LM Legal Services Blog

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%.

Prices of properties in Sofia and in Plovdiv have dropped by approximately 17% in the third quarter of 2009 in comparison with the same period of 2008. The average real purchase prices of apartments in Sofia are similar to the ones at the end of 2007 and in the beginning of 2008. The prices of properties in the Bulgarian capital have reached their climax in the third quarter of 2008.

The situation is similar concerning office space. In the third quarter of this year the index of the average prices of offices, warehouses and shops has dropped by 26 on an annual basis. The market price of office space has reached its peak in the last quarter of 2008.

In Plovdiv the average property prices are close to the those at the end of 2007 and the beginning of 2008. Their peak similarly to Sofia was again in the third quarter of 2008.

In the last months the highest price of a property purchase in Sofia was 3000 Euros per sq m. This is half of the top prices paid for luxury properties two years ago.  The owners of expensive properties sell them now for two reasons – some experience financial difficulties, others think that with the money from the sale they will make a better investment.  According to the statistics the owners with financial difficulties are only 17% of the sellers and all of them are keen on dropping the price of their property.

Buyers ready to spend about 500 000 Euros are rare and they have a very good choice at the moment. The advertised prices of luxury properties are up to 200 000 Euros for apartments and about 600 000 Euros for houses in the affluent areas of Sofia. The actual purchases are carried out at much lower prices.  Buyers are prepared to pay between 120 000 and 150 000 Euros for a luxury apartment and about 500 000 Euros for a house. At the moment properties offered at prices exceeding 1 million Euros can not be sold as prospective buyers very rarely view them.

Only 12% of the buyers of luxury properties actually buy with the intention to make this property their home. 53% of them think that this is the right time to make a long term profitable investment. The rest have different reasons for buying like increasing the number of children in the family or achieving higher social standing.

According to estate agents the recession on the market of luxury properties came with a delay of about three months, possibly due to the optimism of the people with money. Then it crushed. The property market’s stability of the last months is less likely to cause price increase. This is not good news of owners of luxury properties as they expect to sell within a time limit. The reason for this is that more than 90% of the luxury properties are sold furnished and the furnishing loses its value in time thus affecting the price of the property.

The location of the property continues to be a key factor in the choice of property. The most popular affluent parts of Sofia are still the Doctors’ Garden, Lozenets, the luxury enclaves along Bulgaria Boulevard and the outskirts of Sofia in the south, right in the foot of Vitosha Mountain.

Analysts believe that once the recession is over, the luxury properties will increase in price faster than the other types of property.

In the next four to five months the property price drop in Bulgaria will be much of smaller scale, according to analysts. After that the property market will hit the bottom.

According to the statistics, the property prices in Sofia drop slower in the last months. In February the price drop was of 6.88 % while in August it was 3.84%. The slowing down of the recession can be also seen in the rents . In May the rents in Sofia were by 2.8% lower than in April, while in June they were by 1.9% lower than in May and in July by 1,6% lower than in May.  In the end of August the  price drop was only by 0.6 in comparison with July.

The same tendency can be observed in the other major Bulgarian towns.

The developers in Bulgaria still find it very hard to sell. Those at the Black Sea coast claim that they mainly rely on buyers from Russia who look for finished apartments, positioned right on the sea coast, close to the beaches.

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.