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Bulgaria property price predictions 2010

Not even those who are meant to be 'in the know' are keen to make any property price predictions for 2010. Forecasting the properrty market in these turbulent times is particularly hard and there are few 'experts' who have done a decent job even in a more normal market.

However, there is no harm in making a well founded assessment of the likely events in the Bulgarian property and real estate market for the coming year.

If we go back to the beginning, property prices in Bulgaria were pushed up dramatically during the years from 2004 to 2008. Like lemmings, buyers were dashing to get onto the overseas property ladder, believing the only way prices would go was up. This held true... at least until the global financial crisis and subsequent property price collapse. There will be many who bought a second home overseas who are now wondering whether they made a wise move.

2009

2009 was certainly the year of price correction, with falls across the globe. The contagion reached Bulgaria a lot later than much of Western Europe. House prices only started to slide in the last three months of 2008. This brought the end of the boom years, where prices had rocketed by 35% in 2005 and 27% in 2007.

When the global financial crisis hit the UK and other Western European nations, the frenzy of foreigners buying crashed. For Bulgaria this meant that the buyers dried up. Numerous estate agents, many of whom were, it has to be said, fly-by-nights, closed. The banks curbed mortgage lending. New construction developments were been put on hold. Property prices fell further, with a particularly sharp fall in the third quarter of last year.

As Bulgaria was one of the last countries affected by the financial crisis, it is surely going to be later coming out, compared with others. Research from Knight Frank, showed that 'house prices are now rising in a clear majority of locations around the world, with nearly 70% reporting growth in the third quarter 2009' but Bulgaria was not included in this number. Prices have now fallen a total of 28%, which is usually close to the largest price fall experienced as a rule before stagnation and recovery come about.

2010

Recovery of the Bulgarian property market is dependent upon many factors.

Finance. The Bulgarian banks have always exercised cautious lending but it is likely they will remain far more conservative even when the crisis unravels itself. There has been a slight shift in Bulgarian lending rates (downwards) but interest rates still remain high and it is to be hoped the banks will move rates down to spur the market.

Currency. The British Pound took a nosedive against the Euro, making overseas property more expensive to the Britons by some 30%. The pound does not look like recovering soon.

Vendors. Supply is always a governing factor. Many who wish to sell are hanging on to their property, waiting for signals of any upturn. Construction has been put on hold. A shortage of available property may become apparent.

Buyers. Desperately looking for the bottom of the market. They are watching closely and don't want to miss the moment when it arrives. Those with cash are waiting but will move quickly when the time comes and they will benefit first.

It seems as if everything is 'hanging in the balance' and it is likely that prices will take another fall in the early part of 2010, whilst banks, buyers and vendors sit it out. The Bulgarian property market should then bottom out and stabilise. Sales volumes are also likely to hit a low early in the year but also recover in the latter six months.

Stephane Lambert of Stara Planina Properties (www.stara-planina.com) shares with us his thoughts. 'The overall picture is of falling prices and the expectation in early 2010 is for further falls with some leveling out of the prices towards the end of 2010. As an average figure prices have fallen by approximately 35%. This is based on actual sale prices not asking prices. This is important to highlight because many properties are still marketed at pre-crisis prices and there is a margin for negotiating down the asking price.

The worst hit market has been the new builds along the coast and in the ski resorts and in fact there are many so-called distressed sellers in unfortunate situations where they are forced to sell at levels even lower than 50%.

The crisis hit Bulgaria late and its effects will linger longer. For this reason prices are likely to drop off further in early 2010 with analysts predicting a recovery in the economy from mid 2010. When a bubble is built everyone expects it to burst and eventually it does. Our client base in the last year has changed. Prior to 2009 it consisted in equal share between lifestyle buyers (those looking to relocate or to use the property for personal reasons) and investment buyers (buying to make profit and no other reason). Now the lifestyle buyers are the dominant sector. I suspect in 2010 there will be a growth in the investment buyers as prices bottom out.'

Checklist

Bulgaria is now in the third stage of the property cycle, which typically follows: rapid growth, rapid decline (usually up to 30%), stagnation, recovery.

Bulgaria will still remain one of the best value-for-money destinations in the EU
Potential falls first half 2010
Imbalance between supply and demand will prevent market falling further
Economy will show upturn in second half of the year
Upward property price change by this time next year
Finding money will still be difficult but will become easier
Those with money are in ideal market conditions
Long term returns, less significant capital appreciation for three years
Lending: take fixed rate over longest period possible
Best buys: distressed frontline coast / gondola ski: quality builds on completed developments: historic and listed buildings