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.

By Kevin Rose, The Independent

As property prices fall across Europe, the chance of owning a holiday home abroad may never be better. And with sterling struggling against foreign currencies – touching a six-month low against the Euro on Thursday – it may be wise to get moving sooner rather than later. But where are the bargains?

Latest figures suggest that old favourites France and Spain are regaining their popularity with buyers of holiday homes. But the picture is not so positive for investors wanting a sizeable return on their purchases, with some former European hotspots now looking decidedly chilly.

According to overseas mortgage firm Conti, 31 per cent of the enquiries it has received so far this year have been about property in France, while more than a fifth were about Spain. Clare Nessling, director at Conti, says buyers are sticking to areas they know and trust, and turning their backs on more adventurous territories such as Bulgaria, Turkey and Dubai.

Spain is maintaining its popularity with UK holiday home buyers as prices have fallen heavily due to an oversupply of properties on the market. In some cases, prices in the Costa del Sol have plummeted by 40 per cent since the peak in 2006/7.

That means for those who have always dreamed of buying a place in the sun but been put off by the cost, now is the time to take a look.

The glut of properties on the Spanish market has led one UK firm to launch a service specifically to try and find buyers for “distressed” properties, typically repossessions, probate or part-exchanged properties.

The online property company, whitehotproperty.co.uk, is currently marketing around 4,000 distressed properties in the popular tourist destinations with – in some cases – sizeable discounts. In one example, a four-bed, two-bathroom duplex apartment in Torrevieja has been reduced to €118.400 (£102,068), a 27 per cent discount on the original asking price.

Similarly, a three-bedroom villa with a pool in a tourist hotspot such as the Costas can be bought for €400,000. It would have cost around €650,000 at the height of the market three years ago.

Stuart Law, chief executive of international property investment firm Assetz, puts the British homebuyers’ continued interest in Spain down to its proximity to the UK, its sunny climate and an abundance of sandy beaches.

The addition of relatively low property prices means Brits are in a good position to buy in Spain – so long as they don’t expect investor-grade price rises. With supply outstripping demand, the situation is unattractive to the professional property developer reliant on solid returns over a relatively short period.

Law says: “Spain is a very difficult place to be buying from an investment point of view, particularly if you are keen on covering all of your costs with rent. Oversupply is impacting the rental market and the exchange rate isn’t helping.

“If someone has set their mind on a holiday home that they are not going to rent out then Spain is ideal, and the very problem that would cause an issue to an investor is what is helping push prices down. There is massive choice, and also some very good pricing.”

However, although Spain may have plenty of appeal, the European continental property market as a whole has not yet recovered. The Netherlands, Denmark, Slovenia and Slovakia have all seen double-digit house price falls over the second quarter of the year.

But the leading horror story is Bulgaria. The former hotspot in the Balkans is now a no-go area for lenders and buyers alike, with its land registry data showing that real estate transactions crashed by 35 per cent year-on-year in the first half of 2009.

Land prices in the previously fashionable Black Sea area fell by an average of 40 per cent in the first eight months of 2009 compared to the same period in 2008, according to the International Real Estate Federation in Bulgaria. All of Bulgaria’s major cities and seaside resorts, including Sofia, Varna and Samokov, as well as winter resort Borovets, reported falls in the region of 50 per cent over the same period.

Stuart Law cautions Brits to avoid Bulgaria at all costs. He says: “It’s just horrific; where is the bottom of the market? Our question has always been ‘why would you bother?’ There are so many better places, either closer, nicer or just as cheap. Comparing Spain to Bulgaria… there really isn’t any choice. Spain ticks almost every box and is much closer and easier?”

He suggests that if potential holiday homebuyers want to go further afield, they should consider the US, where some bargains can be found. “Anybody who has ever aspired to own a holiday home in Florida and hasn’t looked recently is going to be genuinely shocked by what they could get. We’ve seen Orlando townhouses in prime resorts at €50,000-€70,000.”

One reason that many are avoiding Europe at the moment is the state of the pound. Over the past two years there has been unprecedented volatility in the currency markets, with the value of sterling fluctuating by over 30 per cent against the euro. The pound currently buys around €1.1, with many currency analysts predicting that parity will occur very soon.

Stephen Hughes, a director of Foreign Currency Direct, fears that sterling is “collapsing”. He argues that currency traders are agreeing on one thing: “sterling is likely to fall fast and far.”

With further falls probable, what should existing or potential European homebuyers do to protect themselves? Mark Bodega, a director at currency broker HiFX, recommends that people looking to buy abroad should consider a “forward contact”. “This allows you to buy currency now and pay for it later,” he explains. “You will need to pay a 10 per cent deposit now and the 90 per cent balance upon the maturity of the contract, but it allows clients to lock into an exchange rate for up to a year.”

Julian Cunningham, from international estate agents Knight Frank, advises British sellers on the continent to reduce their asking prices. He says: “The savvy vendor is passing on any currency gain to the potential buyer in the form of a reduced asking price. But without passing on a certain percentage of that gain to the potential purchaser, it makes it a lot more difficult to do the deal.”

Holiday home heaven: Why France remains number one

It’s not difficult to see why France remains the most popular choice for Brits. Easily accessible by road, rail and air, potential buyers are not solely at the mercy of budget airlines. House prices have remained resilient in France compared to the UK, and mortgage funding is largely more attractive, too.

Nessling says: “In France, lenders have always been a little more cautious. They certainly haven’t taken the extreme view that most UK lenders did. Throughout the credit crunch we’ve still been able to get 100 per cent mortgages in France for loans over €250,000.”

More than four-fifths of mortgages in France are fixed and the majority of all new mortgages are fixed for at least one year. This lending strategy is another reason why the French property market is, on the whole, performing better than in Britain.

Despite a period of house-price falls in the country last year, prices in France actually increased by 3.9 per cent in the second quarter of this year, according to the French National Association of Real Estate Agents.

Stuart Law, chief executive of international property investment firm Assetz, agrees that mortgage lenders in France have kept their criteria largely unchanged, arguing that because they lend based on affordability, an unsustainable boom in prices in France has been prevented. He says: “In the South of France prices have barely wobbled as banks do not think they have substantial risk there.”

More than 70 hotels in the area of Varna, among them 4-star hotels in Golden Sands have been put for sale.  Almost all of the hotels are open and operating, only a few are still being built. The small family hotels are predominating among them. All the sale prices of the hotels are in Euros, 14 of them are above 1 million Euros. The highest price is for an apartment building in Golden Sands and it is 15 million Euros. This development is still under construction and according to the plan it must be a 4 star complex with its own SPA, restaurants, cafes, open air and indoors pools and park. Another 4-star hotel right on the beach in Golden Sands is for sale for 14.2 million Euros, and a 3-star hotel with 232 rooms, SPA and a restaurant with 200 places is offered for 13 million Euros. The cheapest hotel is a 3-storey villa which is being sold for 210 000 Euros.

The highest number of hotels are located in Golden Sands – 17. In St Konstantin and Elena there are 15, in Alen Mak -11 and in Evxinograd  there are 8, while in Journalist – 5. There are some hotels for sale in Sunny Day, Trakata, Manastirski Rid, Borovets and Priboy, as well as in Priseltsy, Byala and Shkorpilovtsy.

The property prices in Bulgaria at the moment are at the real market value according to analysts.  Nevertheless it is still difficult to predict when they will start growing. The most popular property among buyers in Sofia  is the one-bedroom apartment. The areas of Liulin and Drujba offer the best prices now.  The most prestigious area is South Park. For 1000 – 12000 Euros/sq m there the buyers can get a new quality built apartment in a good location. However, most of the estate agents in the Bulgarian capital think that the real market is at prices below 900 Euros/sq m., depending on the quality of the finish.

]]> http://lmlegalservices.com/blog/archives/603/feed 0 http://lmlegalservices.com/blog/archives/584 http://lmlegalservices.com/blog/archives/584#comments Tue, 02 Jun 2009 07:53:31 +0000 Boyan Yordanov http://lmlegalservices.com/blog/archives/584

According to the British estate agents Knight Frank by 31 March 2009 the property prices in Bulgaria have increased by 3,3% annually and in the first three months of 2009 they have decreased only by 1,2%, which puts Bulgaria in ninth place in terms of property price growth.

The information provided by the Bulgarian National Statistics Institute (NSI) shows that in the first quarter of 2009 the property prices have fallen by 12,4% and by 8,4% on annual basis. According to NSI from January to March 2008 the properties in Bulgaria cost on average 1299,9 levs (650 Euros) per sq m. In the first quarter of this year this price has fallen to 1190,7 levs (just under 600 Euros) per sq m. If the information of the NSI is taken into account, then Bulgaria will be in the top ten shrinking property markets.

In the first quarter of 2009 the property prices in 32 out of 46 countries world wide have fallen. The most serious price decrease has been in Singapore, Dubai and Latvia. In Latvia alone the prices of property have been steadily falling in the last two years and only in the last 12 months they have fallen by 36%. In Dubai the prices have fallen by 40% only in the last three months. The short term forecast is that the recession will continue at least until the end of 2009.

More and more ex-pats who have bought holiday apartments on the Bulgarian Black Sea coast have put their properties on the market for sale. They do not have money to pay for the maintenance of their holiday apartments and would like to sell them as soon as possible, but there are no buyers.  Mainly Irish, British and Russian owners have put more than 10 000 properties on the market, all of them located in the stretch from Sunny Beach to Sozopol.

In the Bulgarian cities the tendency is exactly the opposite. There is a growing interest among prospective buyers due to the fact that prices have fallen between 16% and 38% in the first four months of this year. In the capital Sofia the apartments with living area of 50 to 70 sq m are most in demand. The most popular areas are Liulin, Mladost, Dianabadt, Ovcha Kupel, Nadezhda and Zona B17. The lowest price has been registered in Liulin and it is 454 Euros per sq m for an off-plan property.

Estate agents claim that at the moment buyers have much higher expectations from a property. They insist on location close to the public transport and on quality construction work and materials.

The reason for the raising interest among prospective buyers is the fact that banks have started giving more mortgages and there are people who have savings that can pay for at least 50% of the price of the properties. The average size of the mortgage in Bulgaria at the moment is 35 000 Euros, a decrease by 15 000 Euros in comparison with 2008.

Jack Fagan, Irish Times

AROUND THIS time of year, the newspapers are generally packed with large ads for overseas real estate. That has been going on for over a decade but, in recent years, Bulgaria and other former Eastern Bloc countries have been particularly active in targeting Irish buyers who had a reputation for being big spenders during the Celtic Tiger years.

These overseas property ads are rarely, if ever, seen any more simply because Bulgaria’s real estate boom has turned to bust and Irish and UK buyers are fleeing due to rapidly falling values and the rising number of uncompleted developments.

Other former Eastern Bloc countries are suffering the same fate.

Bulgaria became a particular favourite for many Irish investors because holiday homes were frequently available at half, or even one-third, of the price of similar properties on the Costa del Sol. Attracted by unrealistic promises of exceptional returns, Irish investors had no hesitation in borrowing heavily to buy cheap buy-to-let homes.

Dublin mortgage agents say that, because of the refusal of Irish banks generally to fund property investments in Bulgaria, many purchasers released equity from their homes or Irish-based property investments. Others used hot money in the belief that the Revenue had enough on its plate in tracing second homes and investments in Spain, France, Portugal and other popular destinations without traipsing through the former Eastern Bloc.

“A great deal of the money invested in Bulgaria never appeared on the radar. It would be hard to trace,” says one of Dublin’s largest mortgage lenders.

Tom McGrath, a Dublin solicitor specialising in the overseas residential markets, says that a combination of naivety and greed led many Irish people to buy up to five properties in Bulgaria with the intention of “flipping” them on before they were completed to make a profit.

Any number of estate agents had recommended this as a fool-proof way of making money but the reality was different and they have been left “with properties that they do not want, cannot sell and cannot afford to complete on”.

The market in Bulgaria is over-supplied and pretty well on the floor. Real estate agencies say that at least one-third of the 2,200 foreign-owned holiday flats in Bansko – one of the country’s top ski towns – are on the block again, often at half price.

One media report has suggested that some Black Sea hotel owners have offered their debt-laden businesses for sale for €1 – grim news for tourism, Bulgaria’s top foreign investment sector.

The property market in Bulgaria, like Ireland, has had a hard landing. Construction firms have been laying off workers and, with bank borrowing getting more difficult, many developers are finding it increasingly hard to complete schemes.

McGrath says that promises of guaranteed rent from developers are often unfulfilled and these properties were overvalued in the first instance to take account of this arrangement.

Investment in the property sector, which accounted for 30 to 40 per cent of GNP in the past few years, brought an immediate profit, says local economist Tihomir Bezlov: “Real estate for Bulgaria was like oil and gold for other countries.”

The same could probably be said of Ireland but, unlike Bulgaria, there was never any suspicion here that the industry was being used to launder money from criminal proceeds.

Bulgaria’s authorities have admitted they cannot prove where the money that fed the boom came from. Could some of the proceeds of the Northern Bank robbery in Belfast in 2004 be in the Black Sea? There’s a thought.

The estate agents expect a real drop in the number of purchases of holiday homes at the Bulgarian Black Sea resorts. Some expect a decrease of 20%, others a much higher drop of 40 – 50% in comparison with last year.

If in previous years most of the buyers were British, now it is expected that the market will be 100% Russian. However, the devaluation of the Russian Ruble means that despite that fact that Bulgaria is one of the most popular destinations for the purchase of second homes, it is likely that the property market will shrink by 40%. Some estate agent even think that the boom of the Russian market was last year and this year the results will be less encouraging.

Property prices of holiday homes at the Black Sea have dropped by 20% and for the new season and now they start at about 650 EUR per sq m.

The mortgage applications in Bulgaria have increased by 20% in April in comparison to March 2009. They are mostly young professionals who work for foreign companies and have good incomes. They would like to take advantage of the good prices and think that it is worth paying higher mortgage interest. Most of them have savings which can pay for 50% of the price of the property that they would like to buy and answer to the stringent requirements of the Bulgarian banks which do not lend higher than 50% mortgages.

In connection with this and with the decreasing property prices, the average amount of the mortgage in Bulgaria has fallen down to 35 236 EUR, levels typical for the summer of 2007.

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 number of purchases of property in Bulgaria is expected to increase in the summer according to analysts. However, there will be no growth unlike the last two years due to the lack of fresh money and the stricter rules for lending of the Bulgarian banks. The prices of properties in Bulgaria are expected to decrease by further 15% by the end of the year.

Despite the financial and economic crisis, the market of agricultural land will stay relatively active in 2009 but the prices will fall, according to the Bulgarian Deputy Agricultural Minister Svetla Bachvarova. In her annual analysis of the agricultural land market she said that there has been an increase of more than 21% of the market in comparison with 2007. The average price of the deals in the last year has been 312 levs per 1000 sq m, according to the System for Agricultural Market Information. This is an increase of almost 33% of the market values in comparison with 2008. The prediction for this year is that they will fall to 280-300 levs per 1000 sq m. The differences in the prices for the different regions of the country remain. The lowest prices are in the area of Lovech and Pernik, relatively 201 lv per 1000 sq m and 140 lv per 1000 sq m. The highest prices are in Dobrich – 546 levs per 1000 sq m.
In 2008 for the second consecutive year the highest number of purchases of land took place in the Northern Central area.
There is a decrease in the renting of agricultural land. This was due to the fact that in 2008 and 2007 a larger part of the tenants have signed long-term contracts for more than four years with the land owners.
The regulation of agricultural land has decreased in the last year by 20% in comparison with 2007. The reason is the decreased interest for investment in tourism.
In 2009 it is expected that the area of the land for growing agricultural production will stay the same and only the land used for growing wheat will increase by 10%.

The Bulgarian ski resort Bansko was a typical example of the “hot market” in Easter Europe. Now, the small town is an example for the exactly the opposite.
The balloon has burst and the market of holiday properties in Bulgaria has collapsed. With this, sank the dreams for fast returns of many investors who have poured money into the region. Bansko is an emblem of the end of the hot market of holiday properties in the region. Most often the investors in the region are Brits and Irish who relied on the rental market or on the sharply increasing prices. The locals have earned some cash by selling their land, but the charm of the small town with small houses and narrow streets has disappeared forever. Now there are huge hotels and the roads are either made wider to cope with the traffic or are under construction. The holiday property market has suffered more than any other during the recession. The number of purchases has decreased by 10% at the end of the last year. The property boom in Bulgaria started in 2002 and the pivotal points were Bansko and some Black Sea resorts like Sunny Beach.
Now, when the market has collapsed, the biggest advantage of the situation take investment funds which buy properties in great numbers in the resorts at low prices and wait for the market to recover, the buyers to return and the prices to start going up again. There are buyers who are not so happy. Many British owners who bought their apartments at the Black Sea a year ago at prices exceeding 1000 Euros per square metre are ready to sell them now for as little as 500 Euros per square metre.

By Anna Mikhailova, The Times

When Maryla Guzinska, a housewife from the Isle of Wight, read an article in a national newspaper extolling the virtues of property on the Estonian riviera, it seemed like a sound investment. In June 2005, she put down a deposit of £10,500 on a two-bedroom villa in Parnu, the seaside “summer capital” of the Baltic state, and was told her new holiday home would be ready by the end of the next year, when the remainder of the £42,500 sale price would be due.

Churchill Properties Overseas, which was building and selling the villas, assured Guzinska that her home would double in price in the 18 months or so it would take to build, thanks to the property boom under way in the former Soviet republic. Guzinska, 49, believed them – not least because the company was based near her on the Isle of Wight. When she went to the office, the salesman was “professional and well spoken” (even if, in retrospect, she recalls that he never looked her in the eye).

The completion date came and went, however, and in the months that followed, Guzinska was repeatedly told that her home on the Churchill Village development had been delayed.

Then, last July, she received a letter from Churchill Innovative Solutions – as the company appeared to have renamed itself – saying that it had been put into “voluntary liquidation”. Guzinska began to doubt that she would ever see her £10,500 again. “I was hoping to buy something that would be an investment and a holiday home,” she says. “Now I’m on a debt management programme.”
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Gary Fensome, a company director from Luton, has also lost hope of recovering the £12,000 he invested in a one-bedroom flat in the same development. “I’m furious and I want my money back,” says Fensome, 48. “When Churchill showed me the site in 2006, it looked lovely. It all sounded reputable. But for the next year I had to keep chasing them for receipts, then it emerged that nothing was being built.”

Churchill – which had a local office in Parnu, but sold its off-plan log cabins and villas largely to British customers – is not believed to have obtained planning permission for Churchill Village or for two other developments in Parnu, Audru Golf and Parnu River (although it appears to have received it for a fourth one). As a result, no building work had started on the land, even though Churchill gave the impression to investors that the projects were in full swing.

In the meantime, hundreds of investors are left wondering what has happened to their deposits, which total more than £1.5m. Hampshire Constabulary confirmed that two men, aged 40 and 44, were arrested on suspicion of theft in August and November last year, respectively, and released on bail until this August. No charges have been brought. They are thought to be Paul Wade, 40, and Karl Goldthorpe, 44, both directors of the company.

In an attempt to recoup their losses, 120 of the investors have signed up to the Action Against Churchills group (actionagainstchurchills.blogspot.com), founded last summer, but are frustrated at the lack of progress. “We’ve given up hope of getting our money back,” says Guzinska’s husband, Clive Bowley, a spokesman for the group, who separately invested just over £14,000 in another Churchill villa. “Lawyers tell us it will cost £100,000 to fight our case, so it’s out of the question.” Churchill – which has no connection with the insurance company of the same name – did not respond to requests for comment from The Sunday Times.

Estonia is not the only place where Britons have seen hopes of easy profits turn to dust. During the boom years of this decade, property abroad – once the preserve of the wealthy – became all too accessible for anyone with a few thousand pounds for a deposit and, ideally, a UK home from which to withdraw equity. Teachers, civil servants, social workers and academics all piled in. It was, in the words of salesmen, a “no-brainer”: you put down a deposit on an off-plan flat, chalet or villa, then sat back and waited for the profits to roll in.

Since the credit crunch struck and world economies hit the buffers, however, the laws of gravity have come back into play with a vengeance. It is not just that many buyers have seen the capital gains on which they were counting turn into losses as property prices across Europe – and beyond – continue to spiral downward.

More serious is the impact that the downturn has had on the developers who were meant to be building those homes. Many have run out of money, leaving properties unbuilt and developments as little more than ghost towns. In other cases – such as that of Churchill Properties Overseas – there are doubts as to whether they ever intended to build anything in the first place.

John Howell, senior partner in the International Law Partnership (ILP), which specialises in overseas property purchases, says he has seen a fivefold increase in the number of clients with problems over the past 12 months. In the same period, the number requiring conveyancing has dropped by 70% as sales have plunged. “Developers are either going bankrupt or the development is not as specified,” Howell says. “One of the first things that happens when developers are in trouble is that they start stripping back on expensive items.”

The problem, he says, has been especially acute in the “emerging markets” of eastern Europe, whose economies – until recently the most dynamic on the continent – have been hit hard. Matters have been made worse by the way in which some local developers teamed up with foreign estate agents in the hope of selling to gullible foreigners at inflated prices.

“In places such as Bulgaria, everybody wants to become a developer, and as well as illegal building, you get oversupply in a market that is always going to be a marginal one,” Howell says.

ILP is representing a number of clients who bought property from Bulgarian Dreams, a London-based estate agency that folded last year, but have yet to take possession of their homes.

Founded and owned by Robert Jenkin, a Cambridge graduate, and his Bulgarian wife, Mariya Georgieva, the company sold flats and houses at more than 40 developments in Sofia, the capital, in ski resorts such as Bansko and Pamporovo, and on the Black Sea coast.

A message on the Bulgarian Dreams website says that the company has ceased trading “following the extraordinarily difficult economic conditions” and suggests those who bought property through it should contact the Bulgarian developers directly.

One of the three companies it names is Interlink BG, of which Georgieva was a “manager”. Jenkin insists, however, that the position did not give his wife similar powers to those of the director of a British company, and says she took it merely so she could “have better access to information regarding the developments”.

Bulgarian Dreams is being investigated by the City of London Police Economic Crime Department. “We have received a number of complaints about Bulgarian Dreams and have begun an investigation,” a spokeswoman says. She confirmed that the company closed its Moorgate offices at the end of 2008, but could not comment further.

Indy Gill, 45, an accountant from Nottingham, and his wife, Kim, 44, who runs a nursery, are among those ruing the day they invested in Bulgaria. In 2005, he says, he paid Bulgarian Dreams a £15,930 deposit on a £55,000 penthouse flat in the first phase of the Windows to Paradise complex in Balchik, on the Bulgarian Black Sea coast, which was due to be completed in December 2006.

Early in 2007, having heard nothing, Gill says he contacted Bulgarian Dreams and was told that, due to planning problems, the top floor of the building, with the penthouse, would not be built – and he would instead be given a flat in the development’s third phase, due to be completed a year or so later.

Then, this year, he received a letter from Bulgarian Dreams informing him that it was no longer acting as agent for the development – and told him to deal directly with Interlink BG instead. Despite sending the Bulgarian-based company repeated e-mails, Gill has heard nothing, and says he fears work has not even started on the third phase in which his flat is meant to be. “We’ve got absolutely nothing to show for our money,” says Gill. “I’ve resigned myself to losing my £16,000, but my wife still wants to do something, so we are trying, though a Bulgarian lawyer, to recover our money.”

In a statement to The Sunday Times, Jenkin insists his company is working with Bulgarian developers to resolve problems with projects in the country with which it has been involved. “If any delays or issues exist with a development, they are due to the current economic conditions affecting all of the property industry,” he says.

Most of the investors who have lost out in schemes in Bulgaria, Estonia or elsewhere put their money into projects that seemed completely above board and were, in some cases, recommended by independent financial advisers. In retrospect, however, some buyers appear to have been simply too trusting – especially when developments were being sold by British-based agents.

“A lot of people never took legal advice, never got an independent valuation or never checked the deeds,” says Simon Conn, technical consultant to Conti Financial Services, which specialises in overseas mortgages. “Many overpaid for their property even before the credit crunch struck, and now these homes are worth even less.” In many cases, Conn says, buyers took advice from a lawyer recommended to them by the developer. Others made the mistake of signing an “English version” of their contract rather than obtaining an accurate translation.

Nor is it just in eastern Europe that things have gone wrong. Hundreds of Britons are reported to have lost money in an alleged £24m housing scam in Orlando, Florida. This month, court documents were filed in America on behalf of a class action against the Superior Homes & Investments estate agency, accusing the company of defrauding customers by taking payments for homes that were never built. More than 500 people paid deposits of up to £217,000.

In Calabria, southern Italy, meanwhile, British and Irish investors have run into difficulties with properties they have purchased. One of the biggest developments in the region, the Jewel of the Sea, was blocked for environmental reasons. Last month, 120 illegally built flats, valued at a total of £28m, in the Santa Venere and Marinate resorts at Vibo Marina were sequestered by police. The El Caribe scheme, where 90 investors have paid deposits totalling £4m, was due to be completed in May, but work has not started.

Then, of course, there is Spain, where a mixture of collapsing property companies, arbitrarily implemented government rules, and out-and-out fraud have put paid to the property dreams of many British buyers.

Last year, Spanish police broke up For-tuna Land, an organisation they claimed had cheated foreign investors, predominantly from Britain and Ireland, out of £61m. As many as 2,000 people are believed to have lost money – some as much as £500,000 each – after investing in the developments in Andalusia.

Others, such as Paul Sibley, 45, an electrician from Luton, have been caught out by the collapse of Martinsa-Fadesa, one of Spain’s biggest developers, which filed for court protection from its creditors last year.

In 2005, Sibley put down a €119,000 deposit on a €400,000 villa on the La Oliva Golf development, near Corralejo, in the north of Fuerteventura, one of the Canary Islands. Although the property was already built when he paid his money, the golf course was not, and problems in obtaining a licence for the course, compounded by the discovery of an archeological site, delayed completion. Then, in the middle of last year, Martinsa-Fadesa went down.

“Work stopped before they finished the access road and the mains water connection,” Sibley says. “I would consider completing without the golf course, if the price was reduced enough, but not without access and water.”

Sibley hopes that the administrators will make finishing the development a priority for Martinsa-Fadesa. If not, his money could be tied up for years. “We decided to invest because the developer was the biggest in Spain, listed on the stock exchange – a blue-chip developer,” he says. “It should have been one of the safest.”

Anna Micklewright, a senior NHS purchasing manager from Cheshire, paid a 30% deposit of €39,000 in January 2006 for an off-plan two-bedroom semidetached house in Jumilla Golf, Murcia. Then, last May, the developer, Herrada del Tollo SL, was obliged to seek voluntary protection from its creditors. Although companies can recover from administration, this is difficult at the best of times – let alone during the current economic conditions.

“The administrators are now in charge, but millions of euros that the developer took in deposits seem to have disappeared,” says Micklewright, 33, adding that under Spanish law, those deposits should have been ring-fenced. “It’s a disaster for hundreds of British buyers who have lost their savings. It is especially tough on those who moved out to Spain to live in rented accommodation provided by the developer while waiting for their retirement homes. They have been evicted.”

“Some 95% of the buyers at Jumilla Golf don’t have a bank guarantee, even though many were told that they did, and they only found out they didn’t when the developer went into administration,” Micklewright says. In her case, she says, they insisted on – and obtained – a guarantee from a bank called Banco Pastor, but were not sure whether this would mean they would be compensated.

Micklewright has complained to the Foreign Office, her MP, her MEP and the Bank of Spain. “In Spain, developers and banks announce that they are not going to honour contracts, and lawyers just shrug their shoulders,” she says.

While the property prices in Bulgaria fall, the business of letting luxury properties flourish. The rent of luxurious apartments range from 400 to 2000 Euros per month, depending on the quality of the interior. The rent of luxury villas in the beginning of the Vitosha Mountain can reach up to 11 000 Euros per month. Estate agents expect that the rents of luxury properties, especially if they are located in and around Sofia, will steadily increase during the recession. Such properties are often rented by Bulgarian emigrants who come back to Bulgaria to work for large international companies, foreign diplomats and Hollywood stars who shoot films in Bulgaria. The properties fetching the highest rent are located in the central parts of the city, close to all administrative centres and institutions. When they are vacated, they do not stay long on the property market but are rented again within 2-3 weeks. Very often luxury villas in the outskirts of Sofia are rented by people with good incomes who have homes in Sofia but need a high quality property for a short term for their guests.

Some analysts predict further 15% decrease of the property prices in Bulgaria. However, they do not expect prices to drop before the value.

The advise of the experts is to buy apartments now, while buyers of office and industrial space will have to wait for another 2-3 years for price to fall further down.

The number of purchases in the first three months of this year has fallen three times in comparison with the same period last year.

The real increase of property prices in Bulgaria for the last year was 2.25% according to the Global Property Guide. This puts the country in the fourth place for price increase among 32 property markets across the world. In 2007 the nominal property price increase in Bulgaria was 19.68%. The United Arab Emirates hold the first place for 2008 with a price increase of 40.86%. Shanghai in China is in second place with 4.83% and Switzerland is in third place with 4%. Nominally, without taking the inflation into account, Bulgaria is in second place with a price increase for 2008 of 11.72%.

The property market in Bulgaria showed a decrease of 5.31% taking the inflation into account or nominally 4.15% in the last three months of 2008.

In the last year the property prices have increased only in eight of the 32 countries taking part in the survey, while in 20 there has been a decrease when compared with the inflation. In 2007 the situation was strikingly different – only in six of the countries there was a price decrease, while in 24 there has been an increase of the property prices.

Russians buy hotels on the Bulgarian Black Sea cost for peanuts. They hire estate agents to look for cheap property, mainly hotel owners who are on the verge of bankruptcy or developers who cannot complete their projects. They also buy already developed projects for holiday resorts which have been denied financing from banks. About ten very good purchases at attractive prices have been completed since the beginning of the year. Most of them are for about 500 Euros per sq m. The jewel in the crown is a four story hotel in Svety Vlas the area of which exceeded 1000 sq m. The hotel sold for 300 000 Euros. The Russians invest their money in Bulgaria in order to save them, as the trust in the Russian banks have sharply decreased over the last six months.

The price of apartments in the northern and western parts of Sofia have dropped seriously. According to analysts there are two major tendencies in the property prices in Sofia. On the one hand, only people who need home urgently buy at the moment, and on the other, only people who urgently need money sell.

The other type of buyers are those who would like to invest in property at a much lower price (up to 20%). The rest wait to see how the market will develop.

In the southern parts of Sofia, where traditionally the demand is great, properties sell at not more than 15% lower prices than the advertised ones. The prices are in the range 1050 – 1250 Euros per sq m.  Very good properties with excellent location and feature, previously unavailable, are now on the market. In these areas there are purchases and there is no stalemate. Analysts advise that now is the time to buy because bargain prices can be negotiated.

The central parts of Sofia keep high prices between 1100 and 1700 Euros per sq m. However, the offers in the range 3000 – 6000 Euros per sq m have disappeared and purchase prices do not exceed 2000 Euros. In the high class central parts of the city the prices have not decreased by more than 5%, while the decrease in the other parts of Sofia is about 20%.

In the other parts of Bulgaria, in the popular among British buyers area of Veliko Turnovo since the last months of 2008 there are no expensive properties on the market. There is a great number of newly built houses in the neighbouring villages. Many Russians bought houses in the low price bracket recently. Apartments in Turnovo sell from 350 to 700 Euros per sq m, a drop of 10 %.  Newly built apartments range from 380 to 520 Euros per sq m – a price drop of 20 – 70 Euros.  The property professionals claim that now is the time to buy period houses in Veliko Turnovo. They are always in great demand but now investors can get a real bargain.

There is a big difference between the property prices officially declared on the Bulgarian market and the willingness of the buyers to pay them. The drop of the number of purchases of property in the last months of 2008 has lead to a new tendency – the buyers dictate the situation on the property market.

According to the official information in the last year Bulgarian property prices have increased by 22%, which has been wiped out by the decrease of the demand for properties by 20% for the same period.

From the beginning of 2009 there is a new trend – the higher proportion of the purchase price  the buyer can pay without a mortgage, the higher reduction of the final price he will get. January 2009 was the first month without foreign participation on the Bulgarian property market. There were no buyers from abroad – neither Bulgarians, nor foreigners.

Due to the recession, renting has become a more popular option than buying. The lack of stability and the uncertainty have forced people to avoid long term bank loans.  At the same time those who have bought a second home have started renting it and the properties for rent have increased by 20%. The highest increase in the number of the rentals was in Rousse – of 31% – while in Blagoevgrad this increase has been the smallest in the country – only of  5%.

In comparison with 2007, the highest increase of the property prices was in Plovdiv – 32% – where the average price in 2008 was 756 Euros/sq.m. The capital Sofia was in second place with increase of 30.13% and an average price of 1087.33 Euros per sq. m. Veliko Turnovo and Rousse share the third place with 27%.

The newest hit on the property market at the Black Sea is three properties for the price of two. The developers have been experiencing serious problems with finding buyers, so they came with this new offer. In the recent months they have been offering free air-conditioners or fitted kitchens but this did not help to activate the property market. Now, the prices of all properties are not fixed. Prospective buyers receive only description of the property they are interested in. Bargaining is the name of the game and once there is interest price start dropping by 200 or even 5000 Euros and some times they even reach a 50% decrease of the initial price.  Luxurious properties right by the sea in Nessebar are offered with a brand new Toyota Yaris as a bonus. However, 2000 Euros per sq.m. do not seem to justify such kind of bonus.

When prices are announced they are very reduced in comparison with last year. A studio apartment in Albena is offered for 18 000 Euros, while one-bedroom apartment facing the sea is for sale for only 10 000 Euros.

The most luxurious apartment is in an apartment complex in Tsarevo. It is offered for 5.5 million Euros off-plan as the complex will be completed in 2011. The buyer of this property will receive the most expensive car at the moment Bugatti Veyron as a bonus.

The number of property purchases in Bulgaria has decreased by 40% in 2008 in comparison with 2007, and in the mountain ski resorts like Bansko, Pamporovo and Borovets it has reached a decrease by 80%, while at the Black Sea cost it is significantly less – by 30%.  This has lead to a price drop and in the resorts currently there are very cheap properties on offer.

At the same time in Sofia the decrease in the number of purchases is 33%, while in Plovdiv it is 50%. The smallest decrease is in Vidin, where it is only 15% in comparison with 2007.

This is mainly due to the recession in the last three months of 2008. Until October 2008 the purchase prices have been on average 26% higher than the ones in 2007.  The the market virtually went dead and it has not been possible to make real statistics of the prices, in some cases prices were 20% lower than in 2007.

It is expected that the average price of properties in Sofia will drop by half. Six months ago the middle class apartment used to sell for 1300 Euros per sq.m., while now it sells for 1000 Euros per sq.m., but there are only a few buyers on the market. This trend suggests that within six months the prices will fall to 800 Euros per sq.m. At the moment this is the price for an off-plan property in the up-market Manastirski Livadi district.

The panic due to the global financial crisis, the outflow of foreign investors and the high mortgage interest rate by all means shall have a long term effect on the property market. It is expected that alongside the falling prices, the quality of the construction and of the finishing will increase due to the competition. Completely finished apartments are already on offer and it is expected that developers will come up with new customer orientated payment plans.

Thousands of newly finished apartments remain unsold in Sofia. Developers try to negotiate with potential buyers and offer different incentives only to sell their properties. Many of those who bought as investment try to sell their properties with a small profit or without a profit, just to get their money in cash. They even offer higher commissions to the estate agents in order to sell. The few buyers on the market tend to wait longer before making a purchase and expect to receive more for their money.

Despite the financial crisis, the property prices in the suburbs of Sofia have been constantly increasing due to the migration of people from smaller towns and villages who seek employment in the capital. In the last year, more than 30 000 people have relocated to Sofia, while 12 000 people have moved to Varna, the second largest Bulgarian city. The same tendency can be seen in Plovdiv, Russe and Burgas. The newcomers to the cities usually look for cheaper properties in the suburds. As result the prices of apartments in those areas keep rising. The average porperty price in Sofia is 1094 Euros per square metre, while in the county it is 588 Euros per square metre. The studios seem to be very popular and their sales have increased by 17% in the last months. At the same time the demand for one-bedroom apartments have decreased by 28% and of larger apartments by 3%. Most of the sales are of newly built properties.

Office and retail rents fall and will keep falling in the next two years according to Raiffeisen Property. In short term the office space on offer will outnumber the demand. The same tendency is valid for retail space, as only in the next 2.5 years it is expected that the retail space will increase eight times.

Meanwhile the interest of investors is expected to decrease due to the world crisis which has hit the property market. As result the secondary market will become rather active.  Those who bought property as investment will rush to sell it. The demand will be focused mainly in the cities. The prices of high quality residential property will rise in expensive city areas.

In the mountain and sea resorts there are too many properties on offer. In the end of 2007 there were more than 80 000 newly built properties there, while currently there is demand for about 65% of them.

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.