[size=75:1yeaams5]Bulgaria propertywise 22 March 2010

Real estate values in Bulgaria face continued uncertainty

One question remains about Bulgarian real estate – will the descent continue throughout 2010, or has the bottom been reached? Some experts say that property values, which declined by as much as 30 per cent in 2009, will fall by another 20 per cent. Others disagree.

According to agencies such as Foros, Colliers, Address and Bulgarian Properties, real estate values will continue to depreciate until the beginning of June. They reckon on a further 10 per cent decrease followed by a stabilisation.

Other property agencies like Aristo, Yavlena and B&H, however, argue that the bottom has already been reached. Aristo claims that come the end of 2010, there will be a 10 per cent increase in value, although they fail to specify where – in Sofia, or nationwide.

Tsvetelina Tasseva, CEO of Address, however, said that real estate prices could suffer another collapse if banks pass onto the market properties obtained through bad credit.

Currently, a 70 sq m flat, fully furnished, in a good area in Sofia, fetches about 40 000 euro, according to Dnevnik daily. And although such possibilities currently do exist in Sofia, a more realistic possibility, according to Kaloyan Bogdanov, marketing manager of Address, is that for the same price (40 000 euro) a buyer would get a 70 sq m flat, which is pending completion and without Article 14, which is a very risky enterprise.

Article 14 pertains to a special document that allows for the building to be constructed in the first place. Specifically, it allows for the foundation structure of the building to be erected, including the ceiling, but nothing else. So, technically, buying a flat without article 14 risks a new owner being told that the building has to be razed because it is illegality erected.

Alternatively, 40 000 euro would buy a 60 sq m in an old socialist-style panel flat or 45 sq m in a new construction.

Colliers say that property in major cities varies from 400 to 800 euro a sq m depending on location, and that people are not likely to find property at 200-300 euro a sq m in cities like Sofia and Varna, Dnevnik reported on March 22.

On January 20, industry experts said that there would be an increase of demand in the market and increased flexibility given lower prices, and investors were said to be "
willing to negotiate"
.

Legislative amendments to real estate transactions outlawing cash payments would have little or no effect on current market conditions, according to Atanas Garov, CEO of Colliers Bulgaria. The proposed measure aimed to bring "
light and transparency to the industry"
but, according to Garov, real estate would continue to be sold at prices different from official values and cash payments would continue to be the norm.

"
If the Government wants real transparency in the industry, it must implement measures whereby the cash flow would be constantly monitored and evaluated,"
Darov was quoted by Dnevnik as saying.

The real estate transactions law amendment was passed by Cabinet on first reading on January 20.

According to Industry Watch, real estate values are likely to drop by another 10 per cent due to the weak influx of foreign capital and delayed bank credit in Bulgaria.

For the period 2006-2008, foreign investment in Bulgarian real estate accounted for more than two billion euro, while in the preceding three years it was about 300 million a year before the global economic downturn eventually constricted the flow of cash.

Real estate in Bulgaria's largest cities and towns recorded an average devaluation of about 28 per cent in the third quarter of 2009, compared to last year, the National Statistics Institute (NSI) has indicated. From Industry Watch, the estimation is that this is equivalent to a six billion leva loss sustained by all property owners.

"
Bulgaria is poor in locally generated capital, and most major projects here were financed by foreign capital investments,"
Luchezar Bogdanov, managing partner in Industry Watch, said.

"
Readily available cash on the Bulgarian market continues to shrink and while this continues, there will be little opportunity for flexibility on the market,"
Bogdanov said.

In Bulgaria, houses and flats require between 16 and 20 years to be paid off - once a mortgage is taken from the bank - considering the current level or prices and payments. At 948 euro a sq m, or the average price in Sofia, according to Foros, cited by Dnevnik, and the average rent of 4.67 euro a sq m, the house will be paid off in 17 years.

Meanwhile, in Varna, where the average price reportedly is 907 euro sq m and the rent is 4.04 euro sq m, payments will require 18.7 years.

So in spite of the fact that prices have dropped and are likely to continue to do so, some experts believe that the expected "
flexibility"
in the market, which will "
save the sector"
, will not arrive. They also deem unlikely a sudden rise in purchases because people with unstable or insufficient incomes, will opt to rent a house instead of buying one. In light of the economic crisis in Bulgaria and rising unemployment, the number of such people in the country is only likely to increase throughout 2010.

Bit of a bummer all this uncertainty makes it difficult for all concerned when will we get back to normal

Your right blink but its the same everywhere at the moment I don't think anyone knows what to do I was hoping to buy this year but I'm just thinking I will wait and see how things pan out its very difficult to know what to do but whatever anyone does at the minute will more than likely come back and bite them