A Sensible Price Decrease Will Activate the Property Market

After more than a year of negative trend on the US and British property markets we witnessed interesting phenomena in February. The number of property deals in the US increased, as well as the number of the issued construction permits for family houses. In Britain more buyers are interested in purchasing their first home which up to now they could not afford.

A Stir on the Property Market

The combination between the considerably decreased property prices and the lower interest rates under mortgage loans has contributed to this stir on the market. A lot of analyzers see what is happening as a slight movement which with the right combination of external factors could even lead to partial recovery of the markets in these countries as early as this year. We cannot speak explicitly about the return of the trust on the part of the participants on the market. Instead, some conclusions can be made about the markets’ future:

Observations show that upon sensible and justifiable decrease of prices (this doesn’t mean drastic) a buyer always turns up. There is demand but only if the price is sensible and lucrative.

The state of western countries’ economies and societies is good despite the current crisis and the lack of financial resources. Upon recovery of the balance the stock markets and the property markets will return to more normal levels (those from 2005) relatively fast.

The measures the governments of the developed countries undertook are starting to give positive results as a direct indication for that is the recovery of the US and European stock markets which in the last 3 weeks have a growth of 15-20%.

In Bulgaria

Bulgaria has an open economy which developed mostly thanks to external capital inflows. These inflows have decreased considerably and this is already felt. The lack of fresh capital, the drastically decreased bank lending levels, as well as the stress to which the citizens have been subjected in the last few months have had a negative effect on the property market. The results are a considerable decrease in property deals and not so considerable in offer prices. The prices at which the few successful deals are concluded are with a 20-30% discount. This means that the sellers are ready to reduce the price but only for clients which are ready to buy. However, this is valid only for those sellers who need fresh money urgently. For now most part of the sellers are not ready to make big discounts due to which the deals are very few. Obviously the process of sobering down among them will take more time.

Interest

The last few months have proven that there is interest towards properties in the big cities, mostly towards Sofia and Varna. The new enquiries and viewings in Sofia in March are more compared to the previous months but the decision-making process of the buyers takes a lot of time.

There is also an increase in the number of sale offers. This shows that we will probably witness a further decrease in prices in the months to come. If we take as a basis the prices of the city properties price peak from the middle of 2008 we can expect a movement on the market upon reduction of property prices between 30-40% depending on the property’s quality.

I do not expect the prices of unique properties to fall as well as those of most luxury properties. With properties of lower quality the level of sales may recover if the prices decrease by 40-50% compared to the peak ones. As for properties in the middle segment the market will become more active if prices fall by about 30%. Our company also has a stable position with foreign buyers. They often as us the question: Did property prices in Bulgaria fall? When this happens the market will become more active.

Offers

The sellers should put their properties up for sale at a minimum price

• Up to now the decrease in offer prices is up to 15%. We expect this figure to increase as the actually concluded deals are made at levels 20-25% below offer prices. We advise our clients who are in a hurry to sell not to put a reserve in the price that would allow them to lower it further but to put the property up at the minimum possible price.

• To the buyers we would tell that now is the time to look for a bargain. There haven’t been such favorable conditions for purchasing a quality property since 1996 with the condition that in 1996 there wasn’t such a wide choice of quality properties. I believe that now is the right time for buying a property.

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