LM Legal Services Blog

The property prices in Bulgaria have dropped on average by 12.4% in the first three months of the year according to information of the National Statistics Institute. The sharpest price drop was in Veliko Turnovo – 25.1%, followed by Kyustendil – 21.5% and Blagoevgrad – 20.5%. The average price for the country is 1190.7 levs (608 Euros) per sq m. The most expensive apartments are in Varna – 1982 levs (1013 Euros) per sq m, closely followed by Sofia – 1980 levs per sq m.

Now is a good time to buy a property according to estate agents and there are no expectations in the next two years for the property price to start going up.

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.

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 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.