Property Market Will Enter Maturity Phase in Next Decade

In connection to the publishing of the Analysis of the Bulgarian Real Estate Market for the Decade 2000-2010, Stroitelstvo Imoti weekly interviews BULGARIAN PROEPRTIES’ Chief Operations Manager Polina Stoykova:

- Ms Stoykova, how would you characterize the residential property market in the last decade – as unpredictable, dynamic or as something else?

- If we go back to the beginning of the decade and try to forecast the property market for the next ten years it will surely turn out that the market was unpredictable. Even in the bravest of forecasts I think no one expected Bulgaria to witness such a property boom and then such a big price drop. This is partly due to the lack of history on this market in Bulgaria and no possibility for comparison to past cycles; on the other hand the dynamics was defined by many positive factors for Bulgaria like the very low property prices at the beginning of the decade. The currency board and the fixed exchange rate, which show stability to the foreign investor, were also an important market driver. What also had great influence on the market was Bulgaria’s accession to NATO and the EU. Many investors compared Bulgaria’s accession to that of other Eastern European countries and the big property price increase that followed there. These expectations attracted a considerable number of investors to the Bulgarian real estate market. The increasing bank financing, the decrease in interest rates and the decreasing unemployment rate also helped local property demand.

Even though we are in a crisis and property prices are far from their peak values in 2008 property data shows that even after the price drop long-term investment is a sensible decision.

- What conclusions should the sector make taking into consideration the data from the last 10 years? What mistakes should be avoided?

- For me the biggest oversight was that the capital which entered the economy from the sale of properties to foreign buyers was not used optimally so that there would be a more sustainable economic development and an increase in productivity. Much of this capital was used for consumption, which in many of the cases even exceeded the consumers’ and companies’ actual means. This led to indebtedness and a decrease in consumption, which further enhanced the effects of the financial crunch.

- What will happen in the next 10 years?

- In the next 10 years the market will enter a mature phase, which will lead to better regulation and higher standards for all parties. From now on there will be serious planning, targeting and professionalism. The shock of the crisis will die down and we will inevitable enter a phase of increase in deals and property prices, which follow the economic development. I do not expect a boom like the one we had in the next few years. Nevertheless, I am optimistic about the market as it is no longer only local but is part of the global property market. Bulgaria is stably positioned as a second-home and investment destination. It depends on us to keep and strengthen what we have achieved and to regain the buyers’ trust.

If you wish to receive on your e-mail the full analysis of the property market in Bulgaria in the period 2000-2010 click here

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