LM Legal Services Blog

Although that according to the estate agencies, the number of property sales in Bulgaria has increased by 22% in 2011, it must be underlined that this includes the sale of Mall Sofia for 100 million Euros which in fact was about 55% of the investments in the last year. In the last quarter of 2011 the investments in property have reached 186 million Euros which was the highest level since 2008. The Bulgarian market has shown vague signs of recovery but in practice the property prices in 2012 remained the same as last year. The British and the Irish buyers have almost disappeared from the Bulgarian market and the hopes that Russian buyers will enter the market in their place proved to be ungrounded. The property sector is not the major driving force of the Bulgarian economic growth and thus the direct foreign investments are not plenty in it at the moment. This is why the expectations are that the property prices will further decrease by 10-20%.

In the beginning of 2012 the market of rural properties in Bulgaria is slower than in the same period of 2011. This might be due to the exceptionally harsh winter this year. The average price of houses sold in rural areas in the first two months of 2012 is 15 500 Euros. This price for the same period of last year was 18 900 Euros. At the same time, in 2011 there more sales of houses in the 35-45 000 Euros range. The prices of rural properties peaked in 2004-2005 but have fallen six times since then and are now selling at the price levels of 2006. However, now buyers focus on much better rural properties.

In 2011 the main interest was in rural properties in Central Bulgaria and along the Black Sea coast. The expectations are that this tendency will not change in 2012.

Although in comparison with other Central and Eastern European capitals the property market in the Bulgarian capital Sofia is not so profitable at the moment, still in 2011 it has displayed signs of stabilization. In comparison to 2010, there was not much change in the demand and in the properties on offer. The situation in Sofia looked similar to the one in Budapest, Kiev, Bucharest, Zagreb and Ljubljana. However, the experts claim that this is the beginning of stabilization. The volume of the purchases in 2011 has increased steadily and at the same time there was a slight increase in the number of the properties for sale. The decrease of the selling price in the last year has not been so drastic as in 2009 and 2010. However, Sofia is far away from Warsaw and Ljubljana where the average prices were close to 90% of the prices during the property boom years.

The prices of large properties in Sofia have dropped sharply. Only in the area of Oborishte where the most expensive properties in the capital are located, prices have increased by 4% and start at 923 Euros/sq.m. , reaching 4331 Euros/sq.m. At the same time in the affluent area of Lozenets the property prices have dropped by more than 1/5 in the last two years. The lowest price there is of 816 Euros/sq.m. The most serious price drop – of 23% – in the expensive areas of Sofia is in Beli Brezi. More than 700 apartments located in affluent central areas of the city have been put on the market.

The price drop of the properties in Bulgaria stimulated many people to buy properties with the aim to rent them as the price drop of the properties for sale is larger than the drop of the rents. Buying to invest has become a permanent tendency according to analysts.  A property purchased for 28 000 Euros can be rented for 150 Euros per month, i.e. and the annual yield is 6.5%. For the same period last year the yield was 4.5 %.

At the same time rental contracts have become shorter and now landlords are prepared to sign rental contracts for three months instead of for one year.

Purchases are only being made for properties with attractive prices and in affluent areas with good infrastructure. Many Bulgarians have sold the properties which they inherited or properties in a bad condition, so that they can invest in better quality new apartments with good location.