LM Legal Services Blog

More and more ex-pats who have bought holiday apartments on the Bulgarian Black Sea coast have put their properties on the market for sale. They do not have money to pay for the maintenance of their holiday apartments and would like to sell them as soon as possible, but there are no buyers.  Mainly Irish, British and Russian owners have put more than 10 000 properties on the market, all of them located in the stretch from Sunny Beach to Sozopol.

In the Bulgarian cities the tendency is exactly the opposite. There is a growing interest among prospective buyers due to the fact that prices have fallen between 16% and 38% in the first four months of this year. In the capital Sofia the apartments with living area of 50 to 70 sq m are most in demand. The most popular areas are Liulin, Mladost, Dianabadt, Ovcha Kupel, Nadezhda and Zona B17. The lowest price has been registered in Liulin and it is 454 Euros per sq m for an off-plan property.

Estate agents claim that at the moment buyers have much higher expectations from a property. They insist on location close to the public transport and on quality construction work and materials.

The reason for the raising interest among prospective buyers is the fact that banks have started giving more mortgages and there are people who have savings that can pay for at least 50% of the price of the properties. The average size of the mortgage in Bulgaria at the moment is 35 000 Euros, a decrease by 15 000 Euros in comparison with 2008.

Irish estate agencies offer holiday apartments in the Bulgarian resorts at prices which 35% lower than the original ones. Part of the offer is that if the purchase is completed by the end of the month the buyers will save further 500 Euros.

In Sunny Beach on the Black Sea cost the cheapest offer is 24 990 Euros for a studio apartment. At the same time in the ski resort of Bansko studios are on offer for 20 000 Euros and generally prices at the mountain resorts are lower.

The Bulgarian ski resort Bansko was a typical example of the “hot market” in Easter Europe. Now, the small town is an example for the exactly the opposite.
The balloon has burst and the market of holiday properties in Bulgaria has collapsed. With this, sank the dreams for fast returns of many investors who have poured money into the region. Bansko is an emblem of the end of the hot market of holiday properties in the region. Most often the investors in the region are Brits and Irish who relied on the rental market or on the sharply increasing prices. The locals have earned some cash by selling their land, but the charm of the small town with small houses and narrow streets has disappeared forever. Now there are huge hotels and the roads are either made wider to cope with the traffic or are under construction. The holiday property market has suffered more than any other during the recession. The number of purchases has decreased by 10% at the end of the last year. The property boom in Bulgaria started in 2002 and the pivotal points were Bansko and some Black Sea resorts like Sunny Beach.
Now, when the market has collapsed, the biggest advantage of the situation take investment funds which buy properties in great numbers in the resorts at low prices and wait for the market to recover, the buyers to return and the prices to start going up again. There are buyers who are not so happy. Many British owners who bought their apartments at the Black Sea a year ago at prices exceeding 1000 Euros per square metre are ready to sell them now for as little as 500 Euros per square metre.

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

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

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

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

The slowing down of the Bulgarian property market is most obvious at the Black Sea resorts, namely the Sunny Beach and the Golden Sands, and in the mountain ski resorts like Bansko and Pamporovo. The price of properties there have reached their peak levels and the number of purchases has been falling. There is no demand for such properties, while the the properties on offer are many. This is the reason why the Bulgarian banks avoid financing such purchases, as well as the construction of properties along the coast. According to leading business and legal advisers, the prospective investors can not  rely on off-plan sales at the moment. Many hotels along the Bulgarian Black Sea coast have been put up for sale and there are no prospective buyers interested in them. This means that most of them will be acquired by the Bulgarian banks which credited their construction. In the long run if the intensive construction does not stop, many hotels along the coast will have to be demolished like in Spain. However, in order to do this, a new legislative framework needs to be introduced by the Bulgarian parliament, and leading solicitors have been investigating the Spanish experience and preparing the necessary amendments to the current Bulgarian laws. Generally, the lawyers and the law companies seem to be more occupied than anybody else involved in the construction business.

Away from the Black Sea and the mountain resorts, the Bulgarian property market keeps moving because traditionally Bulgarians consider buying a property not only an investment but  most of all a form of security.