According to analysts the prices of apartments in Bulgaria will not decrease further. The experts refer to the prices of actual purchases, underlining that the advertised prices sometimes are unrealistically high. There is already are a mismatch of the demand and the properties on offer. The most desirable properties have sold and there is a lack of good quality homes. At the same time developers can not launch new projects because there is no financing. The off-plan sales have completely stopped. Some experts recommend that the properties prices in Bulgaria should not be calculated per meter, as this can some times lead to confusion.

Analysts expect that 2012 will be again the year of the buyers. Most buyers will be first-timers. The hope is that those who have savings or free money will be bold enough to spend them on properties because of the attractive prices.

The property prices in Bulgaria will continue to fall in 2012, however the analysts do not dare to give forecasts about the amount to which the prices will drop. The expectations are that the buyers and the tenants will dictate the property prices. Most of the buyers of holiday apartments and houses will be Russian, while the buyers of all other types of property will be mostly Bulgarians.  The expectations are that in 2012 cheap properties not exceeding 55 000 Euros will be in demand.  Although the number of the property sales in 2011 has increased by 30% in comparison with 2010 unlike a year ago, now the buyers are spending mostly on cheap properties.

Concerning the survival of the construction companies, the European money will be of prime importance for many of them.  In just one year the income of the construction industry has shrunk from 11.7 billion levs to 9.9 billion levs in 2011. Big companies will focus on the construction of apartment buildings and private investors will commission them for the construction of individual buildings. The construction of big shopping centres will continue.

The money from the European programmes will be spent for the reconstruction of hospitals, schools and cultural monuments.  The greatest amount of the European money will go for the development of infrastructure.  Some of these projects have to be completed in 2012.

The Mail On Sunday, 20 November 2011

A group of Britons who faced arrest and threats of violence during a two-year dispute over the ownership of flats they had bought in a Bulgarian ski resort have finally won their case.
The 70 investors have gained access to the apartment block in the former Communist state as well as securing the title deeds to their flats, which they had purchased for £6 million.
The resolution of the dispute is considered so significant that Britain’s most senior diplomat in the country will attend a party next weekend at the All-Seasons leisure complex in the town of Bansko, 120 miles south of the capital Sofia.
The owners were denied entry after an influential local businessman took over the entire development and refused to hand over the keys.
The Britons staged a mass break-in to seize possession of the block but in a series of court cases their pleas for justice were ignored.
Financial adviser Paul Hassall, from Horsham, West Sussex, who was arrested twice by Bulgarian police during the campaign to get the flats back, said: ‘The British Consul says this is the first time a group of British victims of property crime in Bulgaria have united and won their case.’

The number of property sales in Bulgaria has increased for a third consecutive quarter in comparison with last year – 54 997 sales in comparison to 46 968 sales in the same quarter of 2010. The total number of the property sales in 2011 so far is 157 273, while in the whole of 2010 they were 182 376.

The internet statistics of Yandex, the Russian equivalent of Google, show that the Russians used the phrase “property in Bulgaria” in their online searches and Bulgaria was topping the list of their searches of properties abroad.  This is not surprising as the Russians have bought more than 200 000 properties in Bulgaria in the last four years.

The prices of apartments in Sofia have decreased by 1/3 since 2008 due to the recession. If four years ago a one-bedroom apartment in the Bulgarian capital could sell for 78 302 Euros on average, at the moment it sells for 54 073 Euros. Only in the last year the prices have dropped by 9,78% .

However, according to the Land Registry, the total number of the sales in the first half of 2011 was only 102 276, in comparison to 73 867 sales in the same period of the last year. This is an increase of 27,78%. Most of the sales, about 25%, have taken place in the biggest Bulgarian cities: Sofia, Plovdiv, Varna, Burgas and Stara Zagora.

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%.

In 2009 the Russians have spent 11.3 billion USD to buy second homes abroad, according to the review of the department for properties abroad of the Russian estate agency DOKI. Properties in Bulgaria are the most popular among Russians and 21% of the clients of the agency have been interested in buying second homes in Bulgaria for the average price of 42 000 Euros. In second place are properties in Spain, where 17% of the clients of DOKI are prepared to pay on average 178 000 Euros. In third place are properties in Turkey at an average price of 50 000 Euros which attracted the interest of 12% of the clients of the Russian agency, closely followed by properties in the USA and Israel.

Another Russian estate agency MIEL – Distant Property Management revealed similar statistics. Again properties in Bulgaria are the most popular ones among Russians, followed by properties in Turkey, Spain and the Ukraine. This estate agency has divided their clients into three groups. The first one consists of young people under the age of 35 who buy studios and one-bedroom apartments in the price range 25 -70 000 Euros. They prefer Bulgaria in first place, followed by Egypt and The Czech Republic.

The second group are married couples at the age of 35 – 45. The look for one- or two-bedroom apartments for the price of 70-80 000 Euros in Monte Negro, Bulgaria, Spain, Germany, Italy and Turkey.

The third group consist of wealthy people above 45 who spend at least 250 000 Euros. They do not have specific preferences about the location of their property.

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.

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.

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.”

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.

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.

The average decrease of  property prices in Bulgaria is by 23% in the first six months of 2009. There are areas of the country and especially cities where due to  overpricing, now the decrease is exceeds 30%. The expectations of analysts are that by the end of the year prices will decrease further by 5% to 15%.

The most significant price decrease in the capital Sofia where the prices of newly built developments in the area of Obelya have dropped by more than 40%. The lowest price drop is in Student Town – by only 10%. In the affluent Lozenets and Iztok where the price exceeded 2000 Euros/sq m in 2008,  now there is a decrease by 1/3. The decrease is similar in Liulin and Ovcha Kupel. In the down-market Banishora the lowest price of newly built apartments is 390 Euros/ sq m.  The lowest prices are in the southern and the eastern parts of the city because there many apartments have been bought off-plan as investment and now they have been completed and put on the market.

In the first half of this year buyers preferred mostly one-bedroom apartments not exceeding 50 000 Euros per sq m.  In the last month two of every ten buyers have purchased in the end a bigger and more expensive apartment than planned in the beginning due to the lower prices.  The number of owners who sell their property to buy a bigger one has increased, as the difference in the price is lower than ever.

In most cases buyers used their savings for the purchase of a property, while 44% of them have taken small mortgages or even consumer loans. 32% of the buyers who took mortgages have problems repaying them regularly but only 17% of them cannot repay their mortgage at all.

Village houses with big yards sell even under their value around Veliko Turnovo, Pernik, Sliven, Haskovo and Yambol, as owners just want to get rid of them. In smaller towns the purchase of property is rarely for the purpose of investment but mainly it is in case of change of the marital status and the recession is felt stronger on the property market. Unemployment is growing faster and first time buyers are very cautious.

The construction of new apartment buildings, offices, shops, roads and others has decreased by 11% in May 2009 in comparison with April 2009, according to the information of the National Statistics Institute based in Sofia. The sharpest drop is in the number of the new apartment buildings closely followed by infrastructural projects. In comparison with May 2008 the volume of construction has shrunk by 15%. This drop is due to the much smaller number of new apartment and office buildings and new shops.

It is expected that the prices of apartments in Bulgaria will reach a new bottom at the end of this year and in the beginning of the next one.  The analysts predict that the further decrease will be moderate and will not exceed 10%.  The property prices will stabilize in the first half of 2010.

So far this year apartment prices have slumped by 10% on average and the highest drop is of apartments in prefabricated blocks from the days of socialism – 12%.  The lowest drop is of finished new properties – by only 4%.

The highest decrease of the property prices in Sofia has been in the top notch areas of the Doctor’s Garden (by 33%) and in Ivan Vazov (by 17%)

Many new construction projects situated beyond the ring road of Sofia and in Manastirski Livadi have been put on hold due to the recession. At the moment all off-plan purchases have stopped.

The construction of two new shopping malls in Sofia have been stopped – Europe Mall and the Mall of the Spanish company Riofisa. Currently the rent of commercial space in shopping malls have fallen to 41 EUR/ sq m while in the central boulevards of Sofia it is 100 EUR/sq m. Big retail chains – Billa, Carrefour, Kaufland and Piccadilly – have taken advantage of this situation and have opened new shops. Analysts think that the rents will not go up before the shops start making much higher turnover.

In the first half of 2009 the rental space in shopping malls have increased by 50 000 sq m and have reached 220 000 sq m in total.  This is the reason why it is more and more difficult for their owners to find tenants for all empty spaces. In Sofia the situation is better and there almost no malls with empty shops. However in the country the situation is different. Retail centres with good location have 3% of their space free, while the others have more than 10% of their space empty.

Concerning office space, 13.4% of it in the central parts of Sofia and 20% of it in the outskirts of the city have been empty. In the central parts of the city prices are still high but in the greater center of Sofia the prices have fallen by 1.5 EUR/ sq m. In the outskirts this decrease has reached 12 EUR/ sq m or the levels of 2006.

According to specialists the freight forwarding and logistic centres and warehouses have been doing better than any other properties in the country. Their rents are the same as last year due to the fact that these properties have developed later than all other types and currently there is a demand for logistics’ space.

Office rent in Sofia has decreased in comparison to the end of last year and at the moment is between 10 and 15 Euros/sq m. The decrease is due to mainly two reasons. Firstly, the economic recession and secondly, the highest number of new offices for rent, both because of the high number of newly completed office buildings and the bankruptcy of companies which leave their offices.

The office rental market follows the economic situation in Bulgaria. However, according to analysts, the future tendencies will depend to a great extend on the investors. An investor who has already rented 60% of the building before its completion is less likely to accept lower rent than the investor with an empty building. Additionally, it is important how many projects an investor has and whether they are profitable. Last but not least, offices with good location and effective use of the space, with enough of parking space and with access to the necessary technology are unlikely to rent for less.

The ex-pats who have moved to the Bulgarian Black Sea coast are selling their properties and leaving Bulgaria in great numbers. They have lost their hope to make a profit by renting their apartments. They offer their properties for sale at prices which are 20% lower than in the last year. Studios are for sale for as little as 38 000 Euros and two-bedroom apartments are on offer for about 60 000 Euros. The second-hand car markets are full of British cars which sell at half the price of the ones with a left steering wheel. Many of the Brit who have settled in Bulgaria are pensioners and some of them find it hard to cope during the recession and sell their apartments, houses and cars.

The direct foreign investment in  construction and in properties  in Bulgaria in the first quarter of 2009 was 208 million Euros which is a decrease by 59.3% in comparison to 2008 whe it was 511.2 million Euros.

In the first half of 2009 the prices of properties for sale in the country have decreased by 5.95% on average while the rents have decreased by 6.59%, according to the official statistic. From December to May the prices of properties have fallen by 10% in Sofia, by 6.13% in Varna and by 10.25% in Burgas. The most insignificant price drop was in Blagoevgrad – 0.67%.

Most of the deals, however,  were at 20% lower prices than the advertised prices.  The number of purchases from January to March 2009 was 35 433 which is by 37.27% less than in the same period of 2008 when there were 56 483 purchases.  Some analysts expect the number of the purchases to fall by 50% on annual bassis.

In this year due to the limited mortgage lending 70% of the sales were financed by personal savings while in 2008 not less than 80% of the properties were purchases with mortgages.

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/598 http://lmlegalservices.com/blog/archives/598#comments Wed, 10 Jun 2009 10:50:00 +0000 Boyan Yordanov http://lmlegalservices.com/blog/?p=598

According to the State Agency for Tourism (DAT), three-four hotels go bankrupt every week in Bulgaria. They are unable to re-pay their mortgages. Many hotels are put for sale but there are no buyers and banks repossess them but it remains unclear if the banks will be able to sell them.

It seems that Bulgaria follows the road of Spain where the state buys the bankrupted hotels and demolishes them, in order to create parks.

According to the statistics, in the first half of the last year, 820 new hotels have opened on the Black Sea coast. As result of the construction boom the number of hotels and holiday properties is much higher than the number of  the tourists.  Many hotels can not sell all their beds and their owners suffer losses. All this makes it impossible for the hoteliers to repay their mortgages and other credits and go bankrupt.

The property market in Bulgaria was in complete collapse for about six months but from mid-March the first signs of awakening have appeared.  The decrease in the prices of the properties for sale is already a fact.  In the last two months sellers started decreasing the prices more boldly. There are more reduced property prices in Sofia than in any other town in Bulgaria. This comes to prove that the market in the capital is more mature and flexible. The average reduction in Sofia since the beginning of the year is 13.23%. In the central parts of the city it is 14.9%. In the area around Vitosha Boulevard the prices have fallen to 1800 Euros per sq m and around the Doctor’s Garden the prices have gone down to 2000 – 2800 Euros per sq m. In the so-called greater center the prices have decreased by 9.34% to 1190 Euros/sq m. Along Bulgaria Boulevard they have gone down by 2.96% to 978 Euros/sq m. In affluent Lozenets the reduction is 12.6% and the prices are around 1600 Euros/sq m. If the prices on offer are compared with the actual prices from the deals, it appears that prices go down even further. On the whole the purchases in 2009 are completed at prices which are 25-28% lower than the ones in 2008.  At the moment the difference between the offered price and the real price of the purchase is 15%.

In Varna, the second Bulgarian city, the property market seem to be weaker than is Sofia, mainly due to the prices that are still too high. However, there are some bold reductions of up to 40%. The average price drop is 9.97% since the beginning of the year. In the central parts and in the area of the Sea Garden the reduction is by 9% and the prices are about 1990 Euros per sq m. In Levski the reduction is by 3.9% and the prices are about 1074 Eur per sq m. In Briz the drop is by 9.8% and prices are about 1160 Eur/sq m. The actual purchases are at price which are 30% lower than those in 2008. The difference between the offered and the actual purchase price is 20%.

]]> http://lmlegalservices.com/blog/archives/596/feed 0 http://lmlegalservices.com/blog/archives/593 http://lmlegalservices.com/blog/archives/593#comments Thu, 04 Jun 2009 07:13:18 +0000 Boyan Yordanov http://lmlegalservices.com/blog/archives/593

From the end of 2008 the number of new buildings in Bulgaria has decreased by 432 and the number of the apartments in them has decreased by 42.8%.

The greatest number of new apartments still are completed on the Bulgarian Black Sea coast. Only in Burgas district 1136 new apartments have been finished this winter. In second place is Varna district with 727 newly finished apartments, followed by Sofia with 580 and Plovdiv with 265. There are no new apartments in Stara Zagora and Kyustendil.

The area of the newly finished apartments in the first quarter of 2009 is 294 000 sq m which is a decrease by 16% in comparison with the same period of 2008. The size of the average living area has also diminished from 78.3 to 75.5 sq m in the same period.

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.

Jessie Hewitson, The Observer

Back in 2006, Andrew and Pat Pryce decided to buy an investment property in Bulgaria. With retirement looming, they were hoping for rental income to supplement their pension, and a flat they could eventually sell on at a profit. When they read on the internet about the Mechi Chal mountain lodge in Pamporovo, advertised by overseas property agent Someplace Else as “the most exclusive in Bulgaria’s booming ski resorts” and offering a guaranteed rental yield of 7% a year for the first three years, they put down a deposit of £19,485.

It was a year later, in 2007, that they had the first inkling that something might be wrong. No one was asking them for more money, and there seemed to be no evidence that building was taking place. By 2008, they were so concerned with the lack of progress that they went to Bulgaria and drove around Pamporovo to investigate for themselves.

“We couldn’t see any sign of the development,” says Andrew. “On a second visit we attempted to locate the agency’s Bulgarian office in Plovdiv, but found it inhabited by another company.”

Having lost faith that the development would ever be built, the Pryces asked for their deposit to be returned. They say Someplace Else agreed to this more than a year ago but, despite being promised the money on three occasions, they have received only £2,000. They have now consulted a lawyer.

The Pryces are not alone. Since January 2008, the Association of International Property Professionals (AIPP) – a voluntary organisation with 376 members – has received 116 formal complaints from buyers unhappy about purchases abroad.

The number of people who have lost money in projects around the world is likely to be far higher than most realise, partly because nobody is keeping a record, and partly because those who have lost money are too embarrassed – and upset – to talk about it.

John Howell, senior partner in the International Law Partnership, specialising in overseas property purchases, estimates that 20% of those who have bought off-plan in the past two years are likely to run into “significant difficulty”. According to AIPP estimates, in 2007 193,600 of us bought property in the 10 countries most favoured by British buyers. This means more than 38,000 may be in hot water from just a single year’s overseas property purchases – and some may not even realise it yet.

The collapse of Churchill Properties Overseas alone meant about 340 investors, mainly British and Irish, lost deposits worth an estimated £4m. The company, which sold property in Estonia, Cape Verde and Goa, went into “voluntary liquidation” last summer.

Out of pocket

Another high-profile company, Bulgarian Dreams, closed at the end of 2008 and is currently being investigated by the City of London Police economic crime department. It is impossible to know exactly how many of its investors – who have bought in more than 40 developments in the eastern European country – have been left out of pocket.

Some of the estimated 100-150 investors who, like the Pryces, bought off-plan apartments in the Mechi Chal lodge, are leaving desperate posts on property forums and seeking legal action to get their money back.

Ben Mason, a partner of Someplace Else, says the delays have been caused by the local water authority rescinding permission it had previously granted. He is hoping to get it reinstated. “Providing this happens in the next two months, we can get the first phase finished by December this year and the second phase completed by December next year,” he says.

Mason admits the development is hard to find, but claims that the foundations are in place for phase one, many of the houses have been built off-site and when they do get water permission, the Bulgarian office will reopen.

As for the Pryces’ deposit, he says: “Due to the current economic climate, it has taken us longer than we expected to make this refund from the UK … however, there is no question of the Pryces not receiving the balance of their deposit, with interest, over the next few weeks.”

Howell notes that the developers in trouble are not typically local but British would-be Donald Trumps, and new to the game. “Many of these developers probably started off with good intentions but soon got in over their heads,” he says. “Whether it was fraud or bad economic times is a moot point, frankly, because the end result is the same: people lose money.”

Bad lands

Derek Smythe (not his real name) is more than aware of his predicament, and resigned to losing the £30,000 he invested in 2006 into a company that promised to buy land in Montenegro, get planning permission, build and sell on.

“Since investing the money, I’ve had virtually no communication from the directors [both British],” he says. “There’s no evidence that the money was used to purchase any land at all – I have absolutely no idea what happened to it. It’s been pretty miserable – and the worst thing is, it’s all my fault as I didn’t ask enough questions.”

The sums of money being lost are vast: Howell recently met 70 people, mainly Britons, who had sunk an average of €80,000 (£70,000) into a troubled development in Bulgaria.

He also has clients who regret buying in Dubai. “The problem is that all the major building companies belong to the royal family, and you won’t find a lawyer who will sue.”

The range of people losing money this way spans class, gender and age: young, old, working class, middle class, the gullible, the naive and the greedy are all suffering alike.

“I’ve got clients who are working-class people who invested the £20,000 equity they had in their home, and high-flying professionals who frankly ought to have known better,” says Howell, adding that one client who got stung was a partner in a chartered accountancy firm.

Many of these problems would not have happened if the investors had sought the advice of a good lawyer – something that many of the people interviewed for this article bitterly regret not doing.

Expat Properties Plc created for the purpose of buying land, is the first plc of this type in Bulgaria which has returned its license. The general shareholders meeting will take place on 8 June 2009 when it is expected that the shareholders of the company will take the formal decision for its liquidation. It is also expected that the shareholders will give a deadline of 6 months for the liquidation and will choose a receiver. The last deal of Expat Properties Plc was on 16 April 2008.

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.

After the fall of the number of sales of properties and the price drop, the construction industry in Bulgaria and Romania has reached the bottom in the first half of 2009.  Most of the developers in both countries turned out to be unprepared for the shrinking of the local property market and the end of the constant influx of foreign investors of the last couple of years.  One of the major reasons for the sharply decreasing number of purchases is the limited access to mortgages which also caused the property prices to drop.  At the same time the number of the properties on offer continues to grow.  The shrinking of the property market has made many developers put on hold their new projects and drop the prices.  It is expected that the price drop in Sofia and Bucharest this year will be between 10% and 20%. At the end of 2008 the average property price in Sofia was 1250 Euros per sq m while in Bucharest it was 1800 Euros per sq m. The highest prices were in the Slovenian capital Ljubljana – 2800 Eurso per sq m.

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.