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.

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.

The prices of properties on the Bulgarian Black Sea coast have dropped by 15-30% while those of inland properties by almost 70%.

Newly built apartments sell for 390 Euros per sq m. In Sunny Beach there are completed apartments for sale for 20-30 000 Euros, which is below their value.

Properties in the big cities like Sofia, Plovdiv, Varna and Burgas have dropped their prices by 30%.

Some analysts claim that the buyers now come mostly from Russia and the former Soviet republics and that there is no recession on the property market in Bulgaria but just restructuring. The quality properties keep their prices while the low quality ones sell at their real price which is a positive tendency, according to them. The Russians mostly buy luxury properties on the northern Black Sea coast at prices exceeding 250 000 Euros. The interest towards mountain resorts has decreased.

In the first half of 2009, the worldwide recession has had its effect on the market of commercial property in Bulgaria – the number of frozen and delayed projects of shopping centres and malls.

Among the frozen projects in Sofia are Euro Park for 500 million Euros, Sofia Acropolis for 500 million Euros, Tsarigradski Mall (35 million Euros) and GLS Mall. In the country the largest frozen projects are Grand Gallery in Burgas for 35 million Euros, Litos Ibuild in Pazardjik and two shopping malls in Kazanluk.

At the same time GTC has delayed the completion of its three Gallery projects in  Russe and Burgas by 6 months, and in Varna by 4 months.

Since the beginning of the year two bid shopping malls have been completed – Mall Plovdiv and Burgas Plazza with rental area respectively of 20 000 sq m and 26 000 sq m. With them the total area of all shopping centres in Bulgaria has reached 233 460 sq m, an increase by 25% in comparison with the end of 2008. At the end of June 2009 there are 31 sq m of retail space per 1000 people, while in 2008 it was 25 sq m.

At the same time the average decrease of the purchase price of the commercial properties in Bulgaria in the first half of 2009 is of 6.71%. There is also a decrease of the rent of 18% on average for the country. The highest decrease both in purchase prices and in rents is in Sofia and the big seaside towns. The rents in the shopping centres in Sofia have fallen by 25% and vary from 12 to 45 Euros per sq m. The analysts expect a further decrease by 15% by the end of 2009.

The construction of new apartment buildings, offices, shops, roads and others has decreased by 11% in May 2009 in comparison with April 2009, according to the information of the National Statistics Institute based in Sofia. The sharpest drop is in the number of the new apartment buildings closely followed by infrastructural projects. In comparison with May 2008 the volume of construction has shrunk by 15%. This drop is due to the much smaller number of new apartment and office buildings and new shops.

Until now the information about repossessed properties offered at auctions was only available at the offices of the private judges, in the municipalities and the in the regional courts. Often this information which had to be available a month before the auction disappeared.

Now, the cheap repossessed properties which judges sell in Bulgaria can be found on the web. The Chamber of the Private Court Executors publishes information for upcoming auctions at http://www.sales.bcpea.org

At the moment there are 164 announcements for the sale of all types of property – apartments, houses, warehouses, plots of land, etc. The information is constantly updates. The highest number of announcements have been made by the Sofia City Court. Among them are auctions for apartments with a starting price of up to 60 000 levs (30 000 Euros) . For example, the bidding for a one-bedroom apartment on Alexander Stamboliysky Boulevard will start at 52 400 levs, while the bidding for the same size of apartment by located in Hadji  Dimitar at 65 000.  Bidding for apartements in the areas in the outskirts of Sofia start at under 20 000 Euors.  The announcement coming from other Bulgarian cities are quite interesting.  In Varna the bidding for a two-bedroom apartment will start at 80 000 levs and for a villa at 105 000 levs.  In general currently there are eight houses in the country at prices under 10 000 levs.  The most expensive offers are: a factory in Burgas with a starting price of 29 826 750 levs and a house in the affluent Dragalevtsy in Sofia with a starting price of 760 000 levs.

If an auction fails and nobody bids for a property, there is a second auction and the price drops by 20%. The successful bidders must pay the whole amount of the price of the property within 7 days. Potential bidders’ only worry is that the former owners of repossessed apartments can appeal against the repossessions.

The property market in Bulgaria was in complete collapse for about six months but from mid-March the first signs of awakening have appeared.  The decrease in the prices of the properties for sale is already a fact.  In the last two months sellers started decreasing the prices more boldly. There are more reduced property prices in Sofia than in any other town in Bulgaria. This comes to prove that the market in the capital is more mature and flexible. The average reduction in Sofia since the beginning of the year is 13.23%. In the central parts of the city it is 14.9%. In the area around Vitosha Boulevard the prices have fallen to 1800 Euros per sq m and around the Doctor’s Garden the prices have gone down to 2000 – 2800 Euros per sq m. In the so-called greater center the prices have decreased by 9.34% to 1190 Euros/sq m. Along Bulgaria Boulevard they have gone down by 2.96% to 978 Euros/sq m. In affluent Lozenets the reduction is 12.6% and the prices are around 1600 Euros/sq m. If the prices on offer are compared with the actual prices from the deals, it appears that prices go down even further. On the whole the purchases in 2009 are completed at prices which are 25-28% lower than the ones in 2008.  At the moment the difference between the offered price and the real price of the purchase is 15%.

In Varna, the second Bulgarian city, the property market seem to be weaker than is Sofia, mainly due to the prices that are still too high. However, there are some bold reductions of up to 40%. The average price drop is 9.97% since the beginning of the year. In the central parts and in the area of the Sea Garden the reduction is by 9% and the prices are about 1990 Euros per sq m. In Levski the reduction is by 3.9% and the prices are about 1074 Eur per sq m. In Briz the drop is by 9.8% and prices are about 1160 Eur/sq m. The actual purchases are at price which are 30% lower than those in 2008. The difference between the offered and the actual purchase price is 20%.

]]> http://lmlegalservices.com/blog/archives/596/feed 0 http://lmlegalservices.com/blog/archives/593 http://lmlegalservices.com/blog/archives/593#comments Thu, 04 Jun 2009 07:13:18 +0000 Boyan Yordanov http://lmlegalservices.com/blog/archives/593

From the end of 2008 the number of new buildings in Bulgaria has decreased by 432 and the number of the apartments in them has decreased by 42.8%.

The greatest number of new apartments still are completed on the Bulgarian Black Sea coast. Only in Burgas district 1136 new apartments have been finished this winter. In second place is Varna district with 727 newly finished apartments, followed by Sofia with 580 and Plovdiv with 265. There are no new apartments in Stara Zagora and Kyustendil.

The area of the newly finished apartments in the first quarter of 2009 is 294 000 sq m which is a decrease by 16% in comparison with the same period of 2008. The size of the average living area has also diminished from 78.3 to 75.5 sq m in the same period.

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 planning permissions for apartment buildings which have been issued in the first three months of 2009 have been by 40% less than in the same period of 2008, according to the National Statistics Institute. 1470 projects have received planning permissions from January to March 2009. They are for 6530 apartments with a total area of 895 173 sq m. The number of the apartments has decreased by 49% and of the total area, also by 49% in comparison with the same period of 2008.

79 office buildings, as well as 978 other type of buildings – industrial, etc – have received planning permissions. The number of administrative buildings is by 21% less, while their total area has increased by 21%. The number of all other types of buildings has decreased by 36% and their total area has decreased by 44%.

The only tendency that continues into 2009 from the same period of 2008 is that the major part of the planning permissions for new apartment buildings have been issued in the large administrative centres of the country -
Burgas – 185, Sofia – 182, Varna – 170, and Plovdiv – 158. The number of newly planned apartments in Sofia is 1340, in Varna – 1 305, in Burgas – 896, in Blagoevgrad – 668 and in Plovdiv – 537.

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.

Unlike earlier expectations the market of luxury property in Bulgaria has also experienced price decreases. Rich buyers bargain and refuse to pay the high prices for top properties in the Bulgaria. As result prices of luxury properties have dropped by 1 million levs on average according to market analysts. The most striking example is a luxury apartment close to the National Theatre in Sofia which appeared on the market last year with asking price of 2 million Euros. The total area of the apartment was 253 sq m and this was the top price for the country – of 7905 EUR per sq m. The apartment is located in a listed building constructed in 1912. A year later the seller has dropped the asking price to 1,5 million EUR or 5929 EUR per sq m.

At the same time the price of a house close to Perla Hotel in Dragalevsty has dropped by half a million Euros to 2,5 million EUR. The total area of the three-flour house is 900 sq m and it has 7 bedrooms and six bathrooms as well as inside pool, jacuzzi and sauna.

Another striking example of a price decrease of a luxury property is in the affluent suburb of Plovdiv – the village of Markovo. A year ago this property, with total are of 2417 sq m used to sell for 2,5 million EUR. In the last few months its price has dropped to 2 million Euros.

Companies in Sofia which offer office space for rent have a special offer of 3 to 12 rent free months. Tenants who sign a contract with them do not pay rent for some time as a bonus.

The reason for this is the collapse of the rental market of office space in the last few months. According to the statistics, 12% of the office space on offer in Sofia is empty. The average rent of good quality office space is 13-14 EUR per sq m.

Many retailers started leaving the shops in the central parts of Sofia which they have hired and look for new shops in the shopping centers and streets in the outskirts where the rents are lower. Many retailers have terminated their rental contracts for their shops in the central Vitosha Blvd, Solunska, Graf Ignatiev and Rakovski Streets. Most of these retailers sell mobile phones, clothes and shoes. In the last years there has been a boom the sale of mobile phones but now sales have drastically dropped and many shops have closed. At the moment the rent of a shop on Vitosha Blvd is unacceptably high – between 70 and 100 Euros per sq m – while in the shopping centers it varies between 30 and 70 Euros per sq m. It is expected that due to the lack of tenants the rents of retail space in the central parts of Sofia will drop.

Prices of apartments in prefabricated apartment blocks are higher by 100 Euros in Sofia. In middle class areas like Mladost and Borovo in the outskirts of the capital prices of prefabricated apartments vary from 550 Euros to 900 Euros per square metre. Newly built properties in those areas vary from 450 Euros to 850 Euros per square metre.

In the central parts of Sofia the prefabricated apartments sell for 1240 Euros per sq m while newly built ones for 770 Euros.

This is due to several reasons. One of them is that some of the newly built apartments are not of good quality. Some of the owners of prefabricated apartments on the other hand keep the prices from last year in their attempt not to lose money. In order to attract buyers, the developers offer free furnishing of at least one room as a bonus. However, despite the falling prices there are only a few buyers who are ready to pay in cash. Many developers offer payment in instalments, only to attract new buyers.

Despite the fact that the number of purchases has slightly increased, there are no expectations that the property prices will increase in the next three months. To the contrary, all professionals expect further reduction of the prices.

The property prices in Bulgaria have dropped on average by 12.4% in the first three months of the year according to information of the National Statistics Institute. The sharpest price drop was in Veliko Turnovo – 25.1%, followed by Kyustendil – 21.5% and Blagoevgrad – 20.5%. The average price for the country is 1190.7 levs (608 Euros) per sq m. The most expensive apartments are in Varna – 1982 levs (1013 Euros) per sq m, closely followed by Sofia – 1980 levs per sq m.

Now is a good time to buy a property according to estate agents and there are no expectations in the next two years for the property price to start going up.

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.

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.

By Anna Mikhailova, The Times

When Maryla Guzinska, a housewife from the Isle of Wight, read an article in a national newspaper extolling the virtues of property on the Estonian riviera, it seemed like a sound investment. In June 2005, she put down a deposit of £10,500 on a two-bedroom villa in Parnu, the seaside “summer capital” of the Baltic state, and was told her new holiday home would be ready by the end of the next year, when the remainder of the £42,500 sale price would be due.

Churchill Properties Overseas, which was building and selling the villas, assured Guzinska that her home would double in price in the 18 months or so it would take to build, thanks to the property boom under way in the former Soviet republic. Guzinska, 49, believed them – not least because the company was based near her on the Isle of Wight. When she went to the office, the salesman was “professional and well spoken” (even if, in retrospect, she recalls that he never looked her in the eye).

The completion date came and went, however, and in the months that followed, Guzinska was repeatedly told that her home on the Churchill Village development had been delayed.

Then, last July, she received a letter from Churchill Innovative Solutions – as the company appeared to have renamed itself – saying that it had been put into “voluntary liquidation”. Guzinska began to doubt that she would ever see her £10,500 again. “I was hoping to buy something that would be an investment and a holiday home,” she says. “Now I’m on a debt management programme.”
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Gary Fensome, a company director from Luton, has also lost hope of recovering the £12,000 he invested in a one-bedroom flat in the same development. “I’m furious and I want my money back,” says Fensome, 48. “When Churchill showed me the site in 2006, it looked lovely. It all sounded reputable. But for the next year I had to keep chasing them for receipts, then it emerged that nothing was being built.”

Churchill – which had a local office in Parnu, but sold its off-plan log cabins and villas largely to British customers – is not believed to have obtained planning permission for Churchill Village or for two other developments in Parnu, Audru Golf and Parnu River (although it appears to have received it for a fourth one). As a result, no building work had started on the land, even though Churchill gave the impression to investors that the projects were in full swing.

In the meantime, hundreds of investors are left wondering what has happened to their deposits, which total more than £1.5m. Hampshire Constabulary confirmed that two men, aged 40 and 44, were arrested on suspicion of theft in August and November last year, respectively, and released on bail until this August. No charges have been brought. They are thought to be Paul Wade, 40, and Karl Goldthorpe, 44, both directors of the company.

In an attempt to recoup their losses, 120 of the investors have signed up to the Action Against Churchills group (actionagainstchurchills.blogspot.com), founded last summer, but are frustrated at the lack of progress. “We’ve given up hope of getting our money back,” says Guzinska’s husband, Clive Bowley, a spokesman for the group, who separately invested just over £14,000 in another Churchill villa. “Lawyers tell us it will cost £100,000 to fight our case, so it’s out of the question.” Churchill – which has no connection with the insurance company of the same name – did not respond to requests for comment from The Sunday Times.

Estonia is not the only place where Britons have seen hopes of easy profits turn to dust. During the boom years of this decade, property abroad – once the preserve of the wealthy – became all too accessible for anyone with a few thousand pounds for a deposit and, ideally, a UK home from which to withdraw equity. Teachers, civil servants, social workers and academics all piled in. It was, in the words of salesmen, a “no-brainer”: you put down a deposit on an off-plan flat, chalet or villa, then sat back and waited for the profits to roll in.

Since the credit crunch struck and world economies hit the buffers, however, the laws of gravity have come back into play with a vengeance. It is not just that many buyers have seen the capital gains on which they were counting turn into losses as property prices across Europe – and beyond – continue to spiral downward.

More serious is the impact that the downturn has had on the developers who were meant to be building those homes. Many have run out of money, leaving properties unbuilt and developments as little more than ghost towns. In other cases – such as that of Churchill Properties Overseas – there are doubts as to whether they ever intended to build anything in the first place.

John Howell, senior partner in the International Law Partnership (ILP), which specialises in overseas property purchases, says he has seen a fivefold increase in the number of clients with problems over the past 12 months. In the same period, the number requiring conveyancing has dropped by 70% as sales have plunged. “Developers are either going bankrupt or the development is not as specified,” Howell says. “One of the first things that happens when developers are in trouble is that they start stripping back on expensive items.”

The problem, he says, has been especially acute in the “emerging markets” of eastern Europe, whose economies – until recently the most dynamic on the continent – have been hit hard. Matters have been made worse by the way in which some local developers teamed up with foreign estate agents in the hope of selling to gullible foreigners at inflated prices.

“In places such as Bulgaria, everybody wants to become a developer, and as well as illegal building, you get oversupply in a market that is always going to be a marginal one,” Howell says.

ILP is representing a number of clients who bought property from Bulgarian Dreams, a London-based estate agency that folded last year, but have yet to take possession of their homes.

Founded and owned by Robert Jenkin, a Cambridge graduate, and his Bulgarian wife, Mariya Georgieva, the company sold flats and houses at more than 40 developments in Sofia, the capital, in ski resorts such as Bansko and Pamporovo, and on the Black Sea coast.

A message on the Bulgarian Dreams website says that the company has ceased trading “following the extraordinarily difficult economic conditions” and suggests those who bought property through it should contact the Bulgarian developers directly.

One of the three companies it names is Interlink BG, of which Georgieva was a “manager”. Jenkin insists, however, that the position did not give his wife similar powers to those of the director of a British company, and says she took it merely so she could “have better access to information regarding the developments”.

Bulgarian Dreams is being investigated by the City of London Police Economic Crime Department. “We have received a number of complaints about Bulgarian Dreams and have begun an investigation,” a spokeswoman says. She confirmed that the company closed its Moorgate offices at the end of 2008, but could not comment further.

Indy Gill, 45, an accountant from Nottingham, and his wife, Kim, 44, who runs a nursery, are among those ruing the day they invested in Bulgaria. In 2005, he says, he paid Bulgarian Dreams a £15,930 deposit on a £55,000 penthouse flat in the first phase of the Windows to Paradise complex in Balchik, on the Bulgarian Black Sea coast, which was due to be completed in December 2006.

Early in 2007, having heard nothing, Gill says he contacted Bulgarian Dreams and was told that, due to planning problems, the top floor of the building, with the penthouse, would not be built – and he would instead be given a flat in the development’s third phase, due to be completed a year or so later.

Then, this year, he received a letter from Bulgarian Dreams informing him that it was no longer acting as agent for the development – and told him to deal directly with Interlink BG instead. Despite sending the Bulgarian-based company repeated e-mails, Gill has heard nothing, and says he fears work has not even started on the third phase in which his flat is meant to be. “We’ve got absolutely nothing to show for our money,” says Gill. “I’ve resigned myself to losing my £16,000, but my wife still wants to do something, so we are trying, though a Bulgarian lawyer, to recover our money.”

In a statement to The Sunday Times, Jenkin insists his company is working with Bulgarian developers to resolve problems with projects in the country with which it has been involved. “If any delays or issues exist with a development, they are due to the current economic conditions affecting all of the property industry,” he says.

Most of the investors who have lost out in schemes in Bulgaria, Estonia or elsewhere put their money into projects that seemed completely above board and were, in some cases, recommended by independent financial advisers. In retrospect, however, some buyers appear to have been simply too trusting – especially when developments were being sold by British-based agents.

“A lot of people never took legal advice, never got an independent valuation or never checked the deeds,” says Simon Conn, technical consultant to Conti Financial Services, which specialises in overseas mortgages. “Many overpaid for their property even before the credit crunch struck, and now these homes are worth even less.” In many cases, Conn says, buyers took advice from a lawyer recommended to them by the developer. Others made the mistake of signing an “English version” of their contract rather than obtaining an accurate translation.

Nor is it just in eastern Europe that things have gone wrong. Hundreds of Britons are reported to have lost money in an alleged £24m housing scam in Orlando, Florida. This month, court documents were filed in America on behalf of a class action against the Superior Homes & Investments estate agency, accusing the company of defrauding customers by taking payments for homes that were never built. More than 500 people paid deposits of up to £217,000.

In Calabria, southern Italy, meanwhile, British and Irish investors have run into difficulties with properties they have purchased. One of the biggest developments in the region, the Jewel of the Sea, was blocked for environmental reasons. Last month, 120 illegally built flats, valued at a total of £28m, in the Santa Venere and Marinate resorts at Vibo Marina were sequestered by police. The El Caribe scheme, where 90 investors have paid deposits totalling £4m, was due to be completed in May, but work has not started.

Then, of course, there is Spain, where a mixture of collapsing property companies, arbitrarily implemented government rules, and out-and-out fraud have put paid to the property dreams of many British buyers.

Last year, Spanish police broke up For-tuna Land, an organisation they claimed had cheated foreign investors, predominantly from Britain and Ireland, out of £61m. As many as 2,000 people are believed to have lost money – some as much as £500,000 each – after investing in the developments in Andalusia.

Others, such as Paul Sibley, 45, an electrician from Luton, have been caught out by the collapse of Martinsa-Fadesa, one of Spain’s biggest developers, which filed for court protection from its creditors last year.

In 2005, Sibley put down a €119,000 deposit on a €400,000 villa on the La Oliva Golf development, near Corralejo, in the north of Fuerteventura, one of the Canary Islands. Although the property was already built when he paid his money, the golf course was not, and problems in obtaining a licence for the course, compounded by the discovery of an archeological site, delayed completion. Then, in the middle of last year, Martinsa-Fadesa went down.

“Work stopped before they finished the access road and the mains water connection,” Sibley says. “I would consider completing without the golf course, if the price was reduced enough, but not without access and water.”

Sibley hopes that the administrators will make finishing the development a priority for Martinsa-Fadesa. If not, his money could be tied up for years. “We decided to invest because the developer was the biggest in Spain, listed on the stock exchange – a blue-chip developer,” he says. “It should have been one of the safest.”

Anna Micklewright, a senior NHS purchasing manager from Cheshire, paid a 30% deposit of €39,000 in January 2006 for an off-plan two-bedroom semidetached house in Jumilla Golf, Murcia. Then, last May, the developer, Herrada del Tollo SL, was obliged to seek voluntary protection from its creditors. Although companies can recover from administration, this is difficult at the best of times – let alone during the current economic conditions.

“The administrators are now in charge, but millions of euros that the developer took in deposits seem to have disappeared,” says Micklewright, 33, adding that under Spanish law, those deposits should have been ring-fenced. “It’s a disaster for hundreds of British buyers who have lost their savings. It is especially tough on those who moved out to Spain to live in rented accommodation provided by the developer while waiting for their retirement homes. They have been evicted.”

“Some 95% of the buyers at Jumilla Golf don’t have a bank guarantee, even though many were told that they did, and they only found out they didn’t when the developer went into administration,” Micklewright says. In her case, she says, they insisted on – and obtained – a guarantee from a bank called Banco Pastor, but were not sure whether this would mean they would be compensated.

Micklewright has complained to the Foreign Office, her MP, her MEP and the Bank of Spain. “In Spain, developers and banks announce that they are not going to honour contracts, and lawyers just shrug their shoulders,” she says.

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.

Russians started buying apartments in Bulgaria in bulks of 300. They buy everything at prices ranging from 300 Euros to expensive attic apartments at 2000 Euros per sq m. The Russians are attracted by the drop of prices in Bulgaria which exceeds 20% in comparison with last year. “We buy properties in bulk!” is written on billboards on the streets in Sofia and in the Bulgarian Black Sea resorts. Many Russians have decided to invest heavily in property in Bulgaria in an attempt to protect their savings in the climate of uncertainty about the future of the major Russian banks. At the same time this is badly needed influx of fresh money on the Bulgarian property market.

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.

In 2008 in Bulgaria the number of purchases of property was 309 788 which was 4.79 % less than in 2007 when their number was 325 385.
The direct foreign investment in property in Bulgaria in the first nine months of 2008 amounted to 1190.5 million Euros which is a decrease of 33.34% in comparison to 2007. At the same time the direct foreign investment in construction in the same period showed a decrease of 27.99% and amounted to 405.2 million Euros.
The average property price increase in Bulgaria for 2008 was 14.88% due to the expansion of the construction industry in the first half of the year unlike the stalemate of the last months. The average increase of the rent was 4.74%. Most of the buyers in 2008 were Bulgarians and Russians. The average monthly yield in 2008 was 6.34% which is about the average for Europe. In Sofia it was 5.89%, in the second largest Bulgarian city Varna it was 4.97%, while in Plovdiv, the third city it was 4.86%.
The average mortgage in February was 36 100 Euros. Mostly people who have savings able to cover 40% of the price of the property take mortgages at the moment. In Sofia the average mortgage was 45 200 Euros, in Varna – 36 140 Euros, and in Plovdiv – 25 400 Euros. Nobody takes mortgages exceeding
70 000 Euros at the moment and the banks do not lend mortgage which cover 80% or 90% of the price of the property.

The price of apartments in the northern and western parts of Sofia have dropped seriously. According to analysts there are two major tendencies in the property prices in Sofia. On the one hand, only people who need home urgently buy at the moment, and on the other, only people who urgently need money sell.

The other type of buyers are those who would like to invest in property at a much lower price (up to 20%). The rest wait to see how the market will develop.

In the southern parts of Sofia, where traditionally the demand is great, properties sell at not more than 15% lower prices than the advertised ones. The prices are in the range 1050 – 1250 Euros per sq m.  Very good properties with excellent location and feature, previously unavailable, are now on the market. In these areas there are purchases and there is no stalemate. Analysts advise that now is the time to buy because bargain prices can be negotiated.

The central parts of Sofia keep high prices between 1100 and 1700 Euros per sq m. However, the offers in the range 3000 – 6000 Euros per sq m have disappeared and purchase prices do not exceed 2000 Euros. In the high class central parts of the city the prices have not decreased by more than 5%, while the decrease in the other parts of Sofia is about 20%.

In the other parts of Bulgaria, in the popular among British buyers area of Veliko Turnovo since the last months of 2008 there are no expensive properties on the market. There is a great number of newly built houses in the neighbouring villages. Many Russians bought houses in the low price bracket recently. Apartments in Turnovo sell from 350 to 700 Euros per sq m, a drop of 10 %.  Newly built apartments range from 380 to 520 Euros per sq m – a price drop of 20 – 70 Euros.  The property professionals claim that now is the time to buy period houses in Veliko Turnovo. They are always in great demand but now investors can get a real bargain.

It is expected that the average price of properties in Sofia will drop by half. Six months ago the middle class apartment used to sell for 1300 Euros per sq.m., while now it sells for 1000 Euros per sq.m., but there are only a few buyers on the market. This trend suggests that within six months the prices will fall to 800 Euros per sq.m. At the moment this is the price for an off-plan property in the up-market Manastirski Livadi district.

The panic due to the global financial crisis, the outflow of foreign investors and the high mortgage interest rate by all means shall have a long term effect on the property market. It is expected that alongside the falling prices, the quality of the construction and of the finishing will increase due to the competition. Completely finished apartments are already on offer and it is expected that developers will come up with new customer orientated payment plans.

Thousands of newly finished apartments remain unsold in Sofia. Developers try to negotiate with potential buyers and offer different incentives only to sell their properties. Many of those who bought as investment try to sell their properties with a small profit or without a profit, just to get their money in cash. They even offer higher commissions to the estate agents in order to sell. The few buyers on the market tend to wait longer before making a purchase and expect to receive more for their money.

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 construction of Struma Highway will cost about 1 billion Euros and its completion has been planned for 2020. Initially, the 160 km long highway connection between Sofia and Thessaloniki had to be completed in 2004. Until recently it was considered that the project would cost 600 million Euros and this amount has been provided to Bulgaria from the cohesion fund of the EU. However, the Ministry of Environment and Water has calculated that in order to secure the necessary protection of the rare species of animals who live along the Struma river, another 200 million Euros will be required. As result the Council of Ministers has included the final completion of the Struma Highway in the financial plans for 2020. When the highway will be completed it will take only one and a half hours to take the distance from Sofia to Thessaloniki.