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.

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/596 http://lmlegalservices.com/blog/archives/596#comments Fri, 05 Jun 2009 09:02:09 +0000 Boyan Yordanov http://lmlegalservices.com/blog/?p=596

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%.

]]> http://lmlegalservices.com/blog/archives/596/feed 0 http://lmlegalservices.com/blog/archives/533 http://lmlegalservices.com/blog/archives/533#comments Mon, 11 May 2009 09:33:32 +0000 Boyan Yordanov http://lmlegalservices.com/blog/archives/533

Prices of apartments in prefabricated apartment blocks are higher by 100 Euros in Sofia. In middle class areas like Mladost and Borovo in the outskirts of the capital prices of prefabricated apartments vary from 550 Euros to 900 Euros per square metre. Newly built properties in those areas vary from 450 Euros to 850 Euros per square metre.

In the central parts of Sofia the prefabricated apartments sell for 1240 Euros per sq m while newly built ones for 770 Euros.

This is due to several reasons. One of them is that some of the newly built apartments are not of good quality. Some of the owners of prefabricated apartments on the other hand keep the prices from last year in their attempt not to lose money. In order to attract buyers, the developers offer free furnishing of at least one room as a bonus. However, despite the falling prices there are only a few buyers who are ready to pay in cash. Many developers offer payment in instalments, only to attract new buyers.

Despite the fact that the number of purchases has slightly increased, there are no expectations that the property prices will increase in the next three months. To the contrary, all professionals expect further reduction of the prices.

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.

Sofia is in third place among the European capitals in terms of profitability of office space. A high quality office building can have a 10% annual return. Only the Russian capital Moscow (11.5%) and the Ukrainian capital Kiev (14%) are rating better than Sofia. The profitability of office space in the Bulgarian capital has increased by 3% or 300 points from its lowest position three years ago. The figures for Belgrade are similar – 10% – while for the other Balkan cities this ratio varies from 7% to 8.5%. Only offices in the Romanian capital Bucharest show higher annual return of 9.5%. The more developed markets of office space like Prague, Budapest and Warsaw have much lower levels of annual returns of 6.75 % – 7.75%.

The rent of office space in the Bulgarian capital has actually decreased by 6.85% in the last year and now is 17 EUR/sq.m. on average as it is linked to the decreasing prices of properties in general. There is similar decrease of office rent in Madrid, Dublin, Moscow, Kiev, Belgrade, Budapest, Warsaw and Bucharest. In the 15 older EU-member states the office rent has decreased by 4% on average.

The investment funds will be able to buy properties on territory of EU-member-states, according to the draft amendments of the law for the investment funds suggested by the Committee for Financial Supervision. Until now these funds could invest only in Bulgaria. The other significant amendment is that the minimal capital will increase from 600 000 levs to 1 million levs. The funds will be able to cooperate and work together on large property project which they would not be able to do on their own. The requirement that the depository bank which holds the money of the fund should give credits to them shall be removed. Other amendments include the possibility for investment in bonds and futures issued with the aim to finance major infrastructural projects. The requirement to obligatory increase the initial capital in order to get the right to operate as a fund will be also removed.

The rules for terminating the license of the company. The fund will be able to request it and in such case it will continue to operate as a normal company not as an investment fund.

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.

The recession has led to diversification of the rental market in Bulgaria. Many tenants are unable to pay high rent because of decreasing incomes and the landlords have reacted accordingly – in the last 12 months while in some parts of Sofia rents have increased by 15 %, in others it has decreased by 20%. The area where the property is situated is of primal importance, as well as the condition of the property itself. The size of the property is more and more important. It is very difficult to find studios as they are in demand. Their rent have remained more or less the same in the last twelve months, even in expensive parts of Sofia like Lozenets, Oborishte and Yavorov. In these areas studios can be rented for 250 Euros per month, while in the central parts of the capital the rent has decreased from 291 Euros to 257 Euros. At the same time studios is in the area of the Medical Academy now rent for 22% more than last year, the highest increase in the city.
The rent of one-bedroom apartments in the expensive areas like Boyana have decreased by 25% as there is no demand. In March 2007 a one-bedroom apartment in Boyana rented for 400 Euros per month but now it rents for 300 Euros. The tendency is the same in affluent Dianabadt and Strelbishte, while in Kniazhevo, Lagera and Mussagenitsa rents of one-bedroom apartments have increased by 15%.
The recession is most seriously felt in the renting of two-bedroom apartments. The demand is so limited that although landlords have put down rents, still tenants can not be easily found. The decrease of rents have reached 20% and in upmarket Lozenets such apartment can be rented for 570 Euros on average, which is 100 Euros less than last year.
Generally,the purchase prices of the most popular apartments have gone down to the prices of 2007.

Despite the financial crisis, the property prices in the suburbs of Sofia have been constantly increasing due to the migration of people from smaller towns and villages who seek employment in the capital. In the last year, more than 30 000 people have relocated to Sofia, while 12 000 people have moved to Varna, the second largest Bulgarian city. The same tendency can be seen in Plovdiv, Russe and Burgas. The newcomers to the cities usually look for cheaper properties in the suburds. As result the prices of apartments in those areas keep rising. The average porperty price in Sofia is 1094 Euros per square metre, while in the county it is 588 Euros per square metre. The studios seem to be very popular and their sales have increased by 17% in the last months. At the same time the demand for one-bedroom apartments have decreased by 28% and of larger apartments by 3%. Most of the sales are of newly built properties.

Bulgaria’s economic development depends heavily on the ability of the country’s production to compete on the European market.  From 2000 until 2006 the industry has experienced a speedy development. The invested capital has increased three times. The original capital has increased 3.4 times and the floating capital – 2.9 times. At the same time the effectiveness of expenses is low and the increase is insignificant. For this period one lev of expenses has resulted in 1.06 levs of income. The profitability of the invested capital is 6% – rather disappointing in comparison to the level of the interest rates of the bank credits. The increase of the production is mainly due to the increase of the number of producers, rather than good organisation. The reason for this is the structure of the industry which is still to a great extent ineffective. As result there is a necessity to develop a new strategy for the Bulgarian industry and to underline priorities. The emphasis should be on highly effective projects. Another significant problem related to this one is the decrease of the profitability of the long-term assets and the inadequate qualification of the workforce.

The situation is much better in relation to the use of the current assets. The improvement is obvious and it is expressed in the decreased time for the turn over of the material reserves and the decreased need for materials. One lev of goods has been serviced by 0.16 levs of material reserves, which is an increase of about two levs.

The short term debt to suppliers has increased and also both the number of days for the collection of the short term debts and for paying the short term debts. The ratio observed is that for one lev of receipts from clients, there are 0,83 levs of short-term debts to suppliers.

Generally, there is a tendency for the short term improvement of the financial situation of the companies and their liquidity has increased which mainly due to the good work of the management.