20.09.2011 BULGARIAN PROPERTIES' Chief Operations Manager: The property market is influenced both by internal and external factors
Polina Stoykova, Chief Operations Manager of BULGARIAN PROPERTIES
2011 is a year of stabilization in all sectors of the Bulgarian property market. It is also the year during which the market is expected to come out of the crisis, there were many positive expectations, but not all are coming to be. This is so because the coming out of the crisis depends not only on the pace of recovery of the Bulgarian economy and of the internal processes in the country. A research of BULGARIAN PROPERTIES shows that a great part of the influence on the Bulgarian property market comes from external factors and external demand, which was also the catalyst for the property boom in the sector in the last few years. This means that the external interest in buying properties in Bulgaria must return in order to stimulate the Bulgarian property market to come out of the crisis.
As early as at the end of 2008 the construction and real estate sector were the first to be hit by the crisis and since then we have been witnessing less and less issued building permits and less buildings put into operation. The trend of investments in buildings is still negative as in 2011 there is a 6% decrease in the issued building permits compared to 2010.
As for new projects in the big cities – at present there are such and they are well thought through, they have financing, but they are for smaller residential buildings – they are considerably less risky projects for investors. But the trend is still negative and based on the issued new building permits the real estate sector has not yet started to come out of the crisis.
The only positive signal at the moment is the increased number of sales of property around the country. In the regional cities property deals have increased by about 30% in 2011 year-on-year and in Sofia – by about 15% so in the first half of the year we witnessed a more dynamic market.
The demand and supply at the moment
In the first half of the year we witnessed strong demand and deals in Sofia in the upscale market segment but in the last couple of months there is demand for smaller and cheaper homes up to 50,000 Euro, as there is the rare deal for up to 80,000 Euro.
At present there is big supply and it satisfies the demand but because construction of new buildings is quite limited it might turn out that in a few years there won’t be enough quality homes on the market.
With regard to prices of rural properties the situation is that demand is limited and because the main buyers of such properties were British and Irish – and they withdrew from the market – at present the interest in rural houses is much smaller. Now there are many bargain offers for houses ready to live in priced up to 60% less compared to only a couple of years ago.
The rental market
The rental market has been quite dynamic in the last 2-3 months, especially in the big cities – Sofia, Varna, and Plovdiv. There is the normal increased interest from students, including from foreign students, and from company managers, etc. In the last few years rental prices of properties fell considerably.
Prices of office space have also decreased since the beginning of the crisis, as for example for rental prices of offices in Sofia this decrease is up to 30%. Prices in this sector are directly linked to the economy and the expected recovery.
With regard to newly granted mortgage loans the year started well and banks were giving more new home loans, as interest loans have remained stable since the end of 2010. At present banks want to give loans but now they tend to loan a smaller amount and expect more self-participation on the part of the buyer. Loans are granted mainly for quality properties in the bigger cities.
Prices of properties continue to fall this year as well but much slower compared to previous years. We expect this year to end with a minimal average drop year-on-year.
Property seller cannot afford to wait for the crisis to start ending and that is why we are witnessing a big discount in listing prices since the beginning of the crisis. For example, in Sofia asking prices of homes have dropped by up to 40% compared to 2008 and they are now close to the prices at which deals are actually concluded. This means that it is getting harder to negotiate an additional discount because more and more properties come on the market at the lowest possible asking price. Now sellers are more flexible when it comes to negotiating, especially when it comes to foreign property owners in Bulgaria – they have been waiting for three years to realize some of their investments and now they have decreased significantly the price of their properties only to sell them fast.
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We don’t expect any great changes on the market until the end of the year as it has gained momentum and deals are concluded. However, how the market will develop and how prices will change depends mainly on the economic situation, which regretfully grows more uncertain – a deepening crisis, high unemployment rate, and insecurity – all this is also reflected on the property market.
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: email@example.com. 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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