The Activity on the Market Is Increasing

Imam Imot Magazine, vol.5, May 2010

Property buyers recovered from the initial shock and are now trying to take advantage of the decreased prices. Meanwhile, the banks, though slightly, loosened the credit conditions.

The change immediately reflected on the market causing it to become more dynamic. This stir is still unnoticeable in some segments. But the interest of potential investors and buyers is returning. Imam Imot magazine asked some of the leading real estate agencies to analyze the present market conditions and share their forecasts for the forthcoming months. Here is how Polina Stoykova – the Chief Operations Manager of BULGARIAN PROPERTIES – answered these questions.

1. What are the main trends in the first four months of the year? What is typical for the different market segments? What are your forecasts for the next few months?

The first quarter of 2010 was relatively successful for the property market in Bulgaria, as the average activity on the market was about 40% higher compared to the first quarter of 2009 – the toughest period for the property market in Bulgaria. Property sales in January and February 2010 remained the same as those in the second half of 2009.

March brought higher activity on the market and the number of deals reached a record high since the beginning of the crisis and a growth of 50% compared to the average monthly levels in the last 10 months. The more dynamic market in March was mainly connected to properties in regions around the country some of which had registered almost no deals in the last few months. The activity on the market of city properties in Sofia and Varna remains unchanged compared to the last six months and property prices based on actual concluded deals remain stable.

In April the activity on the market remained close to that of March but was 50% higher compared to April 2009. This is the sixth consecutive month with higher number of deals compared to the same month in 2009.

The concluded deals are still mainly with luxurious properties or with very cheap properties, as the main requirement of the buyers is the bargain price. This trend started in 2009 and still continues.

Foreign property buyers from various nationalities are slowly returning to the Bulgarian market attracted by the low prices. For the first quarter of 2010 the share of foreign buyers increased by 5% compared to 2009. If the government abolishes the limitation for foreigners to buy land in Bulgaria – at least regarding houses with yards and apartments with ideal parts of the land, their interest towards Bulgarian properties might increase.

The reduction of asking prices in the beginning of the year led to conversion of the levels of the asking prices and the actual prices at which deals are concluded. Presently, the asking prices are still undergoing a correction process now but the number of discounted properties every week adds up to just half of the number of new offers.

Only a couple of months ago the discounted properties were more than the new offers for the week. For the first quarter of 2010 the asking prices of properties decreased by 5%. We expect an additional decrease for low-quality properties, for those with bad location and for those in need of overall renovation. The demand of these properties and their prices still cross each other. The prices of rural properties and properties in small settlements are to fall further as well.

In 2009 the prices of all property types fell on a mass scale – even of high-class properties. In 2010 we will witness the true segmentation of the market and we do not expect prices of luxury properties to fall further – they will show they are more resistant in terms of prices, while the prices of other property types will fall some more.

If we have to describe the current situation on the market in one sentence it would sound like this: “Buyers are returning to the market, there is interest on their side, the number of concluded deals is increasing but all this is true for properties offered at attractive prices.”

2. Many of the countries, which went through a serious property market collapse, are starting to recover. How will this affect the Bulgarian property market? Usually it lags behind the global trends.

The market in Bulgaria will recover as well. We felt the economic crisis later and it is normal for the countries that were hit first to recover earlier.

The recovery of the global economy will influence directly the Bulgarian economy as we are closely linked to it and upon recovery of the economy will result in the recovery of the property market.

The property market in Bulgaria is not a closed system and there are buyers and investors of various nationalities on it. Once they saw the recovery of their markets their confidence started to build up again and they are looking for bargain properties in Bulgaria. This will lead to the increase the demand and will help the stabilization and recovery of the market. And last, but not least, the recovery of the economies will give more freedom to the banks in Bulgaria to encourage the lending to the business and to give more mortgage loans which will stimulate local property demand. This process already started – the banks have been more active since the beginning of 2010.

3. What are your observations about the demand and supply at the moment? What do people look for in the different segments, especially in the residential properties and second home segments? Is the time for concluding a deal decreasing?

People look for bargain deals in all property segments.

In Sofia there is demand for one-bed apartments for up to 40,000 Euro, as the supply of such apartments is not very big. There is also interest on the part of buyers in elite properties in Sofia and Varna at prices between 100,000 and 200,000 Euro. In Sofia luxury properties are sold at prices between 1,300 and 1,600 Euro/sq.m. Since the beginning of the year there is higher interest in the other big cities as well – Bourgas and Plovdiv. Both Bulgarian and foreign buyers are interested in cheap holiday apartments in ski and seaside resorts around the country. These are apartments sold at prices between 300 and 500 Euro/sq.m. The same is valid for cheap rural properties sold at prices up to 10,000 Euro.

The supply of all property types remains stable and there is a great variety of offers. Many owners who were waiting for a long time before lowering the prices of their properties are now convinced there is no sense in waiting. Many foreign sellers offer their properties for sale on a daily basis and they are competitors to the local sellers as they are more flexible and ready to lower their prices to make a fast deal.

Sometimes deals are concluded a week or two after putting the property up for sale but they are always properties offered at very lucrative prices and which have interesting parameters distinguishing them from the others – like wonderfully furnished apartments with great location and at a bargain price.

Buyers who put a high price and are ready for a long time to sale the property are very few as they do not want to waste their time and are more willing to offer bargain prices.

4. Not long ago a real estate agency said it feared that if construction continues to decrease there might be a hunger for homes by the end of the year. Do you share those fears and for what types of properties are we talking about?

I wouldn’t say that the demand might increase so much in the next six months to result in a shortage of homes. Before that there will be another phase – a decrease in the prices of unsold off-plan buildings. This will diversify the supply.

However, there is a problem and it is the great number of small apartments that were built that are not functional and do not meet the buyers’ needs. That is why the Soviet-type blocks are still in demand. In the future the demand of functional and quality properties will increase and at one point it might really turn out that there is a shortage of such properties.

5. Can it really be said that the market is more active, that the work of the property agencies is increasing, and that they even have to hire more people?

There really is higher activity which is especially noticeable since the beginning of March. The work of the agencies has increased mostly in terms of more viewing trips and stable supply of properties around the country. Real estate agents are also swamped with sale offers and enquiries from potential buyers who often keep up correspondence with their agents for months.

The hiring of people is inevitable – many of the agencies cut down their staff significantly due to the crisis. However, now property agencies look for people with very good professional skills and experience and the profession of the real estate agent will not be as accessible as before the crisis.

6. Is the trend in which buyers and sellers waiting for a new fall of prices continuing? Is a new price decrease possible? When is the time for a sensible deal?

Sellers are not waiting for a new price decrease and definitely do not want one, while a large part of buyers still think they might fall further.

A sensible deal can be concluded at any time – what is important is the parameters and the price of the property to be assessed carefully, as well as one’s needs and possibilities for financing. When these aspects find the point of intersection, i.e. when the buyer finds a property with good parameters, at a bargain price and answering their needs without putting themselves and their families at a financial risk – that would be a sensible deal.


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