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Panic, Panic, the Credit Crunch is Here

It will take a long time to sort out this horrible financial mess and work out what damage has been done to the global property markets. Originating in the USA, with their reckless financial activities, it has now impacted everywhere. The impact is most likely going to be particularly hard felt on the property markets which relied too much on slapdash cheap credit, and masses of it. But what about Bulgaria?

It is interesting to note that this crisis is bringing a dose of reality to the world - that one cannot permanently live on credit nor beyond one's means.

Where it is impacting most is with those who over-borrowed and find themselves now on a sticky financial footing. Given that the most abundant cheap credit was in Britain, Ireland and Spain, these are particularly feeling the crunch. This means that there is now a reliance on other regions (Russia, Central and Eastern Europe- to push the global economy, including the property markets.

Those who didn't 'overgear' are smiling through the credit crunch as they now have the power. They are still buying but perhaps are spending a little less. Indeed, the whole Bulgarian property market is now fortunately stabilising, with no more giddy days of 35% plus per annum price growth. Those who are investing now are financially more stable and only the best agents and developers will weather the storm, meaning buyers will be able to have more trust in those who remain. This is leaving the market open to more sensible medium to long term purchasers who are looking for true quality property which will stand the test in today's and tomorrow's market.

David Davidov of Colliers International commented, “The situation is on the whole healthy rather than alarming. This means that it is only projects with solid investor capacity, a good concept and a long-term strategy that will be realised,”

Bulgaria's position is interesting as the banks have taken a much more conservative approach in their lending. The local Bulgarian market is very active in property, buyers have a lot of choice and the Bulgarians have very little debt.

Where there has been oversupply (such as some of the ski and sea resorts) then prices have fallen but in other areas, prices are still rising. Property prices in the low end price range have gone down, but there is strong healthy demand for quality properties. The main attraction is that property prices in Bulgaria are still low.

With signature golf courses, marinas, five star international hotels and ever more cheap flights, making travel to the country easier, this all adds to the lure of the country.

For the Bulgarian banks, well they have not been heavily into mortgages over the last few years, particularly in the light of the fact that there is such high property ownership in Bulgaria. The banks have not really got to grips with credit cards or quick loans, which means they are better protected in such times. Most Bulgarian wealth is based on the property they own outright, very low credit (if at all) and frequently savings in the bank. This is not to say that the whole crunch will bypass Bulgaria but the country is better placed than many to limit the worst effects.

Many financial analysts consider that the effect of the banking crisis in Bulgaria iss limited to the amount of securities issued in the USA bought by Bulgarian banks. But another effect is the raising of interest rates and also sales of shares by foreign investors to endeavour to minimise their losses.

Darik Radio reported the words of Bulgaria's Deputy Prime Minister in charge of the economy, "We are in a better position than many other EU member states for a number of reasons. Among them is our underdeveloped financial market; we don't have futures options, and this is where the financial crisis in the USA started, and the European markets were affected in this way. We in Bulgaria do not have that kind of market. In Bulgaria the investments are long term, we do not have "hot" money."

When you can still buy in Bulgaria a top level property for under 120,000 euros and get a cheaper cost of living, why bother with such rapidly declining markets as Spain and France.