LM Legal Services Blog

BULGARIAN ECONOMY

Boyan Yordanov — Mon, 14 May 2012 14:31:44 +0000

Although that according to the official statistics the construction of buildings has decreased by 1,4% on an annual basis, the index of the construction has increased by 2.1% in March 2012 in comparison with March 2011. The production of the construction industry in March 2012 has increased by 7.1% annually. This is mainly due to the increase of the volume of civil and engineering construction.
In comparison with February 2012 the retail index in March 2012 has increased by 3.9%. The highest increase was in the sales of home appliances and hi-fi, furniture and home ware. However in comparison with February, the online and phone sales have decreased, as well as the sales of medicines and perfumes.
The industrial production in March 2012 has increased by 1% in comparison with February 2012. The index of the industrial production has decreased on an annual basis by 3.2%. The production and the supply of electricity, heating and gas have decreased.

BULGARIAN PROPERTY MARKET – REVIEW

Boyan Yordanov — Thu, 10 May 2012 10:27:43 +0000

Although that according to the estate agencies, the number of property sales in Bulgaria has increased by 22% in 2011, it must be underlined that this includes the sale of Mall Sofia for 100 million Euros which in fact was about 55% of the investments in the last year. In the last quarter of 2011 the investments in property have reached 186 million Euros which was the highest level since 2008. The Bulgarian market has shown vague signs of recovery but in practice the property prices in 2012 remained the same as last year. The British and the Irish buyers have almost disappeared from the Bulgarian market and the hopes that Russian buyers will enter the market in their place proved to be ungrounded. The property sector is not the major driving force of the Bulgarian economic growth and thus the direct foreign investments are not plenty in it at the moment. This is why the expectations are that the property prices will further decrease by 10-20%.

DECLARED INCOMES AND TAXATION

Boyan Yordanov — Wed, 02 May 2012 08:56:03 +0000

According to the Bulgarian Inland Revenue Agency about 177 million levs (85 million Euros) have been declared as income from rent of property. The total amount of the declared income that also included the income of free-lancers was 587 million levs or 290 million Euros. In the second largest Bulgarian city Plovdiv, despite the recession, the highest capital gain tax for 2011 was paid by an estate agency and it exceeded 425 000 levs (270 000 Euros). The second highest capital gain tax for 2011 was paid by yet another estate agency. The twenty richest Bulgarians have declared incomes from work that amassed 16 million levs (8 million Euros).

PROPERTY PRICES IN SOFIA

Boyan Yordanov — Fri, 27 Apr 2012 07:21:21 +0000

According to the Land Registry, the property sales in the Bulgarian capital Sofia have increased for a second consecutive quarter reaching 3324 sales in the first three months of 2012. On the average in Sofia have been completed 37 sales per day – an annual decrease of 8.8%. The property prices in the capital have increased on the whole and now properties in Sofia are more expensive than properties in Varna, Bulgaria’s Black Sea capital, where for years property prices have been the highest in the country. The average price in Sofia is 1 453.30 levs (appr. 750.5 Euros)/square metre, while in Varna it is 1439.00 levs (appr. 740 Euros)/square metre. In third place are property prices in the second largest Bulgarian city on the Black Sea – Burgas – 1158.83 levs (appr.592 Euros)/ square metre.

PROPERTY PRICES IN BULGARIA

Boyan Yordanov — Mon, 23 Apr 2012 10:07:48 +0000

In the first quarter of 2012 the property prices in Bulgaria have decreased in 17 regional cities on an annual basis, while price increases have been registered in 10 cities. In 2011 the property prices have dropped by 6.1% on average and at the end of last year the average property price in Sofia was 750.5 Euros per square metre.
In the first quarter of 2012 the average property price for the whole of Bulgaria was 477 Euros per square metre. The properties in Sofia remained as the most expensive ones in the country, closely followed by the properties in Varna and in Burgas. On the average the property prices in the first quarter of 2012 have dropped by 0.4% in comparison with the last quarter of 2011.

SOFIA – THE PROPERTY MARKET

Boyan Yordanov — Mon, 09 Apr 2012 11:13:02 +0000

In the last year the property prices in Sofia continued dropping. The sharpest decrease was of the prices of studios – which have dropped by 6.9% in comparison with April 2011. Now they sell for less than 700 Euros per square metre, while in 2011 their price was 733 Euros per square metres on average. Last year one-bedroom apartments used to sell for 770 Euros per square metre but now they sell for 723 Euros per square metre, a price drop of 6.1%. The prices of two-bedroom apartments have dropped less then the rest – by only 4.6% from 754 Euros in 2011 to 719 Euros now.
The one-bedroom apartments are the most popular ones and buyers prefer them to the two-bedroom apartments. The cheapest one-bedroom apartments last year could be found in the area of Tolstoy, 552 Euros per square metre, while this year the cheapest one-bedroom apartments are located in Malinova Dolina and fetch a price of 468 Euros per square metre. The most expensive one-bedroom apartments last year have been located in the affluent area of Ivan Vazov with an average price of 1286 Euros per square metre. This year, the most expensive one-bedroom apartments are located in the central area of Oborishte with average prices of 1167 Euros per squre metre which is a price drop of 9.3%.

BULGARIA – FINANCIAL ANALYSIS

Boyan Yordanov — Fri, 06 Apr 2012 10:04:54 +0000

According to leading Bulgarian banks, the value of the properties owned by Bulgarians has decreased by 3 billion levs (1.6 billion Euros) to 208 billion levs (106 billion Euros) in the last quarter of 2011. At the same time the savings held in bank accounts have increased by 1.4 billion levs and at the end of last year they have reached 30.9 billion levs (16 billion Euros). The debt of the Bulgarians has decreased and currently is under 52%. The loss from investments in shares has increased to 285 million levs (190 million Euros) at the end of 2011, an all time record.

BULGARIAN BANKS

Boyan Yordanov — Mon, 02 Apr 2012 08:18:28 +0000

At the end of 2011 the profit of the Bulgarian banks has reached 586 million levs (270 million Euros). In the last three years the Bulgarian banks have saved their profit to create a buffer zone of capital for emergency situations. Thus at the end of last year in the banking system there was a surplus of 2.9 billion levs (1.5 billion Euros) on top of the required capital.
The volume of the profit of the Bulgarian banks has been shrinking until the beginning of last year due to the expenses for servicing bad credits and due to the high interest on the deposits. However, during 2011, the banks managed to turn this tendency around. In January and February 2012 they recorded an increase of their profit. In January 2012 the increase on annual basis was by 19.2%, while in February 2012 it has reached 34.7% or 118 million levs (60 million Euros).

THE BULGARIAN PROPERTY MARKET – OVERVIEW

Boyan Yordanov — Fri, 30 Mar 2012 10:28:59 +0000

It is clear that the foreign buyers are the most influential on the property market in Bulgaria. Currently, the most active buyers are the Russians and the Russian speaking citizens of the former Soviet republics with share exceeding 40% of all buyers. They mainly buy holiday apartments in ready developments at the Black Sea (90% of them) at prices ranging between 20 000 Euros and 40 000 Euros. Most of these buyers come from the European part of Russia, the area of Moscow and the other large Russian cities. The interest of the Russians is based on the better property prices and the lower costs of living in Bulgaria. French, Italians, Germans and Dutch also buy properties in Bulgaria but there isn’t a specific nationality of buyers who have a significant impact on the market.

The Brits who have been the engine of the property boom in Bulgaria in previous years are not in the role of sellers. Many of them would like to sell their holiday homes due to the recession and the shortage of cash.

The property mark in the once popular Black Sea resort of Sunny Beach is almost dead and the prices have dropped by 50% since 2008. The most popular mountain resort of Bansko is full of empty developments and although the property prices have been slashed to 500-600 Euros per square metre, they still do not attract buyers. Fully furnished apartments are on the market for 18 000 Euros.

AGRICULTURAL LAND

Boyan Yordanov — Tue, 27 Mar 2012 06:52:50 +0000

The sale of agricultural land in Bulgaria has peaked up in March 2012 after two months of stagnation due to the winter. The areas of Vidin, Stara Zagora, Razgrad and Haskovo are the most attractive for the buyers. In 2011 the number of sales of agricultural land has increased by 10-13% on the average and in same areas has reached 25%. In 126 000 purchases the buyers have acquired 1,185 million decars of land. The secondary market has a share of about 50% of the purchases and the expectations are in this year this share will grow to about 70%. The increase of the rent of agricultural land has been significant.

NEW LAW

Boyan Yordanov — Fri, 23 Mar 2012 10:31:42 +0000

The National Union of the Bulgarian estate agents will propose to the parliament to pass the drafts of the new Law for the Work of the Estate Agents. This project has the support of the Notary Chamber, the Surveyors Chamber, the Builders Chamber and the Confederation of the Customers in Bulgaria. Such kind of law will regulate the business of the estate agents in the country and will impose clear rules and obligations. The new law aims to provide quality service and to establish professional ethics. All members of the union have expressed their readiness to cooperate with the state in its attempt to block all opportunities for money laundering through property purchases and sales.

RURAL PROPERTIES

Boyan Yordanov — Fri, 16 Mar 2012 16:16:20 +0000

In the beginning of 2012 the market of rural properties in Bulgaria is slower than in the same period of 2011. This might be due to the exceptionally harsh winter this year. The average price of houses sold in rural areas in the first two months of 2012 is 15 500 Euros. This price for the same period of last year was 18 900 Euros. At the same time, in 2011 there more sales of houses in the 35-45 000 Euros range. The prices of rural properties peaked in 2004-2005 but have fallen six times since then and are now selling at the price levels of 2006. However, now buyers focus on much better rural properties.

In 2011 the main interest was in rural properties in Central Bulgaria and along the Black Sea coast. The expectations are that this tendency will not change in 2012.

BUSINESS PROPERTIES

Boyan Yordanov — Mon, 12 Mar 2012 08:33:26 +0000

Globally, the investments in business properties have increased by 14% in 2011 in comparison with 2010. The highest growth was in North America – 52%, followed by Europe and the Middle East – 17%. In Central and Eastern Europe, these investments have reached 19 billion Euros in 2011, which is a growth of 76% in comparison with 2010. This is 68% of the volume of their volume during the property boom years.
In 2011 the investments in business properties in Bulgaria have increased sharply in comparison with 2010. In 2010 they were 20 million Euros, while in 2011 they reached 198 million Euros, which has put the country in the first place regarding this type of investment. In the second place is Slovakia with an annual increase of 534%, followed by the Czech Republic with 366%, South Africa with 269% and Switzerland with 216%. However, the annual yield in Bulgaria has not changed – for office spaces it is about 9,5%, for shops – 9% and for industrial space it is 12%.

UNFINISHED CONSTRUCTION PROJECTS

Boyan Yordanov — Tue, 06 Mar 2012 16:28:53 +0000

Many construction projects in Bulgaria launched in the days of the property boom have been left unfinished. Some people look at this as an opportunity to destroy these semi-finished buildings in order to collect scrap which they later sell. The most striking case is in Blagoevgrad, not far from the ski resort of Bansko, where a Polish company could not complete the shopping mall which they started building on the site of the largest once dairy in the area. Three years ago the Polish investors paid 6 million Euros for the dairy. Now the only thing left from the unsuccessful construction project is shapeless concrete, as all iron bars have been sold for scrap. There is no sign of the investors and they had not paid their property tax, which hinted Kostadin Paskalev, the former mayor of Blagoevgrad to ask Interpol for help to find them.

PROPERTY MARKET IN SOFIA – A REVIEW

Boyan Yordanov — Mon, 27 Feb 2012 14:03:44 +0000

Although in comparison with other Central and Eastern European capitals the property market in the Bulgarian capital Sofia is not so profitable at the moment, still in 2011 it has displayed signs of stabilization. In comparison to 2010, there was not much change in the demand and in the properties on offer. The situation in Sofia looked similar to the one in Budapest, Kiev, Bucharest, Zagreb and Ljubljana. However, the experts claim that this is the beginning of stabilization. The volume of the purchases in 2011 has increased steadily and at the same time there was a slight increase in the number of the properties for sale. The decrease of the selling price in the last year has not been so drastic as in 2009 and 2010. However, Sofia is far away from Warsaw and Ljubljana where the average prices were close to 90% of the prices during the property boom years.

THE PROPERTY MARKET – OVERVIEW

Boyan Yordanov — Fri, 24 Feb 2012 09:44:28 +0000

According to analysts the prices of apartments in Bulgaria will not decrease further. The experts refer to the prices of actual purchases, underlining that the advertised prices sometimes are unrealistically high. There is already are a mismatch of the demand and the properties on offer. The most desirable properties have sold and there is a lack of good quality homes. At the same time developers can not launch new projects because there is no financing. The off-plan sales have completely stopped. Some experts recommend that the properties prices in Bulgaria should not be calculated per meter, as this can some times lead to confusion.

BULGARIA’S GDP AND TRADE

Boyan Yordanov — Mon, 20 Feb 2012 16:15:42 +0000

According to the National Statistics Institute, Bulgaria’s GDP is still 4.4 % bellow its highest pre-recession level of the last quarter of 2008. It is expected to catch up in the end of 2012. The economic growth is expected to be about 2%. The slowing down of the economies of the major economic partners of Bulgaria continues and this is the main reason to expect slowing down of the Bulgarian economy in the short term. The share of industrial production is shrinking while the share of the services keeps growing. The share of the net export has decreased while the share of the domestic demand has increased. Bulgaria’s foreign trade keeps performing well despite the limited economic growth in the Eurozone and the shrinking of the domestic demand in the major economic partners of the country. The general turnover in 2011 has increased by 25% nominally. FOB has increased by 30.6% and has reached 18.5 billion Euros, while CIF has also increased by 20.6% and has reached 21 billion Euros. The FOB/CIF deficit has decreased by 23.5% in comparison with 2010 and is about 2.5 billion Euros or 6.3% of the expected GDP. The direct foreign investment for 2011 will most likely not exceed 1 billion Euros.

OFFICE SPACE – STATISTICS

Boyan Yordanov — Fri, 17 Feb 2012 08:52:59 +0000

In 2011 the prices of offices in Bulgaria continued dropping, although the average decrease of 3.48% on an annual basis is nothing near to the 18% drop in 2010. Buyers usually expect a price decrease of 30% in case of purchase. The highest price drop was in Blagroevdrad – by 7.71% and in Varna by 6.35%. In Sofia it was minimal – 0,93%. According to the analysts further sharp drops of the office prices are not expected.
At the same time the rental prices of office space have dropped by 18.38% on average for 2011. The sharpest drop was in Blagoevgread – by 26.72% and in Varna – by 25.73%. In the capital Sofia the office rents have increased by 3.08%.
The average yield of office space is 10.59% in Blagoevgrad, 9,71% in Varna and 8.18% in Sofia.

NEW BUILDINGS – STATISTICS

Boyan Yordanov — Mon, 13 Feb 2012 08:58:35 +0000

According to the Bulgarian National Statistics Institute the number of the completed new buildings in Bulgaria (in the country the buildings must receive the so-called “Permission to Use – Act 16” to be considered completed) in the last quarter of 2011 has increased by 34.5% in comparison with the previous quarter, totaling 928. The number of the new apartments however has decreased by 8,1 %. Across the country the highest number of buildings and apartments has been completed in Varna (188 buildings and 815 apartments); Burgas with 127 buildings and 826 apartments is in the second place.
At the same time the average living area of the newly built apartments has increased by 11,4% in the last quarter of 2011 in comparison with the previous quarter. The highest increase was in Gabrovo, followed by Montana.

THE AMENDMENTS TO THE LAW FOR THE FORESTS

Boyan Yordanov — Fri, 10 Feb 2012 08:45:01 +0000

The amendments to the Bulgarian Law of the Forests were passed by the Bulgarian Parliament. According to them ski slopes can be constructed on state owned land without the need to take out this land from the forest fund. Some of the amendments concerned the production and sale of timber.
The easement (the right to build) on plots of land situated in forests shall be granted for the construction of ski slopes, electricity poles and poles for gondola lifts and ski drags or “other poles for transport without an impact with the ground”. The easement (right to build) shall be considered granted to all plots of land situated in forests as from the date of the execution of the detailed organization plan for the construction of state owned national sites, the republic’s road network, including the reconstruction of the affected technical infrastructure.
According to the amendments, the certificates for export and import of raw timber will be abolished.

BULGARIAN ECONOMY – FORECASTS FOR 2012

Boyan Yordanov — Mon, 06 Feb 2012 13:59:36 +0000

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.

PROPERTY PRICES IN BULGARIA – FORECAST

Boyan Yordanov — Mon, 30 Jan 2012 09:17:09 +0000

The expectations of analysts are that the property prices in Bulgaria will continue to drop on average by 5%. The top prices fetch luxury properties in Varna on the Black Sea, where they sell on average for 1500 levs (760 Euros) per square metre, while the properties in the capital Sofia are in the second place with prices of 1468.10 levs ( 700 Euros) per square metre.
In 2012 the market of holiday properties will keep relying on the Russian buyers, as their interest towards properties in Bulgaria has not been affected by the recession like in the case of the Irish and the British buyers. The prices of some of the holiday apartments and houses have dropped by 50% since 2008 and this makes them even more attractive for the Russian buyers. The expectations that Chinese and Middle East investors will start buying properties in Bulgaria failed to materialize.

BULGARIA-EU – NO CONCESSIONS

Boyan Yordanov — Fri, 27 Jan 2012 13:58:58 +0000

After his first visit to Brussels, the Bulgarian President Rossen Plevneliev said that there has not been a positive response to the demand made by the Bulgarian Prime Minister Boiko Borissov the EU to increase its financial share in infrastructure projects in Bulgaria. Currently Bulgaria pays 20% and the EU 80%. During his meeting with the German Chancellor Merkel in Berlin recently the Bulgarian Prime Minister asked that the share of the Bulgarian state decreases to 5%. Only member states with serious economic problems have received such kind of support from the EU. The Bulgarian government considers this approach unjust, as it stimulates undisciplined member states and punishes the others.

BULGARIAN STATE BONDS

Boyan Yordanov — Mon, 23 Jan 2012 09:13:05 +0000

The Bulgarian Ministry of Finance has issued state bonds to the value of 35 million levs (18 million Euros) with maturity date in seven years time and a coupon of 4.45%, which shows increasing trust of the investors. The bonds were bought by banks (about 36%), pension funds (48%) and insurance companies (13%). The coupon of the state bonds is much higher when a country is experiencing financial difficulties like Hungary ( 10,04%) or when its economy is booming like Turkey (5,74%) and Poland (5,05%).

THE DRAFT AMENDMENTS TO THE LAW FOR THE FORESTS

Boyan Yordanov — Fri, 20 Jan 2012 15:37:59 +0000

The Bulgarian government has approved the draft amendments to the Law for the Forests and has sent them to the parliament for voting. According to the draft amendments more than 100 state owned companies that look after the forests will be allowed to cut and sell timber. Until now only private companies have been doing this after participating in tenders. There will be preferences for strategic partners of the state in the tenders for the production of timber.
The amendments shall make the regulations concerning the process of constructing skiing slopes and lifts pretty lose. The current obligatory requirement to exclude the plots of land where the skiing slopes and lifts will be positioned from the forestry fund shall not be in force any more. However, this shall not apply to plots of land where wind power turbines will be constructed.

SOFIA – PAYMENT OF PROPERTY TAX

Boyan Yordanov — Mon, 16 Jan 2012 10:57:49 +0000

This year the citizens of Sofia and the companies based in the Bulgarian capital must think twice before deciding to delay payment of their property tax. Sofia Municipality has focused on collecting debt from individual tax payers whose unpaid property tax exceeds 1000 levs and from companies owing more than 50 000 levs. Until now the emphasis was on collecting tax from the large debtors. Only in 2011 Sofia Municipality has collected more than 90 million levs of old debts which was an increase by 20% in comparison with 2010. The largest debtors were the Chief Mufti with 629 000 levs, Sofia Outlet Centre with 579 000 levs and Limex City with 267 144 levs.

SOFIA – REVIEW OF PRICES OF LUXURY PROPERTIES

Boyan Yordanov — Fri, 13 Jan 2012 08:40:25 +0000

The prices of large properties in Sofia have dropped sharply. Only in the area of Oborishte where the most expensive properties in the capital are located, prices have increased by 4% and start at 923 Euros/sq.m. , reaching 4331 Euros/sq.m. At the same time in the affluent area of Lozenets the property prices have dropped by more than 1/5 in the last two years. The lowest price there is of 816 Euros/sq.m. The most serious price drop – of 23% – in the expensive areas of Sofia is in Beli Brezi. More than 700 apartments located in affluent central areas of the city have been put on the market.

FOREIGNERS BUYING LAND IN BULGARIA 2012

Boyan Yordanov — Tue, 10 Jan 2012 11:13:18 +0000

After its accession into the EU in 2007 Bulgaria had the right to keep in force its existing laws concerning the purchase of a second property by citizens of EU member states and citizens of states signatories to the European Economic Area Agreement (EEAA) for five years.

This term has practically expired on 1 January 2012.

Those citizens of EU member states and citizens of states signatories to the European Economic Area Agreement (EEAA) who legally reside in Bulgaria are in theory excluded from the above rule.

Concerning the purchase of agricultural land, forests and forestry land by citizens of EU member states and citizens of states signatories to the European Economic Area Agreement (EEAA) Bulgarian laws preceding the accession into the E.U. should be in force for seven years after the accession of the country into the E.U., i.e. until 1 January 2014.
The above restriction does not hypothetically apply to self-employed farmers and agricultural producers, who are citizens of EU member states and who would like to settle in Bulgaria. They should be treated like Bulgarian citizens concerning purchasing all types of property in the country.
For your reference please look at the text The Treaty of Accession 2005:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2005:157:0104:0128:EN:PDF

SOFIA – PROPERTY RANKING

Boyan Yordanov — Thu, 05 Jan 2012 08:47:55 +0000

The Daily Telegraph has published the ranking of The Global Property Guide Europe’s Top Places to Invest in Property. The Bulgarian capital Sofia took 17-th place overtaking Prague (18), Paris (20), Lisbon (22) and London (26). According to The Global Property Guide, the positive feature of Sofia is the pro-landlord rental market. The negative feature is that the rental yields are poor – 4,19% – the transaction costs are high, the rental income tax is moderate and the corruption is strife. The capitals of many other Balkan countries feature better than Sofia. Ljubliana, Slovenia’s capital is in place 14, Bucharest, the capital of Romania, is in place 12, Zagreb, the capital of Croatia is in place 5, Istanbul is in place 4 and Skopje, the capital of Macedonia is in place 2.

BULGARIA – REGIONAL DIFFERENCES

Boyan Yordanov — Tue, 03 Jan 2012 15:11:02 +0000

The differences in the standard of living among the regions in Bulgaria continue to grow despite the European funding. The poorest regions – the North-Western and the Northern Central ones – continue to lag behind the rest of the country. At the same time Sofia receives the largest share of the European funding per capita according to the National Strategy for Regional Development 2011 -1015 of the Bulgarian government. The North-Western Region which includes Vidin, Montana, Vratsa, Pleven and Lovetch is getting poorer. According to the National Statistics Institute the GDP in this region was 5576 levs (apprx. 2250 Euros) per capita in 2009 or 62% of the average for the country. At the same time the richest region in Bulgaria – the South-Western Region which includes Sofia – had GDP of 15 610 levs (apprx. 7800 Euros) in 2009. In comparison the GDP per capita in the North-Western Region in 2000 was 90% of the average GDP for the country. The situation in the Northern Central Region that includes Veliko Turnovo, Gabrovo, Russe, Razgrad and Silistra is similar. The GDP per capita there in 2009 was 5942 levs (apprx. 2450 Euros).
In the North-Western Region only 59.3% of the people from the age of 20 to the age of 64 are employed. In the North-Central Region this proportion is 60.5% while in the South-Western Region it is 71.6%.
Instead of attracting Euro-funding, the poorest regions in Bulgaria receive much less European money in comparison with the capital Sofia. The North-Western Region has attracted only 512 levs (250 Euros) per capita, the North-Central Region has featured a little bit better, attracting 691 levs (345 Euros) per capita, while Sofia has attracted 2164 levs (1800 Euros) per capita.