LM Legal Services Blog

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.

The number of new buildings in Bulgaria has dropped by 70% on an annual basis. In the last quarter of 2009 the number of the new planning permissions was 1343,  while in the same period of 2008 they were 2452, according to the National Statistics Institute.  This huge drop has come after 5 years of permanent increase of the number of planning permissions.

The recession in the construction industry  has also had its impact on the size of the new apartments – their living area has decreased by 24% only from October to December 2009 in comparison with the previous quarter. Annually the drop has been more drastic – it has exceeded 70%.

The construction of new offices has also suffered. In the last quarter of 2010 only 63 planning permissions have been issued, which is a drop by 25% in comparison with the previous quarter and 37% on an annual basis. Most of the already finished offices are left empty, despite the decrease of the rents.

The price drop of real estates in 2009 is on average by 20% but in some parts of the country it has reached 60%. The real prices at which purchases are made in the Bulgarian capital Sofia are on average 23%  lower in comparison with the period 2007 – 2008, i.e. the average price in 2009 was 980 Euros/ sq.m.

The price drop in the other cities has not been so drastic but property prices there have not reached the levels of those in the capital. In Varna, the second Bulgarian city, the price drop in 2009 was of 14%, while  in Plovdiv and Burgas (the third and the fourth largest cities) – 15%.

Almost 28% is the decrease in the number of deals on the property market in Bulgaria annually. This number is different in the different parts of the country but only Sofia and Varna have similar statistics. 72% of those who would like to buy a property in Sofia and Varna are prepared to pay not more than 40 000 Euros. In Plovdiv and Bourgas the buyers are prepared to pay not more than 25 000 Euros.

In 2009, 42% of the buyers paid in cash and 37% of the sellers had financial difficulties, not necessary inability to pay their mortgages or bad credits. In 2009 most of the buyers bought newly built properties and only 12 % of them have bought prefabricated apartments. The most active buyers were between 26 and 35 years of age.

The prices of properties on the Bulgarian Black Sea coast have dropped by 15-30% while those of inland properties by almost 70%.

Newly built apartments sell for 390 Euros per sq m. In Sunny Beach there are completed apartments for sale for 20-30 000 Euros, which is below their value.

Properties in the big cities like Sofia, Plovdiv, Varna and Burgas have dropped their prices by 30%.

Some analysts claim that the buyers now come mostly from Russia and the former Soviet republics and that there is no recession on the property market in Bulgaria but just restructuring. The quality properties keep their prices while the low quality ones sell at their real price which is a positive tendency, according to them. The Russians mostly buy luxury properties on the northern Black Sea coast at prices exceeding 250 000 Euros. The interest towards mountain resorts has decreased.

In the first half of 2009, the worldwide recession has had its effect on the market of commercial property in Bulgaria – the number of frozen and delayed projects of shopping centres and malls.

Among the frozen projects in Sofia are Euro Park for 500 million Euros, Sofia Acropolis for 500 million Euros, Tsarigradski Mall (35 million Euros) and GLS Mall. In the country the largest frozen projects are Grand Gallery in Burgas for 35 million Euros, Litos Ibuild in Pazardjik and two shopping malls in Kazanluk.

At the same time GTC has delayed the completion of its three Gallery projects in  Russe and Burgas by 6 months, and in Varna by 4 months.

Since the beginning of the year two bid shopping malls have been completed – Mall Plovdiv and Burgas Plazza with rental area respectively of 20 000 sq m and 26 000 sq m. With them the total area of all shopping centres in Bulgaria has reached 233 460 sq m, an increase by 25% in comparison with the end of 2008. At the end of June 2009 there are 31 sq m of retail space per 1000 people, while in 2008 it was 25 sq m.

At the same time the average decrease of the purchase price of the commercial properties in Bulgaria in the first half of 2009 is of 6.71%. There is also a decrease of the rent of 18% on average for the country. The highest decrease both in purchase prices and in rents is in Sofia and the big seaside towns. The rents in the shopping centres in Sofia have fallen by 25% and vary from 12 to 45 Euros per sq m. The analysts expect a further decrease by 15% by the end of 2009.