficult to do the deal.”

Holiday home heaven: Why France remains number one

It’s not difficult to see why France remains the most popular choice for Brits. Easily accessible by road, rail and air, potential buyers are not solely at the mercy of budget airlines. House prices have remained resilient in France compared to the UK, and mortgage funding is largely more attractive, too.

Nessling says: “In France, lenders have always been a little more cautious. They certainly haven’t taken the extreme view that most UK lenders did. Throughout the credit crunch we’ve still been able to get 100 per cent mortgages in France for loans over €250,000.”

More than four-fifths of mortgages in France are fixed and the majority of all new mortgages are fixed for at least one year. This lending strategy is another reason why the French property market is, on the whole, performing better than in Britain.

Despite a period of house-price falls in the country last year, prices in France actually increased by 3.9 per cent in the second quarter of this year, according to the French National Association of Real Estate Agents.

Stuart Law, chief executive of international property investment firm Assetz, agrees that mortgage lenders in France have kept their criteria largely unchanged, arguing that because they lend based on affordability, an unsustainable boom in prices in France has been prevented. He says: “In the South of France prices have barely wobbled as banks do not think they have substantial risk there.”

Dnevnik Daily

A new public institution will be set up in Bulgaria to manage and control amounts from all real estate transactions in an effort to bring them into the light and crack down on money laundering in the industry.

The new Deposit and Consignation Fund will be inaugurated by special legislation hammered out by the Ministry of Justice and the Notary Chamber.

The institution will be a state-owned enterprise and not a bank and will be modelled on a system already operational in France, said Notary Chamber head Dimitar Tanev. Under the scheme, the sellers will receive their money with a short delay but it will ensure transparency and security to all loyal parties as well as central and local authorities.

The system will see buyers transfer the money into the fund where it will spent two or three weeks before it is passed on the seller. The period will be used to check up the resource’ origin and charge all dues of the government and municipalities. It is expected to put an end to sham transactions and block cash payment as money will have to be put into the fund by a bank transfer, Tanev explained.

Market values in the different regions will be determined by experts and updated every three or four months. The price will serve as a reference point for actual property transactions to make sure money laundering and tax evasion is prevented. A difference within 10-15% could be assumed thanks to property improvements but current differences topping out at between 300% and 1000% will be impossible, Tanev said.

The Notary Chamber discussed the proposal with representatives of the European anti-fraud office OLAF, who said the project will indicate the country’s commitment to combat abuse and money laundering.

The property prices in Bulgaria at the moment are at the real market value according to analysts.  Nevertheless it is still difficult to predict when they will start growing. The most popular property among buyers in Sofia  is the one-bedroom apartment. The areas of Liulin and Drujba offer the best prices now.  The most prestigious area is South Park. For 1000 – 12000 Euros/sq m there the buyers can get a new quality built apartment in a good location. However, most of the estate agents in the Bulgarian capital think that the real market is at prices below 900 Euros/sq m., depending on the quality of the finish.

]]> http://lmlegalservices.com/blog/archives/603/feed 0 http://lmlegalservices.com/blog/archives/575 http://lmlegalservices.com/blog/archives/575#comments Fri, 29 May 2009 08:44:31 +0000 Boyan Yordanov http://lmlegalservices.com/blog/?p=575

More and more ex-pats who have bought holiday apartments on the Bulgarian Black Sea coast have put their properties on the market for sale. They do not have money to pay for the maintenance of their holiday apartments and would like to sell them as soon as possible, but there are no buyers.  Mainly Irish, British and Russian owners have put more than 10 000 properties on the market, all of them located in the stretch from Sunny Beach to Sozopol.

In the Bulgarian cities the tendency is exactly the opposite. There is a growing interest among prospective buyers due to the fact that prices have fallen between 16% and 38% in the first four months of this year. In the capital Sofia the apartments with living area of 50 to 70 sq m are most in demand. The most popular areas are Liulin, Mladost, Dianabadt, Ovcha Kupel, Nadezhda and Zona B17. The lowest price has been registered in Liulin and it is 454 Euros per sq m for an off-plan property.

Estate agents claim that at the moment buyers have much higher expectations from a property. They insist on location close to the public transport and on quality construction work and materials.

The reason for the raising interest among prospective buyers is the fact that banks have started giving more mortgages and there are people who have savings that can pay for at least 50% of the price of the properties. The average size of the mortgage in Bulgaria at the moment is 35 000 Euros, a decrease by 15 000 Euros in comparison with 2008.

The price of agricultural land in Bulgaria has decreased by 40% in the first months of 2009 in comparison with 2008. The reason for this is the recession and the boosted prices of agricultural land in the beginning of 2008. This has put off many prospective buyers.

At the moment the average price is between 200 and 300 levs per 1000 sq m.
The top most expensive agricultural land is in north-east Bulgaria, in the area of Dobrudja, while the cheapest around Vidin in north-west Bulgaria, Haskovo in the south, Lovetch and Gabrovo in mid-Bulgaria and Pernik, close to Sofia.
Despite the price drop, the rent of agricultural land steadily increases. At the moment the average rent is between 18 and 20 levs per 1000 sq m, which is an increase of 10 levs in comparison with the same time last year.

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 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.

According to a prominent Bulgarian banker, the property market in Bulgaria has grown at a 45 degrees but later it has dropped like a stone at 90 degrees. According to him in this situation profit or much smaller loss suffer the developers who sell first. According to him in the times of recession for the developers is crucial to have their own capital. The highest risk for him is if the recession lasts longer than expected in which case even companies with rich reserves might see them draining. The investors in property projects in Bulgaria should focus on the Bulgarian buyer and should drop the prices to levels attractive for him. In this way the developers will get cash so much needed during the recession.

According to the prominent banker, the Bulgarian banker should not be accused for the problems in the property industry in the last months. The banks follow the success and in the last years in the property business there have been no losers. The profits have been huge both for the good and for the bad companies regardless of the quality. The positive effect from the recession will be that the profit margins will shrink.

Irish estate agencies offer holiday apartments in the Bulgarian resorts at prices which 35% lower than the original ones. Part of the offer is that if the purchase is completed by the end of the month the buyers will save further 500 Euros.

In Sunny Beach on the Black Sea cost the cheapest offer is 24 990 Euros for a studio apartment. At the same time in the ski resort of Bansko studios are on offer for 20 000 Euros and generally prices at the mountain resorts are lower.

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.

The Bulgarian ski resort Bansko was a typical example of the “hot market” in Easter Europe. Now, the small town is an example for the exactly the opposite.
The balloon has burst and the market of holiday properties in Bulgaria has collapsed. With this, sank the dreams for fast returns of many investors who have poured money into the region. Bansko is an emblem of the end of the hot market of holiday properties in the region. Most often the investors in the region are Brits and Irish who relied on the rental market or on the sharply increasing prices. The locals have earned some cash by selling their land, but the charm of the small town with small houses and narrow streets has disappeared forever. Now there are huge hotels and the roads are either made wider to cope with the traffic or are under construction. The holiday property market has suffered more than any other during the recession. The number of purchases has decreased by 10% at the end of the last year. The property boom in Bulgaria started in 2002 and the pivotal points were Bansko and some Black Sea resorts like Sunny Beach.
Now, when the market has collapsed, the biggest advantage of the situation take investment funds which buy properties in great numbers in the resorts at low prices and wait for the market to recover, the buyers to return and the prices to start going up again. There are buyers who are not so happy. Many British owners who bought their apartments at the Black Sea a year ago at prices exceeding 1000 Euros per square metre are ready to sell them now for as little as 500 Euros per square metre.

Because of the recession many sellers drop the prices of their properties to be able to sell them. The number of prices of apartments in the big Bulgarian cities which are under 30 000 Euros have drastically increased in the first three months of this year. One of the reasons for this is the lack of buyers due to the strict rules of the bank for lending. A few months ago all Bulgarian banks stopped lending money for the purchase of apartment in prefabricated blocks from the communist era. After that the banks have sharply increased the mortgage interest rates and have decreased the size of the mortgages, thus have put off many prospective buyers. In reality the Bulgarian property market have moved back to the situation years ago of expensive mortgages.

In Plovdiv 70 apartments are on the market for prices under 30 000 Euros. Only 20 of them are off plan. Prefabricated apartments with total area exceeding 90 sq m are for sale for as little as 13 000 Euros.
In Varna the number of the apartments under 30 000 Euros is 60, the cheapest property is a one-bedroom apartment for 20 000 Euros in the outskirts of the city. There is ever an apartment in the central parts of Varna offered at 30 000 Euros, which is still at the off-plan stage. Prefabricated apartments sell for about 25 000 Euros in the outskirts of Varna.

In the second largest city on the Black Sea, Burgas, the number of apartments on offer are twice more than in Varna but most of them are off-plan and in the outskirts of the city. The cheapest offer, €15 120, is for an off-plan apartment with are of 41 sq m. There are ten prefabricated properties for sale at prices starting at 24 000 Euros. All of them are located in the outskirts of Burgas.

In Russe there are 20 apartments under 30 000 Euros. The cheapest offer is for a studio for 12 900 Euros. Prefabricated apartments start at 15 000 Euros.

While in the country at the moment prices range from 440 to 580 Euros per sq m, in the capital Sofia, the property prices have dropped everywhere, apart from the central parts of the city. The sharpest drop of prices is in the southern parts of the city where there are more unfinished buildings then anywhere else in the city. The prices of prefabricated apartments have fallen more than any other. While last year they used to sell for more than 1000 Euros per sq m, now they are on offer for under 750 Euros per sq. m. Newly finished properties are offered for 700 – 800 Euros sq m. Off-plan apartments are offered for 500 Euros per sq m. Some developers offer discounts of 20 % of the prices of their finished apartments in cases of payment in cash. Others who are stable financially offer 15 leasing schemes to their customers.

Russians buy hotels on the Bulgarian Black Sea cost for peanuts. They hire estate agents to look for cheap property, mainly hotel owners who are on the verge of bankruptcy or developers who cannot complete their projects. They also buy already developed projects for holiday resorts which have been denied financing from banks. About ten very good purchases at attractive prices have been completed since the beginning of the year. Most of them are for about 500 Euros per sq m. The jewel in the crown is a four story hotel in Svety Vlas the area of which exceeded 1000 sq m. The hotel sold for 300 000 Euros. The Russians invest their money in Bulgaria in order to save them, as the trust in the Russian banks have sharply decreased over the last six months.

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.

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.

The sales of properties in Bulgaria have decreased for the first time in the last few years, according to the Land Registry. From January to June 2008 there have been 134 891 sales while for the same period of the last year their number was 136 457. The decrease is just by 1.1% but it is a fact. Since 2003 the number of the sales has been increasing by about 20% per annum and this has lead to a constant increase in the prices of properties. At the moment, the buyers are still active in Sofia, Varna, Burgas, Plovdiv and Pleven. The number of sales in these cities has increased, though insufficiently. However, in many regional centres like Shumen, Sliven, Smolyan, Pazardjik, Veliko Turnovo, Vidin, Vratsa and Gabrovo the sales have decreased, and in Ruse and Razgrad this decrease has exceeded 10%. Last year Ruse was the leader in the property price increase which reached 41% but the high prices have put off many prospective buyers.

On the Black Sea coast it seems that the buyers’ activity has moved south. The Land Registry in Nessebar which covers Sunny Beach, St. Vlas, and Ravda reported a decrease of 12.5% for the first half of this year. At the same time the sales in Tsarevo have increased by 50%.

The interest in agricultural land has not diminished at all, according to the activity of the most developed market of agricultural land in the country, which is in the area of Dobrich, Lom and Montana.

Despite this, Bulgaria is still in the first place in the world for the increase of property prices from June 2007 to June 2008. According to Knight Frank the prices of properties in Bulgaria have increased on average by 32.3%.