LM Legal Services Blog

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.

This year the citizens of Sofia and the companies based in the Bulgarian capital must think twice before deciding to delay payment of their property tax. Sofia Municipality has focused on collecting debt from individual tax payers whose unpaid property tax exceeds 1000 levs and from companies owing more than 50 000 levs. Until now the emphasis was on collecting tax from the large debtors. Only in 2011 Sofia Municipality has collected more than 90 million levs of old debts which was an increase by 20% in comparison with 2010. The largest debtors were the Chief Mufti with 629 000 levs, Sofia Outlet Centre with 579 000 levs and Limex City with 267 144 levs.

According to the forecasts of analysts about 350 Bulgarian company will go bankrupt in 2011. In comparison with 2010,this is an increase by 100%. The number of unpaid invoices have increased by 20%. In just a year the period of the delay in the payment of invoices have increased from 78 days to 105 days.

This tendency has lead to the increase in the number of companies collecting debt. Only four years ago there were only 10 major companies operating in this field, mainly foreign subsidiaries. Now their number is 65, quite a high figure for the size of the Bulgarian market.

The total  value of the properties owned by Bulgarian families was 140 billion levs (about 70 billion euros) in the end of 2009, while in the end of 2008 it was 176 billion levs (about 80 billion euros), according to Industry Watch. The drop is due to the devaluation of the properties during the recession and Industry Watch expect that this tendency will continue in the next six months.

The  devaluation of properties has slowed down in the last quarter of 2009 and it has reached 2% in the end of 2009 in comparison to the previous quarter. Because of this devaluation the purchase power of the middle class Bulgarian measured in square metres of living area has increased by 50% in 2009.

The financial resources of the Bulgarian families were 36 billion levs (18 billion euros) in total in the end of 2009 and this is an increase by 7% in comparison with 2008. The annual speed of the growth has slowed down, however, as in 2007 the growth was by 28.5% while in the last year it was just 8%. The amount of 36 billion levs does not include the debt and the credits of the Bulgarians. Last year the debt of the Bulgarians was 1/3 of their financial resources, now the level of debt has decreased according to Industry Watch.

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.