Now is the best time to buy a property. the property prices have dropped significantly and there are no expectations for further decrease, according to large estate agencies. The average decrease of the prices in Sofia since the beginning of 2009 is 6%. The price drop is more significant – of up to 15% – in affluent areas where the prices have been unreasonably high during the property boom, like the Doctor’s Garden in Sofia, as well as in areas with bad infrastructure. By the end of the year prices will drop further by 5-6% but not more, say analysts. Even if there are further price reductions, buying property now will be profitable in the long run. Buyers can naturally wait a bit longer but it is not sure how much of their money will be eaten by the inflation.

The development of the property market in the next few months will depend on the economic recovery and on the job security of the buyers. According to bankers, many governments work toward the increase of the amount of cash in their countries so the increase of inflation is a normal consequence of the recession. As Bulgaria is in the conditions of a monetary board, the inflation is imported and it is a sign of the recovery. However, the recovery will not be felt before the middle of 2010. In this connection, prices will fall further but only of properties which are of lower quality or those belonging to developers who are now experiencing cash problems.

According to some analysts the property market in Bulgaria will reach the bottom by the end of this year. The professionals are of the opinion that it is more important how the Bulgarian property market will start moving rather than when. It seems that the Bulgarian government does not have priorities and the economic recovery will be long and difficult. Around the world the property markets will recover with a different speed and at different times. The huge property markets in the USA and the UK give clear signs to the investors that the prices have become attractive and the expectations are that by the middle of the year there will be an increase in the number of purchases.
Developers operating in Bulgaria have raised their voices to request a more open business environment during the recession and clearer rules concerning their relationship with the state. They outline as a serious problem the behaviour of the electricity, water and heating suppliers which are huge monopolies. The suppliers do not invest in infrastructure but wait for the developers to build it and then buy this infrastructure from them, nobody knows when and how. The developers request that the state regulates these relations.

The demand for properties in Sofia has sharply decrease int he last six months and the prices have subsequently fallen in all areas of the capital.

The lending of mortgages has decreased by 80% by November 2008, totalling 82 million Euros. The interest rate has increased by 2 points.  The banks have decreased the size of mortgages from 90% of the price of the property to 50% – 70%. Buyers do not buy off plan.

The price of properties in Sofia started falling from the middle of the last year. In comparison to the first half of 2008 the decrease of the prices of newly built southern areas of Sofia, like Vitosha is 9%; in affluent Lozenets is 8% and 2% in Ivan Vazov.

In Iztok area the prices have been catching up and they grew by 18%, while in the area of the Doctors’ Garden they grew by 11%.

In the first six months of 2009, the recession will influence the property market and most of the future projects will be put on hold or delayed.

The existing infrastructure, the positioning of the property and the access will influence prices much more than before.

The demand for middle and high class properties will decrease, as there are difficulties in finding mortgages. The market will rely on buyers who have enough money to pay the full price and on different leasing plans offered by the developers.

The cold weather and the financial crisis have made their impact on the construction industry. According to the  Bulgarian National Statistic Institute (NSI) in November 2008 the volume of construction has decreased by 14.9% in comparison to October 2008.

The most serious decrease is in the construction of buildings – 15.7% – while the construction of infrastructure has decreased by 13.2%. The decrease is typical for this industry in this part of the year according to the analysts, as this industry depends heavily on the weather conditions. The entrepreneurs, however, explain it with the recession which has hit them since the summer of 2008. The investors on their part wait to see the depth of the recession and its duration in time.

This is the reason why many prospective purchases of plots of land and many construction projects have been frozen. The entrepreneurs who rely on bank loans do not want to stop work but this is still better than sinking into yet more debt. According to some professionals the official statics lie and the real decrease of the volume of construction exceeds 15%.

The speed of work on many projects have decreased dramatically due to the lack of new purchases. Because of difficulties in getting bank loans many preliminary contracts for purchases of properties have been terminated.

The annual statistincs of the National Statistic Institute (NSI) still show a slight increase of the volume of construction in comparison to 2007. For November it has been of 1%. However, the expectations for 2009 are for general increase of the volume of 2 to 3% due to infrastructural projects and general decrease in the construction of homes and offices.

The turnover of the largest Bulgarian construction companies in 2007 was 2.7 billion levs according to the Builders’ Chamber in Bulgaria (KSB) which announced the annual statistics on the eve of the day of the builders, St Dimitre’s Day. More than 2400 Bulgarian construction companies have provided information for these statistics.

The largest construction company in Bulgaria is Glavbolgarstroy AD with a turnover reaching 228.9 million levs. Roads Holding is in the second place with 151.7 million levs. It seems unlikely a company building roads to take the first place, as there are no infrastructure projects for the time being.

The growth of the construction industry according to its chamber demonstrated a growth of 16% per annum but this year there will be a slow down. This recession has been expressed in the halting of investment projects and of planning permissions. If the European funding has not been stopped, the construction industry would have maintained its growth.

From The Economist

After a good run, Eastern Europe faces an economic slowdown

IT HAS gone on splendidly for years, and the party isn’t quite finished yet. For a decade or more eastern Europe has benefited from exceptional (and mostly unforeseen) good fortune. Economic and political stability, including for ten countries membership of the European Union, has boosted investors’ confidence and cut borrowing costs. A big pool of cheap and diligent workers, along with the unleashing of entrepreneurial talents, has produced thriving new private businesses. In most countries, growth rates have been stellar (see chart).

Inevitably, it could not last. Wage costs are creeping up. Labour shortages are biting. Out-of-date infrastructure, such as Poland’s notorious roads, is clogging trade. In several countries inflation is rising. And world markets, both for raising capital and for exporting, are looking tougher. In the face of all this, growth this year has been surprisingly strong. That is partly because the euro-area slowdown has only just started; partly because domestic demand has been rising; and partly because intra-east European trade has started to make up for softer exports westwards.

The big exceptions are the Baltic countries of Estonia and Latvia, home to colossal current-account deficits and breakneck growth in recent years. Now their bubbles have popped. In Latvia, for example, retail sales fell in June by 8.3% on a year earlier; industrial production is down by 6.4%. The construction industry has imploded. Inflation remains high at a whopping 17%. For a country with a pegged currency, that is scary. Yet the gloomiest predictions have so far proved unfounded. For example, Latvia has not been forced to devalue. The foreign banks, mainly Swedish, that own most of the financial system seem largely untouched by the credit crunch elsewhere in the world. And there is no sign of the contagion spreading from the troubled (but tiny) economies of the Baltic to the rest of the region.

In the biggest economy, Poland, things look better. Growth in the first quarter of 2008 was a sprightly 6.1% on a year earlier. Many Poles who left to work in Britain and Ireland are coming home, tempted by higher wages. Unemployment, which was 20% in 2003, has all but vanished in most parts of the country. But growth is now likely to slow, particularly if interest rates keep rising: they were 4% in 2007 and are 6% now, with another rise likely. That will strengthen the zloty further; it has risen against the euro. That may be a reason why Poles are returning from Britain, but it hurts Polish exporters.

Critics say the government should now do more to reform public finances, especially pensions, and get big infrastructure projects going, before a contraction in the labour force kicks in during the next decade. That would also improve the country’s chances of joining the euro, which it now seems unlikely to do before 2013. So far, Slovenia has adopted the single currency and Slovakia will do so next year. No other country looks close.

The biggest worry is Hungary, which is the country most dependent on the continuing confidence of the capital markets. A shaky government has done surprisingly well in restoring macroeconomic stability after the near-disastrous spending and borrowing splurge in the early years of this decade. The budget deficit reached a yawning 9.4% of GDP in 2006; Neil Shearing of Capital Economics, a consultancy, reckons it may be down to as little as 3.5% by the end of 2008.

This has come at a heavy price, both in the government’s rising unpopularity and in a near economic standstill last year. The economy has picked up a bit since then, but inflation remains troubling at over 6%. The question is whether the government has the stomach for another round of fiscal tightening. Public spending is still over 50% of GDP, the highest in the region. A further worry is the looming slowdown in the richer half of the continent. The Hungarian economy depends heavily on exports to western Europe, which account for nearly 40% of GDP.

Despite the EU’s worries about corruption and organised crime in its newest (and poorest) members, Romania and Bulgaria, their economies have been growing fast at around 7-8% a year. They are now leading candidates for a hard landing. A property bubble in Bulgaria seems to be on the verge of bursting, though this has still to filter through to the rest of the economy. Yet for now, few seem worried. Having dodged sanctions from Brussels (not fully in the case of Bulgaria), politicians in the Balkans seem to think that defying the laws of economic gravity is a cinch.

]]> http://lmlegalservices.com/blog/archives/94/feed 3 http://lmlegalservices.com/blog/archives/36 http://lmlegalservices.com/blog/archives/36#comments Mon, 21 Jul 2008 08:49:58 +0000 Boyan Yordanov http://lmlegalservices.com/blog/?p=36

The Deputy Prime Minister Meglena Plugchieva and the managers of the National Road Infrastructure Fund and the Ministry of Regional Development and Public Works will divide the remaining 119 km of the highway that need to be completed into lots and will decide how to provide funding for this project. It is expected that the stretch will be divided in three parts and three different companies will complete the highway. The government decided to allocate 120 million levs from the budget’s surplus for infrastructure. However, this will have to pay for three more projects – Hemus Highway, the Sofia Ring Road and Maritsa Highway. The completion of Trakia Highway will cost 300 million levs, while the completion of the Sofia Ring Road will require another 60 million levs.