LM Legal Services Blog

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.

The collapse of the banks in the West is a serious warning for the future of Bulgarian banks. In the last three-four years, the Bulgarian banks enjoyed enormous profit and record growth levels but the world financial crisis is going to put an end to this.

Almost all Bulgarian banks have started to change their development policy following September, 14.  Almost all plans for the opening of new branches have been frozen. The major problem in the banking sector is the lack of fresh money. The foreign financing has stopped and now all Bulgarian banks have focused on the domestic market to keep their growth. It is expected that a within a year a real war to attract deposits of new clients will unleash and the perks for the clients will include holidays abroad and golden watches.

However the biggest loser will be the business and the ordinary consumer. Many banks have changed their policy to attract new clients and now focus on keep the reliable clients with a good track record. It will be very difficult to get a credit if you are a new company. The price of this will be high for the Bulgarian economy – so far the banks have been the major force of the economic growth.

The index of the producer prices for May 2008 showed an increase by 12.9% since May 2007, according to the National Statistics Institute.  For the same period the increase of the prices of consumer goods is 9.4% and of the investment products is 5.4%, while the highest increase is the one of energy – 24.8%. The inflation of the production on the domestic market is 13.6%, while on the international market it is 11.6%. According to the analysts, this comes to show that the market in Bulgaria is still not completely free, as local producers offer their production at competitive low prices abroad, while at the same they can compensate this by increasing their profit in Bulgaria.