Mihail Chobanov, BULGARIAN PROPERTIES Managing Director: Prices of Mid-Class Properties Will Fall, Luxury Properties Will Become Stable

- Mr. Chobanov, according to a research Bulgaria is third in the world in terms of residential property price drop in 2010. Why do the forecasts of part of the analyzers in Bulgaria differ from the final data?
- If you look chronologically you will see that we never said prices will stop falling and our forecasts of about a 10% price drop were true. The actual data we have based on concluded deals last year shows that there is a price drop of between 8.3 and 13% in the different segments and types of properties, which makes just under 10% drop on average for the year. In this line of thought our data differs from that placing Bulgaria in the third place and I think this international report has a slightly more long-term view on things. Taking into consideration that in 2009 there was a 40% price drop and now it is only 10% things add up.

- Will there be a recovery in 2011 or will the drop continue?
- For the luxury segment we can say that prices are stable and the number of concluded deals is increasing. The trend with the prices in the lowest segment is similar. In the mid-class segment property prices will continue to fall. I think that the most expensive segment and the cheapest segment this year will be at zero level and if there is any drop it will be between 1 to 3%. In all other segments there will be decreases which will make them more stable.

- What is the demand on the part of buyers and tenants in the beginning of 2011, what types of properties are most in demand and at what price?
- According to our data there is an increase in the demand on the part of buyers and tenants. For example, in Sofia – where one third of the population lives and two third of the business are to be found – from the beginning of 2011 till the end of January the number of concluded deals is similar to the levels in 2008. These aren’t the highest levels but there is definitely more dynamics on the market. As a whole we also report a more dynamic market around the country which shows increased interest from buyers and tenants. However, in the office segment things continue to be at a standstill. It can’t be said that foreign buyers are more interested and interest continues to be similar to that in the second half of 2010. Regarding prices, if we take Sofia the greatest demand is for properties between 50,000 and 60,000 Euro and for properties over 200,000 Euro.

- Before the crisis many people bought properties for investment purposes. How is this segment doing at present?
- I can say for certain that in the last few months buyers in the residential property sector returned to the market. For example, quality properties in Sofia’s very center reached prices of about and under 1,000 EUR/sq.m. Such properties bring an annual return of between 6 and 8% and this is also true for the more luxurious properties. We do not have deals with offices, industrial properties or plots of land which are purely for investment purposes.

- Foreign investors interested in holiday properties have not yet returned to the market. When can we expect this to happen?
- At least a third of the properties offered at the moment are under 500 EUR/sq.m. Deals are made mainly with foreign buyers – both Russian and British. Buyers in this segment always bargain as there are many entrepreneurs selling at high prices of up to 1,000 EUR/sq.m. As a whole in this segment there is also demand in the lowest and highest price segment.

- However, in the meantime more and more hotels in the country are put up for sale, but there are no buyers…
- As a whole there is no interest in small hotels. They were built either as family hotels or as holiday home projects but after the collapse of the market they were turned into apartment hotels. In the hotel segment there is demand only for big well-developed businesses. Buyers look for a price that is adequate for 2011 but not in terms of the number of beds and tour operators but in terms of the plot of land, the construction and the end cost price of the total built-up area.

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