Annual Report on the Bulgarian Real Estate Market 2010/2011

The end of 2010 was also the end of the first decade of the existence of a real property sector in Bulgaria. It was a dynamic decade during which we witnessed a property boom followed by a significant fall in prices and number of deals. The good news is that 2010 brought stabilization to the sector and the Bulgarian real estate market is entering a phase of stabilization and maturity in the new decade.

2010 – stabilization of the prices and an increase in the number of realized deals.

2011 – continuing stabilization of prices, more convincing increase in the number of deals and a small increase in property prices in the last quarter of the year.

This is how the main trends for the past year and our expectations for this year can be described.

According to BULGARIAN PROPERTIES data based on actual concluded deals in 2010 the decrease in property prices slowed down and it was 8.3% on average in 2010 compared to 2009. In comparison, the average price decrease in 2009 our company registered was 36%.

2010 in numbers*:
• 8.3% decrease in average property prices in the country compared to 2009.
• 10% increase in the number of realized property sales around the country compared to 2009.
• 7.8% decrease of average prices per sq.m. of sold Sofia apartments, a 2% increase of the average asking prices and a 5% annual increase of the number of concluded deals in Sofia.
• Stable property prices in Bansko but lack of dynamics on the market.
• 27% decrease of the average prices of sold apartments in Sunny Beach and the neighboring resorts and an increased interest and number of deals.
• 18.8% decrease of the average prices of sold rural properties.
*The data is based in actual concluded deals of BULGARIAN PROPERTIES around the country

Highlights of the year:
• Higher dynamics on the city property market in Sofia and an increased dynamics in the other big cities, although on the background of the activity in Sofia the markets in the other regional cities are quite slow.
• An increased interest towards holiday apartments at low prices.
• An increase in the share of Russian property buyers among foreign buyers in Bulgaria by about 40% compared to 2009.
• Complete withdrawal of British buyers from the Bulgarian real estate market.

OVERVIEW OF 2010

This past year was a year in which the market was expected to finish its readjustment from a regime of boom that abruptly went into crisis to a pace and dynamics normal for the present conditions. We can say that this was exactly what happened. 2010 ended with stable property prices and a beginning increase in the number of deals which validated our expectations and forecasts.

Twice during the year - due to bad economic news and forecasts - the market showed instability and there was sudden decrease in the interest and in the number of deals. However, in both cases these shocks passed fast and in the next couple of months the market became more dynamic. This shows that the market is now stable and only if there is a strong shock to the Bulgarian economy will it result in an additional shrinking of the market.

The decrease in the average prices of the concluded property deals in 2010 is 8.3% which is considerably less compared to decrease of 36% in 2009. It is observed that the data of prices and the number of deals are starting to have positive values, which shows that the market is gradually becoming normal and is starting to recover.

In 2010 prices were the most important element for concluding a deal. Buyers continue to follow the market very closely and react fast when bargain offers come out. That is why our advice to sellers looking for a quick sale continues to be to put the lowest possible and most reasonable price.

PROPERTIES IN SOFIA

The property market in the capital Sofia was the most dynamic in the country in 2010. According to BULGARIAN PROPERTIES data the average concluded deals as per quarters in 2010 and 2009 are as follows:

• 1st quarter– 1040 EUR/sq.m. - 1050 EUR/sq.m. (2009) -0.9%
• 2nd quarter – 870 EUR/sq.m. - 1020 EUR/sq.m. (2009) -15%
• 3rd quarter – 840 EUR/sq.m. - 945 EUR/sq.m. (2009) –11%
• 4th quarter – 930 EUR/sq.m. - 980 EUR/sq.m. (2009) -5%

In the beginning of 2010 it was properties that are in the higher price class that were mostly bought. The lowest value of the average prices of sold Sofia apartments was reached in the 3rd quarter of 2010 after which there was an increase of 10%. Comparing these trends to the market in 2009 we can say that there is an annual cycle in which it is more expensive properties that are sold in the first couple of months of the year after which in the 2nd and 3rd quarters it is cheaper properties that are the focus of attention. Prices of purchased properties increase at the end of the year due to a renewed interest and solvent demand mainly of more expensive properties.

The average price of the properties sold in Sofia in 2010 is 76,000 Euro, which is about 2% more than the average price of the apartments sold in 2009 – 74,500 Euro. This is a minimal increase in the average price which shows that after the second quarter - when there were still price decreases within 10-15% on a quarterly basis - in the third and fourth quarters of 2010 the market became stable and annual data even show a slight growth.

Comparing the average price per sq.m. in 2010 (920 EUR/sq.m.) to that in 2009 (998 EUR/sq.m.) we see a decrease of about 7.8%. There is also a slight decrease of 5% on an annual basis in the average prices from the last quarters of 2009 and 2010.

This means that on the one hand we have a decrease of between 5 and 8% in prices per sq.m. and on the other we have a minimal increase in the prices based on general buying prices in 2010 and on the volume of deals. This can be interpreted as reaching the point of change of market trends from a decrease to stabilization and a gradual transition to price increase.

The most property deals were concluded in the 4th quarter of the year – about 20% more compared to the previous quarter. The news for 2010 for Sofia properties was the strong market even during the traditionally weak summer months.

In the second half of the year the deals in Sofia increased by 30% compared to the first half and by 16% compared to the second half of 2009. This, together with the price stabilization, shows the beginning of the market’s coming out of the crisis.

As the property market in Sofia is indicative of the general market trends we can say that in the second half of 2010 the trends turned positive and the perspectives before the Bulgarian real estate market have started to improve.

About 30% of the deals in Sofia are in gated developments as these are mainly apartments in the higher price class. It can be concluded that there is now once again higher interest in apartments in the central parts of the capital. This interest was considerably reduced in 2009.

THE OTHER BIG CITIES

From the middle of 2010 we are witnessing a more dynamic real estate market in the other big cities around the country as well. However, this higher activity is far from the dynamics and maturity of the market in Sofia apartments. Still, we can say that the interest in apartments in Varna, Bourgas, Plovdiv, Veliko Tarnovo, etc. has increased slightly and deals with apartments were concluded at between 20,000 and 40,000 Euro. Here are the average prices of the sold apartments in some of the big cities in Bulgaria:

• Varna – 77,200 Euro
• Bourgas – 41,800 Euro
• Plovdiv – 43,400 Euro
• Veliko Tarnovo – 36,100 Euro

SKI PROPERTIES

The average price of sold Bansko apartments in 2010 was 42,800 Euro while in 2009 it was 38,700 Euro – a growth of 10.5% on an annual basis. This growth comes mainly from the bigger apartments that were sold while the prices per sq.m. remain the same as in 2009 – about 650 EUR/sq.m. on average. In contrast to the slight increase in the average prices of sold Bansko apartments the number of deals decreased in 2010 compared to 2009.

Although now Borovets (from 650 to 1,400 EUR/sq.m.) and Pamporovo (from 450 to 1,000 EUR/sq.m.) both offer bargain apartments for sale the interest in these resorts remains minimal and deals are concluded rarely. One of the main reasons for that is that the British buyers are altogether missing from the market, at this stage Greek buyers are also not interested in buying properties in Bulgaria and Russian buyers do not know these ski resorts well enough and for now prefer the beach resorts. At present not many Bulgarians buy holiday homes.

PROPERTIES IN BEACH RESORTS

The average price of the apartments bought in the resorts of Sunny Beach and Sveti Vlas in 2010 was 36,500 Euro while in 2009 it was 50,000 – a decrease of 27% year-on-year. The prices per sq.m. remain stable and vary between 350 and 700 Euro. With prices now being lower and more attractive BULGARIAN PROPERTIES report a considerable increase in the number of concluded deals along the southern Black Sea coast compared to 2009.

The interest in Sozopol and the other southern Black Sea resorts was minimal mainly due to the higher property prices there.

The average price of the apartments sold in the northern Black Sea resorts was 44,600 Euro as prices per sq.m. were between 600 and 1,400 Euro.

RURAL PROPERTIES

Rural properties were among those most affected by the crisis with a price decrease of over 50% in 2009. This is also what increased the interest in them in 2010 especially during the first months of the year, which led to an increase of almost 50% in the number of deals compared to 2009. Of course, this growth is measured on the background of very low levels in 2009 and is under the pre-crisis levels, but still it is a positive trend as for the first time since 2007 we have registered an increase in rural property deals. However, despite the more deals prices of rural properties continued to drop in 2010.

The change in the average prices in the various regions of the country is different as there are regions where prices have increased. As rural properties are a more specific type of real estate and to a large extent their prices depend on the specific parameters, we must follow carefully whether this price increase in some of the regions will remain stable in 2011. There are regions like that of Pleven where prices had reached their lowest levels and at the moment these prices are still some of the lowest in the country. However, they have registered a considerable increase year-on-year due to the low base price. What is interesting is that the greatest increase in prices is to be found in rural properties around the city of Bourgas – this data is based mainly on renovated quality houses which returned to the resale market in 2010 and found their new owners because the houses were ready to live in.

As a whole, in 2010 there was interest in expensive new or renovated houses in which the buyers can move immediately. Many Russian buyers are interested in them as they prefer to avoid any renovations and pay a little bit more.

1. Average prices of rural properties in 2010* and change from 2009*

• Villages around Sofia – 16 300 Euro -15%
• Regions of Varna and Dobrich – 13 600 Euro -8%
• Region of Bourgas – 26 400 Euro +34%
• Region of Plovdiv – 18 000 Euro +11%
• Region of Stara Zagora – 13 900 Euro +2%
• Region of Vidin – 6 800 Euro -2%
• Region of Veliko Tarnovo – 11 200 Euro -3%
• Region of Yambol – 13 300 Euro +3%
• Region of Kardzhali – 11 300 Euro 0%
• Region of Montana – 4 900 Euro 0%
• Region of Pleven – 7 800 Euro +60%
*The average prices for 2009 and 2010 are registered on the basis of actual concluded deals with clients of BULGARIAN PROPERTIES

In short, the statistics says:
Average price of concluded deals with rural properties in 2010: 11,600 Euro
Decrease compared to 2009: -18.8%
Increase in the number of concluded deals with rural properties in 2010 compared to 2009: +49%

2. Change in the average prices of rural properties through the years:

Average prices and growth compared to the previous year:
• 2004 – 11 300 Euro
• 2005 – 15 450 Euro +37%
• 2006 – 18 510 Euro +20%
• 2007 – 24 800 Euro +34%
• 2008 – 30 800 Euro +24%
• 2009 – 14 300 Euro -53.5%
• 2010 – 11 600 Euro -18.8% - in 2010 prices of rural properties returned to their 2004 levels

BUYERS AS PER NATIONALITY

In 2010 Bulgarian buyers bought properties mainly in Sofia but also in Varna, Bourgas, Plovdiv, Stara Zagora, Sunny Beach, etc.

In 2010 the biggest group of foreign clients of BULGARIAN PROPERTIES was that of the Russians which made up 20% of all foreign buyers. Their share increased by 40% in 2010 making the Russians the foreigners that most influence the Bulgarian real estate market at the moment – mostly in the holiday home sector, as they are also becoming more and more interested in other sectors as well.

Since May 2010 the British gradually withdrew from the market and at the moment the interest on their part continues to be very weak. They are mainly active in their roles as sellers as the number of Brits who put their properties up for sale in 2010 increased almost twice compared to 2009.

The other foreign buyers come from different countries (at least 50) from around the world including: Australia, Austria, Belgium, Germany, Greece, Denmark, Estonia, Spain, Italy, Cyprus, China, Canada, Luxemburg, Latvia, Norway, Portugal, Poland, Romania, USA, Sweden, Ukraine, Finland, France, the Netherlands, South Africa, etc.

FORECAST FOR 2011

If the economy continues its positive pace, which is the forecast for now, our expectations for the Bulgarian property market in 2011 are that the market will overcome the shock of the dramatic price drop from 2009, prices will remain stable, the number of deals will increase and from the end of 2011 until the spring of 2012 average property prices will start increasing by 2-5%.

From the beginning of 2011 we are witnessing an increased interest on the part of the buyers, as well as an increased supply of properties for sale and rent which shows that all those who were waiting to see what will happen on the market are returning and are looking for bargain deals.

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© Bulgarian Properties Ltd. 2011.