LM Legal Services Blog

Sofia is in third place among the European capitals in terms of profitability of office space. A high quality office building can have a 10% annual return. Only the Russian capital Moscow (11.5%) and the Ukrainian capital Kiev (14%) are rating better than Sofia. The profitability of office space in the Bulgarian capital has increased by 3% or 300 points from its lowest position three years ago. The figures for Belgrade are similar – 10% – while for the other Balkan cities this ratio varies from 7% to 8.5%. Only offices in the Romanian capital Bucharest show higher annual return of 9.5%. The more developed markets of office space like Prague, Budapest and Warsaw have much lower levels of annual returns of 6.75 % – 7.75%.

The rent of office space in the Bulgarian capital has actually decreased by 6.85% in the last year and now is 17 EUR/sq.m. on average as it is linked to the decreasing prices of properties in general. There is similar decrease of office rent in Madrid, Dublin, Moscow, Kiev, Belgrade, Budapest, Warsaw and Bucharest. In the 15 older EU-member states the office rent has decreased by 4% on average.

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.

Burgas Municipality has received the BBB credit rating. The general evaluation has shown that the investment risk in Burgas is and it is a good place to invest. The financial audit of the municipality and the following credit analysis has outlined an income increase of 95%, low unemployment and increase of the tax income.