LM Legal Services Blog

According to the State Agency for Tourism (DAT), three-four hotels go bankrupt every week in Bulgaria. They are unable to re-pay their mortgages. Many hotels are put for sale but there are no buyers and banks repossess them but it remains unclear if the banks will be able to sell them.

It seems that Bulgaria follows the road of Spain where the state buys the bankrupted hotels and demolishes them, in order to create parks.

According to the statistics, in the first half of the last year, 820 new hotels have opened on the Black Sea coast. As result of the construction boom the number of hotels and holiday properties is much higher than the number of  the tourists.  Many hotels can not sell all their beds and their owners suffer losses. All this makes it impossible for the hoteliers to repay their mortgages and other credits and go bankrupt.

The property market in Bulgaria was in complete collapse for about six months but from mid-March the first signs of awakening have appeared.  The decrease in the prices of the properties for sale is already a fact.  In the last two months sellers started decreasing the prices more boldly. There are more reduced property prices in Sofia than in any other town in Bulgaria. This comes to prove that the market in the capital is more mature and flexible. The average reduction in Sofia since the beginning of the year is 13.23%. In the central parts of the city it is 14.9%. In the area around Vitosha Boulevard the prices have fallen to 1800 Euros per sq m and around the Doctor’s Garden the prices have gone down to 2000 – 2800 Euros per sq m. In the so-called greater center the prices have decreased by 9.34% to 1190 Euros/sq m. Along Bulgaria Boulevard they have gone down by 2.96% to 978 Euros/sq m. In affluent Lozenets the reduction is 12.6% and the prices are around 1600 Euros/sq m. If the prices on offer are compared with the actual prices from the deals, it appears that prices go down even further. On the whole the purchases in 2009 are completed at prices which are 25-28% lower than the ones in 2008.  At the moment the difference between the offered price and the real price of the purchase is 15%.

In Varna, the second Bulgarian city, the property market seem to be weaker than is Sofia, mainly due to the prices that are still too high. However, there are some bold reductions of up to 40%. The average price drop is 9.97% since the beginning of the year. In the central parts and in the area of the Sea Garden the reduction is by 9% and the prices are about 1990 Euros per sq m. In Levski the reduction is by 3.9% and the prices are about 1074 Eur per sq m. In Briz the drop is by 9.8% and prices are about 1160 Eur/sq m. The actual purchases are at price which are 30% lower than those in 2008. The difference between the offered and the actual purchase price is 20%.