LM Legal Services Blog

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.

The rents of apartments in Sofia and Istanbul are almost the same. An apartment of 75 sq m in Istanbul rents for 431 Euros per month, while the same apartment in Sofia rents for 400 Euros per month. Renting in Instanbul, however, is better because tenants pay for the living are, while in Bulgaria, they also pay for the common parts.

Purchase prices of properties in Sofia and in Istanbul are also similar. A 75 sq m apartment in Instanbul sells for about 80 000 Euros, while in Sofia it sells for 78 400 Euros. The prices of larger apartments in Sofia, however, are by 20 000 Euros more expensive in comparison with Istanbul. An apartment of 120 sq m in Sofia costs 158 000 Euros while in the Turkish megalopolis it costs 123 100 Euros. The reason for this is the increased demand for bigger apartments in Sofia.

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 new year is wonderful for the buyers of properties in Sofia. Those who have money and can negotiate are able to secure unexpected reductions and perks. Most of the sellers are immediately ready to reduce their price by 20% and at the moment there are no purchases without bargaining.

According to estate agents, in the last year virtually in all parts of Sofia the prices of properties have dropped. The most stable market is in the southern districts of the city where the demand is generally higher and in the last months prices have dropped by merely 5 to 15%. At the moment the prices there vary from 1050 to 1250 Euros per square metre. In the central parts of the city, the decrease is insignificant and the highest price is 2000 Euros per square metre. There are no more offers in the range 3000 to 6000 Euros. The most significant drop of prices is in the northern and western parts of the city where the decrease have reached 20%. New properties in Nadezhda and Levski are offered for 700 Euros per square metre while exactly a year ago they were offered at 900 Euros per square metre.

Because of the lack of demand in the last year the prices of rural properties fell dramatically. Plots of land around Sofia have decreased in price by 50%. The trend at the Bulgarian Black Sea coast is exactly the same. In the last 12 months  mainly Bulgarians bought properties near to the big cities according to Dobromir Ganev, executive director of Foros Estate agents. The main reason for this is the world financial crisis and  prospective buyers have become more cautious, especially when applying for mortgages.

A regulated plot of land of 1020 sq m situated between Sofia and Pernik has decreased by 50%  in price and it is now on offer for 12 000 levs (apprx 6 000 Euros). An old two-storey house in a village with a garden of about 1500 sq m can be purchased for 6-7 000 levs (apprx. 3 000 Euros). In the past the prices of rural properties in the area of Bansko, Sunny Beach and Burgas have been artificially increased but now they have fallen dramatically. The purchases of property for investment have almost stopped and most people buy for their own needs.

The financial crisis have affected the sales of land for the construction of industrial developments. All investors have experienced difficulties in financing and several projects in Varna and Sofia have stopped.

The sharpest fall of the prices according to analysts and advisors are in holiday properties. Due to over supply in Bansko only the prices have fallen by 48%. The number of one-bedroom apartments on offer is astonishing and prices range from 780 to 2015 Euros per sq m.