Supply and Demand Define Property Prices

Imam Imot Magazine, March 2010

The actual price of a property is defined by the supply and demand. However, it is only an expert that can give the most accurate assessment. Imam Imot Magazine asked a few questions on the topic which BULGARIAN PROPERITES’ Chief Operations Manager answered thus:

- Can it already be said that the prices at which deals are concluded in Bulgaria are getting closer to the actual value of properties?

The last research of BULGARIAN PROPERTIES based on actual offers and concluded deals shows that there is still discrepancy between the offer prices and the prices at which deals are concluded. This discrepancy varies between 5 and 15% for the different regions and property types. Based on the offer prices on the BULGARIAN PROPERTIES site property prices have decreased by 20% around the country on an annual basis. Meanwhile, the average price decrease based on actual concluded deals in 2009 compared to 2008 is 36%.

The discrepancy between offer prices and prices of actual concluded deals has decreased since the beginning of 2009 when deals were concluded at prices 20-30% lower than the offer prices. This means that the market is finishing the process of price readjustment and of finding the market value.

The issue of what is the real value of properties in Bulgaria still remains. Perhaps the market is very close to finding the point of balance. We believe that by the middle of 2010 the process will end and the market will reach the bottom, after which upon a positive development in the economy we could expect an increase in the deals and stable prices.

- How can we actually find out how much our property is worth?

This is a very delicate and important question for all of us. Not only for the people selling properties at the moment but for all property owners in the country, who according to official data make up 90% of the citizens in Bulgaria.

When defining the market price of properties due to the market dynamics and to the difficult reference to strict formulas and assessment methods one should take into consideration a number of factors. For example, these would be the prices of similar sold properties, data from experts about the average property prices for a specific property and region, data of the National Statistics Institute, additional advantages and disadvantages of the property that would increase or decrease its price, features of the area and the infrastructure, whether the property is sold furnished or unfurnished, etc. Our company regularly gives free advice about the state of the market which everyone can access easily and use as a guide.

Property owners could research all the abovementioned parameters by themselves and make their own assessment of the property to use as a guide. However, if one needs an accurate assessment of the price for selling the property we advise the sellers to turn to an expert in the field.

- The market is rather stagnated and in some regions or quarters there are not enough deals on which to define a trend or an average price. How can that be overcome?

In such cases we do things intuitively. In the present market situation intuition plays a very important role and when it is combined with the experience of the professional agent and the information about the property a realistic assessment could be received. Still, the market is fast to signal whether this assessment is realistic or not and the parties in a deal are free to bargain. This means the following: the property is put up for sale at a certain price; if there is no interest from potential buyers then the price is high; if there is great interest then buyers find the price attractive. Then it is up to the seller to decide what to do and they can always rely on advice from us.

It is important to underscore that though in a state of crisis the property market is very well developed in terms of information. Potential buyers constantly follow the offers and when an attractive offer comes to the market there is great interest towards it. We as an agency cover the whole country and offer all types of properties and we can say that there is interest in all kinds of attractive offers, as the buyers are of various nationalities and interests.

- What are the dangers of lacking a realistic assessment?

There could be a problem in the event of a sale or a purchase if the parties are not professionals in the field and do not work with a real estate agency. The danger lies in selling too cheap or paying too much money.

However, there is such a risk in all types of deals - the lack of information and a market assessment could put one of the parties in an unfavorable position. Such an uneven distribution of information can exist only in an unregulated market about which there is no information. The property market was like that 6-7 years ago but today there is a lot of information and it is easy for one to find out what they need.

If buyers and sellers work with a reputable real estate agency the risk of a lack of assessment is minimal as this is what the agency does – it advises about the price and assists in the negotiations for achieving the best parameters under the deal.

- How does your company assess the properties which your clients offer or look for?

When assessing a property we take into consideration the specific parameters of the property, its location, the infrastructure, its individual features, the average prices for this type of property and for the area (we have our statistics but use external sources as well), time range for the sale of the property, etc.

Practices change according to the market situation. I can say that since the beginning of the crisis we have relied mainly on our experience, intuition and direct observation of the market by our agents to conclude successful deals. There is no equation that provides a reliable assessment and a guarantee for a good sale. The personal assessment of the sales agent and their sense of the specific property and its sale play an increasingly important role.

An important role in the assessment of the market price is also given to the knowledge of the sellers and the buyers about what the other party is looking for so that they could meet at a certain price. Otherwise there will be no market and if there is no market there is no market assessment and value.

DISCOUNTED PROPERTIES

Has the Bulgarian property market reached the bottom?


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