[size=55:2mte84il]novinite 23 October 2010

Doldrums Prompt Glut of Frozen Residential Projects in Sofia



A mix of an economic slow-down, over construction and bankrupt investors have led to a sharp increase in the number of frozen residential projects in the Bulgarian capital Sofia, data shows.

The downturn has dealt a heavy blow to the plans of thousands of investors and clients in Sofia, the biggest number of frozen projects being in the districts of Manastirski Livadi and Vitosha. Experts say that every tenth project in Sofia has been completely frozen, while every third is facing serious delays in construction works and will surely not meet deadlines.

"
I decided to terminate my contract with the construction company last year because nothing has been done for four years,"
Leonid Tsonev, who has been making instalments to buy an apartment in Manastirski Livadi district, told bTV.

The project was to be completed a year and a half ago. Clients fear that the entrepreneur has run out of money and has even closed the office of his company. There are no security guards at the site.

The construction company puts the blame squarely on the shoulders of the banks, which have restricted crediting since last spring.

Just two years ago Bulgaria, a confident European Union new member, was celebrated as a property hotspot with healthy growth in all segments. These days frozen projects and bankrupt investors paint a gloomy picture and there is growing alarm that the big boom has become the big bust.

Experts say this is not the burst of a speculative bubble, but rather the logical development of the market. The foreign buyers, who fuelled the real estate sector in Bulgaria, started to withdraw in 2008 due to the slow-down in markets outside Bulgaria, finding it harder and harder to finance their purchases.

Property in Bulgaria capital Sofia is the third most undervalued of those countries Global Property Guide has compiled data for.

According to the data the average price of Sofia property is EUR 1,759 per square meter, compared to Monaco at EUR 35,658 per sqm, and London, Paris and Moscow at between EUR 10,000 and EUR 14,000 per sqm, but even comparing it to Vilnius in Lithuania at EUR 2,406 per sqm, and Bucharest, Romania at EUR 3,404 per sqm.

Experts have warned however that most of the offers tend to be off plan and there is always the risk of buying a property that only exists on paper -- especially in an emerging market like Bulgaria.