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Sofia Apartment Prices Drop

For the first time in 5 years apartments in Bulgaria's capital city of Sofia have fallen to an average of 700 euro per square meter. Recent reports by Profit.bg have stated that from the end of 2012 the drop in Sofia's property prices was notable in studios, and larger one and two bedroom apartments.

The price plummets were:

Studio prices by 1.9% to 680 euro's per sqm.

One bedroom dropped by 1.4 % to 697 euro's per sqm.

Two bedroom apartments by 0.7 % to 695 euros per sqm.

This news is not optimistic as the number of buyers has dropped significanlty over the past few years by as much as 40% since the peak in 2007- 2008.

Though this may change soon and boost the rate of buyers investing in apartments as rental costs have increased significantly recently in the capital. Rents for two-bedroom flats increased about 7%, while small studios and one-bedroom apartments fell between 2 - 3%.

Change of investment

Amid the new law of tax on bank savings will this news encourage more people to opt for investing their spare cash into a Sofia apartment and earn rent as an income?

A lot has been discussed about the fast decision to tax savings, which came into force from the beginning of 2013.

A drastic decrease within the bank savings has been noted to save on the new tax laws. So does this mean a property investment is likey to replace the saving deposits?

Mortgage rates have remained stable so this may prompt savers to look at this as an alternative investment to being taxed on bank deposits.

Points to consider

When considering this type of investment by means of finance, there are 2 aspects to consider by investors - one is the decline in value of a property and the other is relying on unpredictable income to pay a monthly loan.

Development in the property market the past year has led studio flats in Sofia to mark their biggest decrease compared to other types of property.

Studios are cheaper per square meter than one-and two-bedroom flats to purchase and rent.

These are characterized by the best rent per square meter and experience the perfect revenue within their rent.

Based on current rental rates for studio flats in Sofia the cost is principally about 6.5%, compared to 5.7 % for one bedroom and 5.2% for the two-bedrooms.

From an investment aim a studio apartment is initially a better investment.

The expenses are lower generally between 5 and 10 percent.

Secondly furnishing a small studio which makes it more appealing to rent out is cheaper than larger one and two bedroom apartments.

Obviously the disadvantages of renting a studio out are it is only attractive to single people and not to couples and families.

And finally the expense of upkeep and repairs, and taxes are lower.