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Bulgarian Property Analysis

Property prices in Bulgaria dropped during the last quarter of 2008 and it is evident that the real estate sector across the world will continue to take a hammering as property developers retrench, vendors hesitate to put their homes on the market and buyers wait to see if there are further price falls. Tight lending and a supply / demand situation which is not clear also adds to the puzzle of whether now is the time to buy Bulgarian property.

Nonetheless, those properties in the best locations, having decent infrastructure around them and facilities on hand are doing ok and riding the storm. Quest Bulgaria shares some thoughts and opinions on the current property situation in Bulgaria.

Apart from the global financial crisis and now a further slowing because of tightening lending, other elements have affected the Bulgarian property market.

Over the last six years, the Bulgarian real estate market grew at a phenomenal pace. Many developers entered the sector building dozens of new developments and buyers launched themselves with frenzy into this new found property market.

Entry into the EU provided further stimulus and investment confidence increased exponentially. The problem was that things grew too fast and too big - all on the back of huge availability of too easy money and financing.

It was inevitable that with so many investors and buyers, small and large, looking to make a quick buck in the short-term, the market would fall off quite quickly in any financial crisis.

With the slowdown in construction and tightening on business funding, job losses are of major concern in the country, particularly in the construction sector. Although, it has to be said that the Bulgarian government are re-directing as many construction workers as possible to infrastructure projects to contain any mass redundancies.

The problem here is that when people are concerned about lay-offs, then they are reluctant to move or buy a new home, be that upgrading or downgrading. Therefore demand reduces. At the same time, vendors are unwilling to put their property on the market, preferring to wait for the sector to move and prices to shift upwards.

This creates an uncertain situation regarding supply and demand.

At the moment, it would appear that demand for Bulgarian and overseas property is building in the UK and this pent-up demand alone may force the market to shift.

Another significant factor relates to how the Bulgarian property market has been financed. In the main, particularly in the ski and sea resorts, there have been a large number of off-plan sales, where buyers were hoping to make a fast, short-term profit.

There is a horrible situation developing due to the current world financial crisis. Many purchasers bought during 2008 at the top of the market, with the development due to complete, say, during this year.

Now, some developers are struggling to complete projects as new buyers have not arrived to buy all the off-plan properties they hoped to sell. At the same time, many buyers are not completing on their contract. Some because they don't want to complete as they are propping up their mortgages and cost of living at home or have just changed their mind, others because they cannot raise the finances for the final payment. This is a nasty vicious circle and it will take some time to see what transpires.

All properties are being affected by this crisis but those with good locations and of high quality are the ones which are withstanding the test as buyers have become more discerning.

If you are looking to invest in Bulgarian property this year, then there are some really good deals out there to be had.

Top quality properties, those which are unusual and have facilities available by foot on hand are still not going cheap, as they will always command a premium.

Apartments on the coast and in ski resorts are selling when the price is in line with current buyers' expectations, which are low.

However, several agents, who are selling in small towns and villages with amenities, have reported to us in the last few weeks that business is surprisingly brisk.

We have noticed that if the price per sq.m. is right or the location / quality very good, then buyers are coming into the Bulgarian property market again, which is evidence that the market could be starting to bottom out.