According to the report of the Center for Economic Development the annual inflation in Bulgaria for 2011 was 2.8%. The predictions for 2012 are that the inflation will be between 2,5% and 3%. The unemployment for 2011 was on the average of 10,2% and for 2012 the expectations are that it will reach 10,5%. It is expected that in the fourth quarter of 2012 the Bulgarian GDP will reach its volume from the times before the recession.

The Bulgarian parliament passed the Bugdet 2012. According to the budget the growth of the Bulgarian economy in 2012 will be 2.9%. However, according to the National Statistics Institute the Bulgarian econcomy has slowed down in the last quarter of 2012. The Bulgarian GDP has not changed in the period July – September 2011 and has increased by 1.3% on an annual bassis. Usually the summer months are considered very good for the Bulgarian economy because of the expected income from tourism. The expectations were that slump of the European markets will affect Bulgarian economy in the autumn, however this has happened much earlier. The Bulgarian government is prepared to revise Budget 2012 in case that the situation gets worse.

The total  value of the properties owned by Bulgarian families was 140 billion levs (about 70 billion euros) in the end of 2009, while in the end of 2008 it was 176 billion levs (about 80 billion euros), according to Industry Watch. The drop is due to the devaluation of the properties during the recession and Industry Watch expect that this tendency will continue in the next six months.

The  devaluation of properties has slowed down in the last quarter of 2009 and it has reached 2% in the end of 2009 in comparison to the previous quarter. Because of this devaluation the purchase power of the middle class Bulgarian measured in square metres of living area has increased by 50% in 2009.

The financial resources of the Bulgarian families were 36 billion levs (18 billion euros) in total in the end of 2009 and this is an increase by 7% in comparison with 2008. The annual speed of the growth has slowed down, however, as in 2007 the growth was by 28.5% while in the last year it was just 8%. The amount of 36 billion levs does not include the debt and the credits of the Bulgarians. Last year the debt of the Bulgarians was 1/3 of their financial resources, now the level of debt has decreased according to Industry Watch.

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%.

The last quarter of 2009 was the worst one for the Bulgarian economy. According to the National Statistics Institute Bulgaria’s GDP has fallen by 6.2% and it has been 17 billion levs (about 8.5 billion Euros). The real annual drop for 2009 was of 5.1% in comparison with 2008. The official forecast of the Bulgarian government made in the autumn of 2009 was for a drop of 6.3% which later has been corrected to 4.9%.

The Bulgarian economy will continue sinking in 2010. The decrease of the GDP will be of 1%, according to the Agency for Economic Analysis and Forecasts.  For 2009 the expectations are of a significant  decrease of the GDP of 6.3%.  Bulgaria will be in recession for two consecutive years.  The decrease of the investments and the retail index will continue in 2010.  The expenses in Bulgaria’s budget will not increase in order to avoid deficit.  The major reason for this is the world wide recession. Although there have been signs for upcoming end to the recession in the USA, the risks for the world and the European economy are still there.

The slowing down of the economies of Bulgaria’s major trading partners has led to shrinking of Bulgaria’s export. The export of goods has decreased by 30,7% in the first five months of this year and it is expected that the decrease will be 10,5% on an annual basis. This has its effect on the transport and freight. As result the total volume of the export will shrink by 12,3%. The limited crediting and the slow increase of the personal incomes has led to a decrease in the investments and the sales in the country itself. The expectations are that in 2009 the spending of the average household will shrink by 4.5% and of the government by 3%.

In the following years the domestic demand, which has been generating mostly by the foreign investments, will be hard to resume the growth of the  Bulgarian economy to the levels of the last years.  That is why the recuperation of the economy is expected to materialise through the export. Having in mind the current world wide tendencies, this will not happen in 2010.  To the contrary, the export will continue decreasing and the expectations are that it will shrink by 3,8% next year.  That is why the forecast is for economic decrease of 1% in 2010. This will be accompanied by relatively low inflation about 2,2%.

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.

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.

Vitosha Boulevard in the Bulgarian capital Sofia dropped out of the top 50 most expensive  streets  in the world. The boulevard is in 53-rd place with an average rent of 120 EUR/ sq m.  The rent in all locations around the world have dropped in the last 12 months because of the global recession.  Although the most expensive streets are without any competition, the big brand names tend to avoid opening new veniews there and prefer to open smaller shops in other areas.

Number one among them is still 5th Ave, New York with an average rent of 15 000 USD per m per annum. Chanzelysee in Paris is in the second place and Russel Street in Hong Kong is in the third place.

]]> http://lmlegalservices.com/blog/archives/605/feed 0 http://lmlegalservices.com/blog/archives/584 http://lmlegalservices.com/blog/archives/584#comments Tue, 02 Jun 2009 07:53:31 +0000 Boyan Yordanov http://lmlegalservices.com/blog/archives/584

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.

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.

A repossessed one-bedroom apartment in an affluent area of Sofia can be purchased for 25 000 Euros at an auction. According to the court statistics there is a boom in the number of the auctioned repossessed properties in the last few months. The information about these auctions is displayed in the municipalities and the auctions take place at the regional courts. A repossessed property is evaluated by a judge who then auctions it at 50% of the market price. Due to the recession and the collapse of the property market, there is no interest in repossessed properties. If such a property does not sell, it is offered again at an auction a month later at a price which is further 20% decreased. The expectations are that the number of the repossessed apartments will continue to grow.

The price of agricultural land in Bulgaria has decreased by 40% in the first months of 2009 in comparison with 2008. The reason for this is the recession and the boosted prices of agricultural land in the beginning of 2008. This has put off many prospective buyers.

At the moment the average price is between 200 and 300 levs per 1000 sq m.
The top most expensive agricultural land is in north-east Bulgaria, in the area of Dobrudja, while the cheapest around Vidin in north-west Bulgaria, Haskovo in the south, Lovetch and Gabrovo in mid-Bulgaria and Pernik, close to Sofia.
Despite the price drop, the rent of agricultural land steadily increases. At the moment the average rent is between 18 and 20 levs per 1000 sq m, which is an increase of 10 levs in comparison with the same time last year.

The Bulgarian property market has entered into a constant slum and it is expected that the earliest in 2011 it will pick up, according to developers, analysts and estate agents.

This conclusion is based on the expectation for a deep recession in the country in the next two years. Prominent business analysts think that the recovery of the property market in Bulgaria entirely depends on the economic development of the country. The boom of the property market coincided with the economic boom. However, now the forecast of the IMF for Bulgaria is most worrying – recession in the next two years, high unemployment and shrinking of the spending. Traditionally, the economic process in Bulgaria lags behind the one in the developed Western countries. Only in case that Bulgaria starts using the European funds properly and more companies from Western Europe relocate in Bulgaria by 2010 the country will reach the lowest point of the economic recession and the economy will start moving upwards.

The number of mortgages lent in the first two months of the year in Bulgaria is twenty times lower in comparison with the same time last year. In January and February last year the banks lent mortgages to the value of 355 million levs, in the same months of this year the same figure was 18 million levs. The positive effect of the limiting of the landing is that for the first time in two weeks there is a tendency for decreasing the interest rate, although not by all banks. This decrease is of 0.54% for the mortgages in levs and 0.36% for the mortgages in euros. The average mortgage interest at the moment is 9.95%.

However, leading bankers think that in a recession the sensible policy is not to drop the interest rate. They have warned the developers to forget about the Brits and the Irish who used to buy all the properties at the Black Sea resorts and to focus on the Bulgarian customers, in order to survive the recession. It is expected that the Bulgarian property market will suffer mostly in September and October of this year.

According to developers the state must support the construction industry and the property market by pressing the water and electricity suppliers to offer better services.

According to some analysts the property market in Bulgaria will reach the bottom by the end of this year. The professionals are of the opinion that it is more important how the Bulgarian property market will start moving rather than when. It seems that the Bulgarian government does not have priorities and the economic recovery will be long and difficult. Around the world the property markets will recover with a different speed and at different times. The huge property markets in the USA and the UK give clear signs to the investors that the prices have become attractive and the expectations are that by the middle of the year there will be an increase in the number of purchases.
Developers operating in Bulgaria have raised their voices to request a more open business environment during the recession and clearer rules concerning their relationship with the state. They outline as a serious problem the behaviour of the electricity, water and heating suppliers which are huge monopolies. The suppliers do not invest in infrastructure but wait for the developers to build it and then buy this infrastructure from them, nobody knows when and how. The developers request that the state regulates these relations.

The number of new shopping centres in Europe which will open in 2009 be about 40% lower than the forecasts made a year ago. In 2010 it is expected that this number will be even lower and the total area of the new shopping centres will not exceed 7 million sq m. These will be the lowest figures in the last five years.
Due to the recession in Europe alone the construction of newly planned shopping centres totaling 7 million square metres will be put on hold.

In 2008 in Europe 310 retail centres with a total area of 9 million sq m have been completed. Most of them were in Russia where the growth was 23% and the total area of the newly completed retail centres was 1,65 million sq m. Turkey was in the second place, closely followed by the U.K., Spain and Romania. In terms of percentage, the highest increase was in Bulgaria – 76% and in Romania – 63%.

It is expected that the current recession will have the most powerful effect in Turkey, Russia and the Ukraine. A year ago 58% of the project took place in these countries, but now only 22% of the new shopping centres are completed in these countries.

According to the IMF report about Bulgaria, 3,5 billion BGN from the planned budget income will not be collected in 2009 due to the recession. This will mean automatic activation of the so-called 10% rule – shrinking of the expenses of all ministries and government agencies by 10% in order to achieve an annual budget with a small profit.

The current IMF mission in Bulgaria aims to establish the economic situation in the country. The most dramatic development is the inability to collect VAT to the value of about 3 billion BGN from the initially planned amounts. The most optimistic forecast of the National Revenue Agency is that the VAT collection will be 5% less than the planned for 2009 or an amount exceeding 110 million BGN, which still will be an increase of 6% in comparison to last year.

Generally, the tax collection might increase by 12% in comparison with last year.

Concerning the collection of Capital Gain Tax, the optimistic forecast underlines that 14% or 360 million BGN will not be collected. Still the collection of Capital Gain Tax will be 2% more than last year.

According to the IMF report, the decrease of income will force Bulgaria cut the budget expenses to the value of 1,7 billion BGN in 2009. The state expenses must be cut, as well as the salary increases, because the economic growth in 2009 will slow down to 1%.

The decrease of lending and of the foreign investment will lead to the shrinking of sales in the country. This in combination with the decrease of property prices and the possible increase of the number of bad debt might lead to shrinking of the economy and a negative GDP growth of – 3,5%, according to the pessimistic forecast of the IMF.

402.6 million Euros is the total turnover from merging and acquisitions in the first three months of this year, which is a decrease of 18.2% or 72% less than in the first quarter of 2008. The recession has hit the merging and acquisitions in Bulgaria. Only 32 M&A have been completed in the first three months of this year. In the same period of last year there were 136 deals to the value of 3.5 billion Euros.

The decrease in the first three months of 2009 still can not give a clear idea about the market situation later during the year. The prices of companies have dramatically decreased and the number of deals has shrunk by 1/3 on annual basis. The analysts still think that the situation is not that bad. In March the number of the deals has increased which might be a sign of recovery at the end of 2009.

Construction projects in Bulgaria exceeding 2,5 billion Euros have been put on hold because of the recession. There are a few large projects, which do not have problems with financing. The fear of bankruptcy and the lack of free money is the reason for the investors to give up their plans for big projects and to sell their business. Some developers are prepared to sell parts of their future developments at lower price just to be able to finish their projects. On 2 April 2009 they met with Russian investors at a business meeting organised in the Russian capital Moscow. There were different projects on offer – holiday homes, residential homes, power plants, regulated and unregulated land, concrete buildings and whole residential areas. However the accent was on holiday homes and golf courses throughout Bulgaria.

Apart from the Russians the other type of investors interested in Bulgaria are those from the Middle East. Some of them are prepared to put on hold their projects in their home countries in order to buy at low prices attractive projects in Europe and in the USA.

While the property prices in Bulgaria fall, the business of letting luxury properties flourish. The rent of luxurious apartments range from 400 to 2000 Euros per month, depending on the quality of the interior. The rent of luxury villas in the beginning of the Vitosha Mountain can reach up to 11 000 Euros per month. Estate agents expect that the rents of luxury properties, especially if they are located in and around Sofia, will steadily increase during the recession. Such properties are often rented by Bulgarian emigrants who come back to Bulgaria to work for large international companies, foreign diplomats and Hollywood stars who shoot films in Bulgaria. The properties fetching the highest rent are located in the central parts of the city, close to all administrative centres and institutions. When they are vacated, they do not stay long on the property market but are rented again within 2-3 weeks. Very often luxury villas in the outskirts of Sofia are rented by people with good incomes who have homes in Sofia but need a high quality property for a short term for their guests.

Last year 60% of the mortgage applications in Bulgaria have been made for the purchase of a second home, according to Bulgarian bankers. Bulgarians used to buy properties for investment, expecting high returns and constantly increasing property prices.

This year the number of the mortgage applications have decreased ten times. According to bank managers this is due to the different expectations of sellers and buyers. The buyers expect prices to go further down and do not rush to buy, while sellers do not drop the prices of their properties and wait for the market situation to change back to the time of the property boom.

The banks lend much less money than before and cover a much smaller proportion of the price of the properties. At the same time prospective buyers are unwilling to take large mortgages and prefer smaller ones. Most of the buyers now have savings but they still need to borrow some money to buy a property.

Leading bankers think that the lending will not go back to the levels during the property boom of the last two years. They expect that at the end of the recession the ratio of the savings to the size of the mortgage will be 50:50 and in the following new boom it will go to 30:70.

The Bulgarian bank managers expect that in the next 6 months two new types of clients will enter the property market. The first type are people with good incomes and substantial savings. Currently, in Bulgarian banks there are 110 000 savings accounts with amounts exceeding 30 000 levs (15 000 Euros) with 76 000 levs (38 000 Euros) on average per account, according to the official statistic of the Bulgarian National Bank. Obviously, these people wait for the right moment to invest.

The second type are people who are not covered by the official statistics. They either keep their money at home or have incomes from the grey economy. Such kind of customers usually apply for mortgages that cover 20% to 30% of the price of the property.

At the moment the mortgage interests of Bulgarian banks are between 8% and 10%. Nobody expects any change until the end of the year, as bankers wait for the first encouraging signals from the U.S.A and Europe, in order to make a move.

Because of the recession many sellers drop the prices of their properties to be able to sell them. The number of prices of apartments in the big Bulgarian cities which are under 30 000 Euros have drastically increased in the first three months of this year. One of the reasons for this is the lack of buyers due to the strict rules of the bank for lending. A few months ago all Bulgarian banks stopped lending money for the purchase of apartment in prefabricated blocks from the communist era. After that the banks have sharply increased the mortgage interest rates and have decreased the size of the mortgages, thus have put off many prospective buyers. In reality the Bulgarian property market have moved back to the situation years ago of expensive mortgages.

In Plovdiv 70 apartments are on the market for prices under 30 000 Euros. Only 20 of them are off plan. Prefabricated apartments with total area exceeding 90 sq m are for sale for as little as 13 000 Euros.
In Varna the number of the apartments under 30 000 Euros is 60, the cheapest property is a one-bedroom apartment for 20 000 Euros in the outskirts of the city. There is ever an apartment in the central parts of Varna offered at 30 000 Euros, which is still at the off-plan stage. Prefabricated apartments sell for about 25 000 Euros in the outskirts of Varna.

In the second largest city on the Black Sea, Burgas, the number of apartments on offer are twice more than in Varna but most of them are off-plan and in the outskirts of the city. The cheapest offer, €15 120, is for an off-plan apartment with are of 41 sq m. There are ten prefabricated properties for sale at prices starting at 24 000 Euros. All of them are located in the outskirts of Burgas.

In Russe there are 20 apartments under 30 000 Euros. The cheapest offer is for a studio for 12 900 Euros. Prefabricated apartments start at 15 000 Euros.

While in the country at the moment prices range from 440 to 580 Euros per sq m, in the capital Sofia, the property prices have dropped everywhere, apart from the central parts of the city. The sharpest drop of prices is in the southern parts of the city where there are more unfinished buildings then anywhere else in the city. The prices of prefabricated apartments have fallen more than any other. While last year they used to sell for more than 1000 Euros per sq m, now they are on offer for under 750 Euros per sq. m. Newly finished properties are offered for 700 – 800 Euros sq m. Off-plan apartments are offered for 500 Euros per sq m. Some developers offer discounts of 20 % of the prices of their finished apartments in cases of payment in cash. Others who are stable financially offer 15 leasing schemes to their customers.

The rent of industrial plots of land in Sofia have increased by 8% or by 0,5 Euros (1 lv) per sq m in 2008 in comparison with 2007. The average rent of industrial land in the country is 6.5 Euros per square metres. This is by 1 Euros more expensive than the neighbouring countries. The reason for this situation is that more and more companies have been looking for industrial land while there have not been many plots on offer.

This year the tendency outlined by the recession is owners first to find tenants and only then to start turning their land into an industrial one. Estate agents expect that the demand for industrial land will not be affected by the recession, as it is expected that more companies will relocate from Western into Eastern Europe.

The recession has led to diversification of the rental market in Bulgaria. Many tenants are unable to pay high rent because of decreasing incomes and the landlords have reacted accordingly – in the last 12 months while in some parts of Sofia rents have increased by 15 %, in others it has decreased by 20%. The area where the property is situated is of primal importance, as well as the condition of the property itself. The size of the property is more and more important. It is very difficult to find studios as they are in demand. Their rent have remained more or less the same in the last twelve months, even in expensive parts of Sofia like Lozenets, Oborishte and Yavorov. In these areas studios can be rented for 250 Euros per month, while in the central parts of the capital the rent has decreased from 291 Euros to 257 Euros. At the same time studios is in the area of the Medical Academy now rent for 22% more than last year, the highest increase in the city.
The rent of one-bedroom apartments in the expensive areas like Boyana have decreased by 25% as there is no demand. In March 2007 a one-bedroom apartment in Boyana rented for 400 Euros per month but now it rents for 300 Euros. The tendency is the same in affluent Dianabadt and Strelbishte, while in Kniazhevo, Lagera and Mussagenitsa rents of one-bedroom apartments have increased by 15%.
The recession is most seriously felt in the renting of two-bedroom apartments. The demand is so limited that although landlords have put down rents, still tenants can not be easily found. The decrease of rents have reached 20% and in upmarket Lozenets such apartment can be rented for 570 Euros on average, which is 100 Euros less than last year.
Generally,the purchase prices of the most popular apartments have gone down to the prices of 2007.

Bronwen Maddox: World Briefing, The Times

The crisis in Central and Eastern Europe has been triggered by the world’s financial turmoil. But the European Union was already set for an unpleasant showdown between its older members and its newer ones. Any recession — never mind one as acute as this — would have driven home the point that the east wants more than voters in the west want to pay.

The leaders of the first to join the EU club never wanted to admit, though, that the expectations of the newcomers were bound to be dashed. They didn’t want to be thought to be condemning them to a second-class wing of Europe. Nor did they want to spell out to voters how big the bill might be — and how funds might be diverted from their own countries to meet it. The blunt truth is that the newcomers’ hopes of becoming Spain, or the Irish Republic — poor countries transformed in a decade or so by the EU — were never realistic. Spain and Ireland joined a club of a few rich countries, and their own people’s income was about two thirds of the average. In contrast, former communist countries joined a loose, large club only half of which was wealthy in any sense. Their people were comparatively far poorer than the Spanish and Irish. The magical transformation was never going to happen.

The oddity now is that this crisis — one that threatens the stability of banks across Europe and might cause some eastern governments to default on debt — creates pressure for Western Europe to help. It won’t want to. But the intertwined finances give the east a case that the west can’t afford to stand back.

The EU’s decision five years ago to take in eight former communist countries, plus Cyprus and Malta, was one of the most generous gestures it has made. The spirit was admirable. But the idealism glossed over the difficulties, particularly on the economic side. The new members made big changes before they joined — but less so afterwards. Romania and Bulgaria, joining in 2007, have rubbed in the point that the EU has few sanctions if countries renege on reform. Romania, again, and Hungary, are now struggling with heavy debt because of reluctance to reform state industries and benefits. Others, such as Estonia, the Czech Republic and Poland, have better claim to be unlucky casualties of the collapse of export markets. Even there, debts were casually taken on in Euros while the income to meet them was in national currency, now sliding. Leaders and their people wanted to act as if they were already as rich as the rest of Europe, without income to match.

Even before this crisis the EU bill for helping these countries was large. A European Commission report last month (“Five years of an enlarged EU”) notes that in 2007 the new states received a fifth of the €99 billion that the EU gives to countries. That is set to rise between 2007 and 2013 to 35 per cent. The report blithely asserts that this “cannot be regarded as an unbearable burden” by old member states as it is only 0.2 per cent of their gross domestic product. The old members may not see it that way. To get the east out of this crisis the bill would have to be even larger, if only to rescue the banks from foreign currency loans.

There is a strong case to be made for the rescue. But it can’t be made in the airy tone in which the Commission has written its assessments of enlargement, which makes taboo any suggestion that the move was risky or expensive or overoptimistic in what it led the newcomers to expect. It was all of these. It was also worth doing.

The only argument which will now persuade Western European voters that they should pay even more is that, otherwise, Europe faces dangerous disintegration. For once, though, that kind of alarmist talk is justified.

The property market in Bulgaria is blocked because of the recession. The few purchases go through in the conditions of total price chaos. There are hundreds of thousands unsold apartments on the market, only in Sofia they are 115 000. Most of them are offered at unrealistic prices. There is a significant difference between the prices of the sellers and the prices which buyers are ready to pay.  In Sofia this difference is of 12 000 Euros on average.

The times of fast growth of the property market are over and only the investors who adapt quickly to the new requirements for better quality and lower profit margins will survive. Some analysts think that the normalisation of the huge profit margin will also affect other parts of the economy.

It is expected that during the recession the major buyers on the property market will be private risk investors who have free cash and the Bulgarian investors will have greater impact. Only in the last year, the share of the Bulgarian investors have increased by 37%.

The number of new planning permissions have decreased by 34% according to the National Statistics Institute.