01.11.2011 The property market in Bulgaria in 3Q 2011: Three years after the beginning of the credit crunch
Polina Stoykova, Chief Operations Manager of BULGARIAN PROPERTIES
• Property prices continued falling this year but at a slower pace compared to previous years
• Demand is focused mainly on the cheapest and most attractive properties in all market segments. Buyers look for bargain offers both from Bulgarians and foreigners
• Since the beginning of the crisis prices of apartments in Sofia fell by 40%, in Bansko – by 55% and in Sunny Beach – by 50%
• The main buyers are still Bulgarians and Russians
• Most deals are with apartments in Sofia for up to 50,000 Euro; for holiday homes deals are concluded with properties between 15,000 and 40,000 Euro
• Rural houses which are of good quality and ready to live in attract the buyers’ interest, as deals are concluded at prices between 10,000 and 45,000 Euro
The property market in the capital Sofia was one of the first local markets in Bulgaria to react to the trend of an increase in sales as early as in the beginning of 2011. After the strong start of the year we witnessed a slowdown in sales during the summer months and although the concluded deals were more compared to the same period last year this growth was very small, based on BULGARIAN PROPERTIES’ concluded deals.
Meanwhile, the demand for property in Sofia changed. While in the first half of the year there was more demand and concluded deals both with high-end properties priced at about and over 100,000 Euro and with cheap properties, in the last quarter the demand was focused mainly on smaller and cheaper homes priced up to 50,000 Euro. There were rare deals for properties between 50,000 and 80,000 Euro and there were almost no deals for properties over 80,000 Euro. This means that at present there is demand only in the lowest price segment of residential property in Sofia.
The average price of the concluded deals in Sofia for 3Q 2011 is 750 EUR/sq.m. In 2Q 2011 it was 850 EUR/sq.m. and in 3Q 2010 it was 840 EUR/sq.m. The average price of apartments sold in 2011 is 53,200 Euro, as in the previous years it was as follows:
2010 – 76 000 Euro
2009 – 74 500 Euro
2008 – 96 200 Euro
Prices of homes in Sofia remained stable in the last year or so – since the summer of 2010 – as they remained between 840-870 EUR/sq.m. In the last few months the average price is lower but this is the result of the change on the market and of the shift in the buyers’ interest to the cheapest homes and not the result of a drop in property prices. Also, in retrospect, in the third quarter of the year it is usually the cheapest properties that are mostly bought which means the lowest average prices are registered this time of year. It would be interesting to see whether this trend is once again the result of the annual cycle or whether it will continue in the coming months.
With index value for Sofia apartments of 100 in November 2008 (based on BULGARIAN PROPERTIES’ index), in September 2011 it was 57.32, i.e. the asking prices in the capital fell by over 40% from their peak values before the crisis. The same is also true for actual concluded deals – prices of homes in Sofia dropped from 1,340 EUR/sq.m. in 2008 to 810 EUR/sq.m. in the first 9 months of 2011 – an accumulated drop from the beginning of the crisis of 39.5%.
The average price at which apartments in Sofia were offered in 2011 is 942 EUR/sq.m., as the asking prices fell under the psychological barrier of 1,000 EUR/sq.m. as early as in January and in September the average asking price of Sofia apartments (according to the data from BULGARIAN PROPERTIES’ site) was already 873 EUR/sq.m.
2. Holiday homes
Naturally, during the summer the activity in the beach holiday home sector is higher and this year was no exception to the rule. Still, apart from the higher demand and the relatively successful summer season (mainly along the Bulgarian southern Black Sea coast) we should also mention the considerable drop in property prices in the country’s biggest ski resort – Bansko, which has been attracting the buyers in the last few months.
2.1 Beach resorts
Both in the second and third quarters of 2011 the southern Black Sea coast and most of all the resort of Sunny Beach registered the most property deals compared to the other beach resorts. The main reasons for that are the price drop and the big supply.
Almost all property deals along the Bulgarian Black Sea coast in 3Q 2011 were concluded once again with Russian buyers. They have been the main players on the beach property market in 2011. Although there is demand the apartments they prefer are still mainly in the lowest price segment, as in the last few months their budgets were reduced even more. The deals are with apartments between 15,000 and 40,000 Euro, as most are between 15,000 and 25,000 Euro. There aren’t so many sales for over 30,000 Euro.
The average price of the bought apartments in the last quarter in the area of Sunny Beach is 29,780 Euro (compared to 31,720 Euro in 2Q 2011), as per sq.m. the average price is 512 Euro – with no change compared to previous periods. Since the middle of 2010 the average price of apartments in Sunny Beach and the area varies between 510 and 515 EUR/sq.m. Prices of bought apartments vary between 350 and 800 EUR/sq.m.
BULGARIAN PROPERTIES’ listing price index for apartments in Sunny Beach – Bulgaria’s biggest beach resort – was 52.39 in September 2011 compared to 100 in December 2008. In the last few months the prices of the apartments for sale in Sunny Beach have not changed. The accumulated decrease in the prices of these properties compared to their highest value in 2008 is almost 50%. The decrease in prices of actual concluded deals is similar – 54%.
In the first 9 months of 2011 apartments in Sunny Beach were offered at an average price of 750 EUR/sq.m. and at an average asking price of 51,500 Euro. To compare, based on actual concluded deals in 2011 average prices of purchased apartments Sunny Beach are 514 EUR/sq.m. or 32,340 Euro. This shows that there still is a gap between the asking prices and the prices at which deals are concluded. It also shows that it is apartments in the lowest price segment that are mostly bought while there is supply at a wide price range between 400 and 1,000 EUR/sq.m.
The interest in the resorts along Bulgaria’s northern Black Sea coast is still weak due to the higher prices and the lower supply of bargain properties.
2.2. Ski resorts
After the 2010/2011 winter season which was slow for property deals in ski resorts, since May 2011 there has been a correction in apartment prices in Bansko and they dropped by about 10% compared to the previous months. This led to an increased interest and more deals with ski apartments in Bansko during the summer months – more than during the high season. In September 2011 the average price of properties for sale in Bansko was 584 EUR/sq.m.
BULGARIAN PROPERTIES’ listing price index for apartments in Bansko was 45.64 in September 2011 compared to 100 in November 2008. This shows that prices of apartments for sale have dropped by almost 55% compared to their peak value in 2008. This is also the accumulated decrease based on actual concluded deals – from 1,100 EUR/sq.m. in 2008 to 505 EUR/sq.m. in 2011.
The average price of Bansko apartments sold in the last quarter is 33,280 Euro (with 27,000 Euro in the previous quarter) as the average price per sq.m. is 467 Euro (with average price for the previous quarter of 460 Euro). These are fully furnished apartments in functioning developments.
What the data shows is that prices of concluded deals remain the same which means that when listing prices are close to the actual market prices buyers are more interested, but when the listing price is high the parties do not even get to the negotiations stage.
In the last quarter no deals were concluded in the resorts of Borovets and Pamporovo and the corrections in property prices there are not as tangible as in Bansko.
3. Rural properties
The number of deals with rural properties in the 3Q remains the same as in the previous two quarters of the year so there are no significant changes in this market segment. The only difference is in the average price of the concluded deals which in the last three months is 20,450 Euro while in the first and second quarters of the year it was between 16,000 and 17,000 Euro. The difference in the prices comes from the more deals with higher quality rural houses that are ready to live in, mostly located close to the sea (near Bourgas and Varna) and close to the big cities of Plovdiv, Stara Zagora and Veliko Tarnovo. The purchased houses are priced between 15,000 and 45,000 Euro. The cheapest sold houses are in the area of Yambol and Elhovo where the average price is about 10,000 Euro but there are also offers for as low as 5,000 Euro.
The main buyers of rural houses – like with holiday properties – are the Russians. They look for houses that are ready to live in priced between 15,000 and 40,000 Euro which also explains the higher prices of the rural properties sold in the last few months. In contrast to a few years ago now there is a wide choice of quality rural houses at bargain prices. In fact, a few years ago the supply of such houses was very limited and now buyers have a lot to choose from.
The sellers are mainly Brits, which is another similarity with the holiday home segment. Many of the British owners are selling their properties at a loss after they had been offering them for 2-3 years and could not sell them at a higher price.
Average prices of rural properties sold in 3Q as per region:
• Bourgas Region – 37,100 Euro
• Dobrich and Varna Region – 26,000 Euro
• Yambol Region – 9,600 Euro
• Stara Zagora Region – 14,500 Euro
• Plovdiv Region – 19,500 Euro
• Veliko Tarnovo Region – 23,500 Euro
4. Buyers as per nationality
The main buyers are still Bulgarians and Russians. Bulgarians buy mainly residential properties in the big cities around the country, mainly in Sofia, while Russians take advantage of the very low prices of holiday homes and rural properties and buy fully finished and furnished apartments (mainly in beach resorts) for 450-500 EUR/sq.m.
The British are mostly sellers on the market. There are few interested in buying cheap rural properties (up to 10,000 Euro) or apartments in Bansko or Sunny Beach up to 20,000 Euro – their budgets are lower than those of the Russians.
There is almost no property demand from buyers from other countries which means a more difficult recovery for the real estate market from the crisis as it depends a lot on foreign demand.
Copyright: 2011 Bulgarian Properties Ltd. All rights reserved. For further information or advice please contact us on tel.: +359 2 9 11 50 or e-mail: firstname.lastname@example.org. The use of this article by third parties is allowed only with proper quotations of the source www.BulgarianProperties.com and the Author of the article. The data in this material has been collected by the Author and Bulgarian Properties Ltd. and is presented for information purposes only. We have made every effort to ensure the accuracy of the data. However, Bulgarian Properties Ltd. cannot be held responsible for loss or damage as a result of decisions made based on the information presented in this article.
© Bulgarian Properties Ltd. 2011.
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