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Bulgarian Property Market Heading For Bottomsville

During the (now not so recent) overseas property boom Bulgaria had its fair share of popularity. Indeed, in the run up to its EU accession in 2002 it was among the top destinations for overseas property investors to buy. However, as with so many of the early successes, it was a victim of that success and it became overdeveloped.

I remember researching the market in 2008 to value a 2 bedroom apartment in a newly completed Bansko ski resort so that its owner could set a suitable asking price. I found that the market was absolutely saturated with similar properties in the same area, and this was dragging down prices rapidly.

Of course, then it got caught up in the global financial crisis, and this only made matters worse. The fact that Bulgarian property prices were already in freefall when the crisis all but killed foreign demand led to Bulgarian prices falling among the farthest of any nation in the world.

But as we all know, falling prices are only bad for sellers, for buyers they present an opportunity, and if you can get in just as a market bottoms or slightly before, you can be in for some good gains, especially if a market has a v-shaped recovery.

No one is suggesting that Bulgaria is in for such a sharp recovery, but it is starting to look like a bottom has been found. Many Eastern European markets like Romania and Latvia never really suffered a recession, but their housing markets crashed. In Latvia prices fell by about 50%, but because the economy remained strong, once prices bottomed it enjoyed a rapid recovery, and the same was predicted for Romania. But of course, Bulgaria did suffer a recession, and this combined with the over-supply will almost certainly prevent a fast recovery in house prices.

However, one other thing that those markets have in common is that prices fell by about 40-50 per cent before the market bottomed. Now that prices in Bulgaria have fallen by 38% (as of May this year) according to the National Statistics Office, and the economy is on the turn, experts are starting to predict that a bottom for Bulgaria could be just around the corner.

According to the Bulgarian National Statistics Office annual house price index, house prices were down 21.4% in 2009 compared to 2008. In 2010 this decline slowed to 10.1%, and last year the decline was just 6.1%. Quarterly data from the same source shows the first slight quarterly growth in Q2 2012 of 0.2%, following a decline of 0.4% in Q1 and 1.5% in Q4 2011. In Q3 2012 prices declined 0.5%. This is hard from staggering, but it does support the theory that the market is stabilising.

Of course, this is nationalised data, and there are vast regional differences. In places like Bansko, where oversupply is great it will likely take a great increase in foreign demand, which will take a great increase in sentiment, which will probably take a turnaround in the EU debt crisis, or something of that magnitude -- I won't be holding my breath.

Oddjob57 wrote:

Hi,
I am a total newbie and know little about Bulgaria but would love to add my unsolicited view.

House prices seem lower in Bulgaria than anywhere else in Europe and at the moment seem to be still tumbling. The reasons are more than likely a combination of factors rather than just one.
1. The exodus from the country over recent years leaving many properties empty, thus reducing demand. As opposed to the UK where there is a continually rising population and a shortage of houses which keeps the property prices mainly on an upward groove.
2. The reputation of the country. I have even been told by Romanians not to set foot in Bulgaria as they are all thieves and bandits. It is a proven fact that when anything bad happens the news spreads 9 times faster than good news. One person has a bad experience buying a property and he/she lets all and sundry know about it, on the other hand, if the sale goes through reasonably simply and you are happy with your lot you are unlikely to be standing on a soap box in Hyde Park telling anybody that will listen.
3. The financial crisis the World over. This might be a time when a few people start looking for somewhere cheaper to live but in the main the financial crisis has just made people tighten their belts and worry what is going to happen to them should their job disappear. People I know spend more time talking about how quiet their business is at the moment rather than where they are going on holiday or what little luxury they are going to buy on pay day.
4. One reason I would see as why this isn't the bottom is that with the doors opening to the UK more people might leave, thus leaving yet more properties empty. In the past I would have said that the money sent home by people working in the UK and elsewhere in Europe would help to inflate the country's coffers but this time I have a feeling the restrictions they are trying to impose on handouts and the lack of any employment is unlikely to have that effect.

Sorry if I have over-written, I am just as bad when I start talking

I would add that if you are living somewhere and don't intend moving to another country in the near future, why worry. It is really only relevant if you want to borrow money on your property or downsize/upsize.

Feel free to tell me I don't know what I am talking about

prawler wrote:

None of your 4 points is correct - prices simply were overpriced due to the big demand from UK/Irish buyers to whom even the inflated prices seemed really attractive.
Now that these prices are 50% down, the so-called investors are left penniless and with no cash to invest, haha :)

We all have opinions but it doesn't mean they are definitive ie right or wrong? While I may agree with Oddjob57 I may not agree with you or visa versa, none of us are experts, but we all have an opinion.

prawler wrote:

None of your 4 points is correct

That's in your opinion prawler (and perhaps not in the opinion of many other members here).

Every member here is entitled to their own opinion be it right or wrong, but no need for such aggressive behaviour, certainly to one of our newer members.

We encourage discussion of all kinds, not just slapping people down because you personally don't agree.

Thanks.

Noone is aggressive or slapping someone here, if you don't interfere to each post, then discussions might happen.

prawler wrote:

None of your 4 points is correct - prices simply were overpriced due to the big demand from UK/Irish buyers to whom even the inflated prices seemed really attractive.
Now that these prices are 50% down, the so-called investors are left penniless and with no cash to invest, haha :)

Yes this is part of the reason but there are many many more factors that we need to take into account just as described by Oddjob57 but these alone are not the end of the story either and I'm sure this topic could on on for ages with a list of reasons other than those already stated here which I have to say I agree with all of them but what about the others for example Fraud, the harsh winters which some never took into account, the culture which some find hard to accept, the language which is difficult, the loss of friends and family and so on.......

prawler wrote:

Now that these prices are 50% down, the so-called investors are left penniless and with no cash to invest, haha :)

That makes little or no sense, what investors are left penniless?

You are surely not expecting the people that have already invested to buy more, it is new investors that keep the property market rising.
As I said previously, the bad stories that have resonated around the World about people losing money in Bulgaria have put people of investing.

Everyone seems to know of someone that was ripped off in Bulgaria whereas those sort of stories about any other country are practically non-existent.

When I was first moving to Hungary (1989) I was told that it snows all year round and that all the women look like Russian shot-putters. These are basically the same people that now tell me I am crazy to go to Bulgaria. They get their info from exaggerated stories of bad experiences.

Chris

Quote :

Strange, the Bulgarians say exactly the same thing about the Romanians and Turks!

Yes, I fully realise that, it is the same nearly everywhere in Eastern Europe when they are talking about their neighbours, I highlighted the Romanians as they have an incredibly bad reputation practically everywhere as opposed to just locally, and unfortunately the Bulgaria property scams have made the Bulgarians comparable in many peoples eyes.

Lot's of my friends are from Romania, I had 76 working with/for me in Albania, all good people.

Oddly enough in all my experiences the only country where I have lived where I have not felt that I could fully trust people was Albania, and that was down to stories rather than experiences, but if you hear enough they somehow get into your system.

Daisy

Quote :

Fraud, the harsh winters which some never took into account, the culture which some find hard to accept, the language which is difficult, the loss of friends and family and so on.......

Yes, these are all factors that I would agree with, they are some of the bad experiences that spread like wildfire. Nobody expresses the joy of learning the new language and the funny incidences that occur while trying to make yourself understood. Few tell stories about the new friends they have made. People ignore the fact that when the winters are cold nearly every bar/restaurant and home is lovely and warm as opposed to 4 months in England where it is cold and miserable and the owners of pubs etc don't put the heating on leaving you nearly as cold inside as outside.

and to the very nice moderators... don't worry, I can handle myself

Prices for property are not cheap in Bulgaria, its just most other countries are too expensive due to rediculous behaviour by the goverments and some people who live there

will666 wrote:

Prices for property are not cheap in Bulgaria, its just most other countries are too expensive due to rediculous behaviour by the goverments and some people who live there

VERY, VERY, TRUE. and yes I am shouting.

I'm sure that if you speak to the Bulgarians they would not say that property here is cheap. In fact in all Countries throughout the World property prices are directly proportional to the wealth of that Country. When I first bought a house it cost 4830 Pounds and in order to finance the property my wife and myself had to put a quarter of the house value down as a deposit. This took 3 years to save with each of us having 2 jobs. In this day and age they now talk about the Bank of Mum &
Dad. Yes we have to bail our kids out from time to time but so do some of the Bulgarians we know, maybe not so much in money terms but our friends let their Granddaughter and her husband stay with them free of charge in order that they could save for the modernisation of a house which had been left to them. So are things that different here or cheaper, no! Its all relative to the cost of living

tonyb60 wrote:

In fact in all Countries throughout the World property prices are directly proportional to the wealth of that Country.

Hi Tony,

Not strictly true in all cases, although no doubt for the majority.

In Bulgaria, Spain, Greece and a few other places property prices rose directly in connection with the Brits coming out and purchasing them.

and although they always seem to fall at a slower pace than they rise (like everything), if there is no demand, either internally or externally then they will keep on falling.
As you say, everything is relative.
Purchasing power is not just money it is where and how you use it.
If someone owns a property (no mortgage) in England they can sell it and move to Bulgaria. It would not be so easy to do that the other way round, so for someone in England moving to Bulgaria property is relatively cheap, but for someone in Bulgaria looking at moving to England, property on this side of the channel is expensive.

Oddjob57 - A very interesting post from someone coming to live in Bulgaria and who has travelled, lived and worked in other countries. If you scroll through my many posts you will see a very positive point of view running through 90% of them. However, you are quite correct in mentioning that bad news travels faster than good and people generally will take more notice of the bad.
There are indeed many reasons property value is dropping in Bulgaria just as everywhere else except possibly Britain where the country is overflowing with property seekers home grown and from abroad.
I was watching a TV programme on Bulsatcom only last night where a London couple were wanting to relocate to Varna as they had become disenchanted with their dream of self-sufficiency and a quiet village life. There are now loads of British renovated properties flooding the Bulgarian market at very reduced prices most of the time and I believe that this couple were not unique in finding the romantic dream of a village life was not for them. Probably they cannot afford to live in Bulgarian big cities because property there is still expensive and so they return to Britain. Where else to go with the whole of Europe in crisis?
I have lived and worked in Greece just across the Albanian border and have certainly had to adjust to life abroad which made it easier for me to retire and integrate in Bulgaria. There are good and bad everywhere and I had Greek and Albanian friends who were pleasant, helpful and worked hard. When I retired and moved to Bulgaria for financial reasons like most who buy here, I found it quite easy to adjust but I can understand that for most Brits coming from the conveniences in Britain Bulgaria is a huge culture shock.
Two years renovating, another year maybe growing veg and chopping wood as in the dream and then reality sets in and Britain suddenly becomes more attractive warts and all. The market is flooded now with properties bought by these people and so the market is dropping quickly although cheap village houses are still selling well. In my village we now have Bulgarian townies and Russians buying so all is not lost for Bulgaria and if you integrate and stop living in a British expat bubble life will be okay although not perfect just like anywhere else.

Quote :

but I can understand that for most Brits coming from the conveniences in Britain Bulgaria is a huge culture shock

Yes, I agree, to a lot of people the dream is far better than the reality. I have a few stories of people not coping with the move from the UK to places new but my favourites are a couple of short stay incidents.

1. I was working in Russia and I met a girl who I hadn't seen for 5 years but who had worked with me for 4 years in London, and who had always seemed confident, and good at her job. She had just arrived that morning, and was on her way to start her first nights work, I wished her well and arranged to meet her for a drink at the weekend. I got to the bar to meet her and was met by her manager (a friend of mine) who informed me that she had started work at 9pm and then at 10.30pm nobody could find her. He eventually checked her hotel who informed him that she had checked out at 11pm and had got a taxi to the airport. It turned out that this was the first time she had been abroad and she just bottled it and ran home to mummy.

2. A friend who I had known for 30 years and was married with a couple of kids decided that they would all move to Spain. They spent a couple of years talking about it and deciding what area to move to, learning the language and preparing everything from insurance to bank accounts. They sold their house, put their furniture in storage with the intention of shipping it out to Spain once they had found their dream villa. Then while his wife worked out her notice, my mate went out to Spain with his lad to rent somewhere to stay while house-hunting. Two weeks later on his wife's last day at work he was back in England telling her he had changed his mind and didn't fancy Spain after all. He is now living in a caravan in Scotland on his own.

Obviously two people whose dreams didn't match the reality.

More stories like these must be re-enacted daily. It seems that people nowadays do not have the strength of character to cope with life's problems and end up thinking the grass is greener somewhere else. It isn't - its just a different shade of green! Personally I never actually decided to jump ship and live abroad. It really is of no interest to others why I ended up in Greece but I managed to work and keep myself ending up with my partner of 18 years and running a bar in Greece for 7 years until it became too much for me and other problems reared their head until I decided that I had worked hard and long enough so time to retire at 64. I often wonder what non-working 50 something Brits think they are going to do for the rest of their lives. That golden egg won't last forever especially now we all live longer and you have to have something to get out of bed for in the morning before waiting for the bar to open. Sorry to generalise here and there are some who have made the change and found work or a hobby and integrated successfully into a Bulgarian life but they are few and far between. Of course, as you mentioned Oddjob, maybe they don't wish to share their happiness because very often people are not interested and prefer to read about failure or complaints. Periodically, I stop writing on the internet because of this lack of interest and the boring things that are posted and you have given a refreshing write-up to spark my interest once more.

Do I detect a spark from my kindred spirit?

Hope so Bgbzz.

Prawler wrote

Quote :

being an agent

and

Quote :

Now that these prices are 50% down, the so-called investors are left penniless and with no cash to invest, haha :)

This seems a somewhat strange attuide for a REA. I am not sure that investors being left penniless is particulary funny. I am sure though that you are as honest as the day is long and and have reproduced the above quote from your company literture. I expect your Russian clients respect your refreshingly honest approach that they are likely to lose 50% of their investment and be left penniless should they invest with you. I am sure your existing clients also find it hilarious and your sensitivity a breath of fresh air.

Keeping on topic, I truly believe that property prices in Bulgaria are going to shoot up in the long term. The prices here are the lowest in Europe and when the world recession ends Bulgaria will be first in line for a strong recovery.