LM Legal Services Blog

According to Credit Centre the most popular mortgage in Bulgaria at the moment is for a plot of land and a prefabricated house. More and more Bulgarians prefer to move in the outskirts of their cities and to build their own house, rather than to buy an apartment in a block, where two-bedroom apartments are in the same price bracket.

Another new trend is the increasing number of customers who restructure their debt, due to the increase of the interest rate. Many Bulgarians face difficulties repaying their mortgages and some even their utility bills. According to Credit Centre in September each sixth credit has been taken to pay old debt.

In general more than 79% of the mortgages are for the purchase of property and only 1.3% for construction.

Another tendency is that for a second consecutive month the average size of the mortgage has decreased to 43 000 Euros, while during the peak of the property boom it has exceeded 50 000 Euros. Customers freeze their purchase or redirect to a cheaper property. The change is more obvious among the most popular customers – the middle class ones – who used to take a 80 % mortgage for the purchase of one-bedroom apartments. Now these clients are seeking smaller apartments and try to pay a large proportion of the price with their own funds.

The assets of the property companies have increased in the first 6 months of this year. 26% of the assets is agricultural land, 20% are buildings and equipment and 17.7%  are off-plan properties. The number of these companies have increased to 68.

The price of the land by the sea has dropped. Because of the high prices of the land by the coast and the refusal of the banks to finance holiday developments, many investors used to accomplish smaller projects according to Nikolay Pehlivanov, the executive director of Green Life. Now they are worse hit by the world recession. Because of failed investment, the banks refuse to finance such projects and that is why the purchase of small plots of land by the sea has stopped. At the moment there is only demand for big plots of land for holiday developments with suitable infrastructure.

The prices of luxury developments have increased by 15% for a year, despite the property slump. After the British clients have pulled out, the small investors are on the verge of bankruptcy. Brits can hardly repay their mortgages and Bulgarian banks refuse to lend them money. That is why many of them lost their properties and their first instalments. Subsequently the investors had to re-sell the apartments. Seaside properties from the lower price brackets now sell for 600 Euros per square metre.

The sales of properties in Bulgaria have decreased for the first time in the last few years, according to the Land Registry. From January to June 2008 there have been 134 891 sales while for the same period of the last year their number was 136 457. The decrease is just by 1.1% but it is a fact. Since 2003 the number of the sales has been increasing by about 20% per annum and this has lead to a constant increase in the prices of properties. At the moment, the buyers are still active in Sofia, Varna, Burgas, Plovdiv and Pleven. The number of sales in these cities has increased, though insufficiently. However, in many regional centres like Shumen, Sliven, Smolyan, Pazardjik, Veliko Turnovo, Vidin, Vratsa and Gabrovo the sales have decreased, and in Ruse and Razgrad this decrease has exceeded 10%. Last year Ruse was the leader in the property price increase which reached 41% but the high prices have put off many prospective buyers.

On the Black Sea coast it seems that the buyers’ activity has moved south. The Land Registry in Nessebar which covers Sunny Beach, St. Vlas, and Ravda reported a decrease of 12.5% for the first half of this year. At the same time the sales in Tsarevo have increased by 50%.

The interest in agricultural land has not diminished at all, according to the activity of the most developed market of agricultural land in the country, which is in the area of Dobrich, Lom and Montana.

Despite this, Bulgaria is still in the first place in the world for the increase of property prices from June 2007 to June 2008. According to Knight Frank the prices of properties in Bulgaria have increased on average by 32.3%.

The Austrian steel producer Voest Alpine have been signing preliminary contracts with land owners in the area of Konstaza in Romania, according to the local press. For some time the company have been looking for a location for their new plant in Bulgaria, Romania and Ukraine. In June, due to the new restrictions on pollution enforced by the Bulgarian government, Bulgaria was excluded from this project which is expected to amount to 7 billion Euros.