LM Legal Services Blog

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.