LM Legal Services Blog

The expectations of analysts are that the property prices in Bulgaria will continue to drop on average by 5%. The top prices fetch luxury properties in Varna on the Black Sea, where they sell on average for 1500 levs (760 Euros) per square metre, while the properties in the capital Sofia are in the second place with prices of 1468.10 levs ( 700 Euros) per square metre.
In 2012 the market of holiday properties will keep relying on the Russian buyers, as their interest towards properties in Bulgaria has not been affected by the recession like in the case of the Irish and the British buyers. The prices of some of the holiday apartments and houses have dropped by 50% since 2008 and this makes them even more attractive for the Russian buyers. The expectations that Chinese and Middle East investors will start buying properties in Bulgaria failed to materialize.

A Greek bank group has predicted that the Bulgarian economy will slow down due to the debt crisis in the Euro zone and the negative prospects for the recovery of the European and the US economies. The Eurobank EFG Group announced that in 2011 the growth of the Bulgarian GDP will be 3,5%. In their forecast for 2011 the predicted growth of 3,2% of the Bulgarian GDP has been revised to 2,9%.

According to the Greek bank group the Bulgarian economy is slowing down, despite being above the average levels for the EU in the last quarter of 2011. The major drive of Bulgaria’s growth is the export, but in the second quarter of this year, its volume has decreased in half in comparison with the first quarter. The Bulgarian export shall continue to decrease due to the worse conditions on the EU market – the main market of the country.

On the positive side the domestic demand is gaining speed and the investments have increased. According to the forecast the investments will keep increasing because of the privatization programme of the Bulgarian government and the improved use of the European funding. Bulgaria, according to the Eurobank EFG Group has not been affected by the debt crisis and has remained stable financially, and its credit rating has improved.

The forecasts for a slow down on the property market in Bulgaria came true – it is back to the levels of 2004. The number of deals with real estate have dropped by 35% in 2009 and stopped at 200 678. This drop was deeper than the one in 1997 – 1998 when the country experienced hyperinflation and bank crisis.

According to the Land Registry the hysterical purchases of apartments in the big cities has died away and the drop in the number of purchases  in Sofia, Varna, Plovdiv and Pleven has dropped lower than the average for the country. In the capital Sofia this number has dropped below the lever of 2004 when the purchases were 28 837.

The market in the Black Sea resorts and in the agricultural areas of the country is fairing better than in the rest of the country during the recession. In Nessebar on the Black Sea there were 6461 deals in 2009 which is only by 23% lower than in 2008. In Dobrich the drop is even lower. The interest in agricultural land in the area has remained the same.

According to the British estate agents Knight Frank by 31 March 2009 the property prices in Bulgaria have increased by 3,3% annually and in the first three months of 2009 they have decreased only by 1,2%, which puts Bulgaria in ninth place in terms of property price growth.

The information provided by the Bulgarian National Statistics Institute (NSI) shows that in the first quarter of 2009 the property prices have fallen by 12,4% and by 8,4% on annual basis. According to NSI from January to March 2008 the properties in Bulgaria cost on average 1299,9 levs (650 Euros) per sq m. In the first quarter of this year this price has fallen to 1190,7 levs (just under 600 Euros) per sq m. If the information of the NSI is taken into account, then Bulgaria will be in the top ten shrinking property markets.

In the first quarter of 2009 the property prices in 32 out of 46 countries world wide have fallen. The most serious price decrease has been in Singapore, Dubai and Latvia. In Latvia alone the prices of property have been steadily falling in the last two years and only in the last 12 months they have fallen by 36%. In Dubai the prices have fallen by 40% only in the last three months. The short term forecast is that the recession will continue at least until the end of 2009.

The Bulgarian property market has entered into a constant slum and it is expected that the earliest in 2011 it will pick up, according to developers, analysts and estate agents.

This conclusion is based on the expectation for a deep recession in the country in the next two years. Prominent business analysts think that the recovery of the property market in Bulgaria entirely depends on the economic development of the country. The boom of the property market coincided with the economic boom. However, now the forecast of the IMF for Bulgaria is most worrying – recession in the next two years, high unemployment and shrinking of the spending. Traditionally, the economic process in Bulgaria lags behind the one in the developed Western countries. Only in case that Bulgaria starts using the European funds properly and more companies from Western Europe relocate in Bulgaria by 2010 the country will reach the lowest point of the economic recession and the economy will start moving upwards.