LM Legal Services Blog

Property prices in Bulgaria have fallen by 13.57% in the first quarter of 2009 in comparison with the same period last year, according to the Global Property Guide. This time last year the Bulgarian property prices have registered an increase of 16%. Now, in 14 countries the property prices have dropped by more than 10%. The main reason for this tendency in Bulgaria is the drop in the number of foreign buyers.

According to the Global Property Guide the property market is in crisis in 27 out of 32 reviewed countries. The main reasons for this are the growing unemployment, stricter bank rules for landing and diminishing consumer confidence.

Only a few countries experienced increase of property prices. Switzerland is in the first place with a growth of 4% in the first quarter of 2009. The main reason for this is the stable demand supported by falling interest rates and the presence of a great number of foreign buyers. Next are Thailand, Austria and Israel with a price growth of 3%, shortly followed by Shanghai with 1.76%.

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 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.

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.

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.