LM Legal Services Blog

The sales of properties have decreased twice in the first three months of 2009 in comparison with the same period in 2007. The main reason is the shrinking of the market. The investments in the property market are much less than in previous years.

In order to attract clients the construction companies now tend to building longer – up to 3 years. At the same time they  accept smaller instalments during the construction and a bigger final instalment when the project is ready. It is difficult to make predictions at the moment but for the time being there are no significant changes in the cities.

Despite the financial crisis, the property prices in the suburbs of Sofia have been constantly increasing due to the migration of people from smaller towns and villages who seek employment in the capital. In the last year, more than 30 000 people have relocated to Sofia, while 12 000 people have moved to Varna, the second largest Bulgarian city. The same tendency can be seen in Plovdiv, Russe and Burgas. The newcomers to the cities usually look for cheaper properties in the suburds. As result the prices of apartments in those areas keep rising. The average porperty price in Sofia is 1094 Euros per square metre, while in the county it is 588 Euros per square metre. The studios seem to be very popular and their sales have increased by 17% in the last months. At the same time the demand for one-bedroom apartments have decreased by 28% and of larger apartments by 3%. Most of the sales are of newly built properties.

The forecast of Bulgarian and American analysts for the future of the real estate business in Bulgaria are absolutely different.

According to the National Revenue Agency, the business climate in Bulgaria has got worse by 1.1 points. According to 69% of the interviewed industrial and construction business managers, the sale prices will not change in the next three months, 20,5% of them expect a decrease, while only 10,5% predict an increase. The unstable business environment and the lack of qualified workers are the reasons for the decrease by 2.5 points of the business climate in the construction industry in July alone. The increasing competition and the rising prices of materials make the business more difficult. At the same time more clients delay their payments. Despite this developers expect price rise in the next three months.

According to the US analyst Nouriel Roubini, Bulgaria’s future is bright due to the good financial policy and the high level of the foreign investments in the country. However, he expects slowing down of the Central and Eastern European economies in 2008 which is in tune with Western Europe. The new EU-member states are tied to the West as 65% of their export is in the Euro zone. It is expected that Bulgaria and Romania will show steady but stable progress.

Having in mind the current account deficit of 20% of the GDP and the frozen EU funding it is difficult to predict Bulgaria’s future.

Almost 400 hotels on the Bulgarian Black Sea coast are for sale, according to Colliers. In the last year only, 20 000 new apartments have appeared on the market, while at the moment another 12 000 are in the process of construction. Half of the apartments for sale are secondary market. However, the deals with holiday apartments have decreased by 40% in comparison to last year.