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Review of the Bulgarian Property Market

With all the global markets being badly hit, we take a look at the current situation for Bulgarian property and real estate. The six years before the crisis saw investors from all over the world scrabbling in their haste to grab a slice of the property pie and the rush was not much more furious anywhere than in Bulgaria. The number of properties sold these days has fallen and there is far lower demand, the effects of which are being seen all over Bulgaria. However, for buyers, prices are now incredibly low so, is this a time to buy?

Vendors are grappling with their own financial problems, some having to prop up their situation back home, and reduced demand with less buyers in the market. Whilst a couple of years ago 70,000 euros would have been hardly enough to buy a small off plan apartment in the capital, today this money will easily get you a 100 sq.m flat in a decent part of Sofia. Purchasers seeking off plan have dwindled and consequently prices in Sofia for this type of property have fallen considerably. Buyers are sticking with completed new builds, where prices in the best areas of Sofia, such as Lozonets, are still at about 1,000 euros sq.m.

Some apartments which are completed on the Black Sea coast are going at incredibly low prices of 250 to 300 euros a sq.m. as developers who have finished their project seek to offload the properties. House prices on the coast have gone down by some 25% but very little new property is now coming onto the market. Only those desperate to sell are placing their homes up for sale. On some parts of the coast, prices have even bucked the trend. This is particularly true on the southern Black Sea coast, as supply has decreased, leading in some instances to a small percentage increase. On the northern coastline, house prices have come as far down as 300 euros sq.m. offering a real bargain to the buyer. It is unlikely that prices of houses will fall much lower as their prices are already more competitive than newly built apartments.

Despite much bad publicity, Bansko still remains the best ski resort in the country. Whilst those who purchased property in this area will have to sit tight to see the returns they hoped for, those looking to invest now are seeing the best of prices. Apartments and other new builds can be readily picked up for 500 euros sq.m. In the other popular ski resort of Pamporovo, where buyer numbers have gone down more dramatically, prices are about the same as Bansko. Borovets seemed to have been least affected because there are generally less properties on the market, so supply has not outstripped demand to the same level. On average the prices here remain at 700 euros sq.m.

After the years of large-scale cheap-build developments, the trend is definitely towards small developments of higher quality. In part, no doubt this is due to the global credit situation but it is also down to a more discerning buyer. James Gonzalez, market analyst at Obelisk International believes that a move to smaller homes is good sense, "In a changing market, for every problem that might arise, so does a new opportunity. It is at times such as these that the most innovative minds come to the forefront. The ability to adjust to changing market condisions is central to successful buying in today's climate". The trend is backed up by the latest stats, which show that the Bulgarian building permits recently issued were for built-up space some 29% smaller than previously.

Rural property has remained fairly static by comparison and proven to be a safer bet than all the off plan and new builds. Prices overall have reduced but the countryside has not seen the swingeing falls that the over-built coast and ski resorts are experiencing. This may well be because in general, those buying in the small towns and villages are lifestyle buyers and these areas were not on the radar of the 'investors', with their calculators in hand.

Farmland has represented an excellent investment and has proven quite robust even in the downturn. Agricultural land has been lost to development and has kept prices stable. Rises of up to 300% beetween 2004 and 2008 have been reported, according to a report by property consultants Savills. The report points out that increasing demand for food and bio fuel will keep land values high. "Although there is now more commodity price volatility, against a backdrop of low interest rates the industry is well placed to weather the current recession and prosper in the future", said Ian Bailey, head of Savills rural research.

Mortgage applications in Bulgaria are increasing. With property prices being at an all-time low, buyers are starting to come back into the market and an increasing number are seeking mortgages. CreditCenter say that mortgage applications have gone up by 20%, most of whome are young families with a couple of kids and the parents having decent jobs and good personal savings.

Agents and analysts in Bulgaria are predicting that there will be a recovery early 2010. Certainly, buyers are emerging now that property prices are down some 20% overall and even 30% in some parts of the country. There are both motivated buyers, because of low prices, and motivated sellers, who have their own financial problems. The number of new build homes in the first quarter of this year was 43% less than at the end of 2008. There are also less homes coming onto the property market for sale. It is possible that with less new builds and resales available a vacuum could appear in 2010. It may not be the moment to go mad and buy up a ton of Bulgarian property but it may be the right moment to take a serious look as prices may not be this low if you delay too long.