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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.

Unfortunately statistics are not always right and can hardly be used as a yard stick, I won't be holding my breath.

I read somewhere that the population of Bulgaria had declined by 812,000 in the past two years, so unless the grave yards are bursting at the seams it is safe to presume that a lot of nationals have gone to another country to live. This has resulted in lots of properties being left with relatives or abandoned. There is a figure given out by the BG government of how many ghost towns exist here.

I have driven a little bit around Bulgaria and noticed hundreds of houses with the"
simply abandoned"
look about them, especially in mountain areas. With this situation existing, it is no surprise that house values are on the floor, property prices are on the floor all over the world especially in Spain and Turkey, so it is only to be expected prices have decreased here in BG. Analysts will tell us all sorts of things such as when they believe prices will pick up again, but personally I will only believe it when it happens.

I don't think the bottom will be reached just yet and when it does I fear it will stay there for sometime to come, lets not forget that the property market reached an artificial high so although now to most it looks low I would say it's getting back to being what is normal.

Let's say bottom has already been reached... no evidence for that but let's assume it...
Having an average monthly salary of 350 euros, the average Bulgarian would hardly be able to buy at higher price levels...
So bottom will simply appear as average for Bulgaria and it will stay like this until living standards are dramatically improved.
This hasn't happened in the last 20 years, no big hopes it will happen in next 20 years...

So, who loves Bulgaria and the opportunities it provides - keep your place and use it.
Who is not impressed by Bulgaria - even if you keep the property for 5 years more, don't expect that prices would have risen.

Construction cost for fully finished apartments including expenses for buying land, drawing plans and getting planning permissions are 250-300 euros per sq.m. - buyers know that quite well, as Russians appear to be very good researchers and I doubt they will ever be prepared to pay more than 500-600 euros/sq.m. for fully furnished holiday homes. Leave aside poor Bulgarians, they are not interested in buying in Sunny Beach, Bansko or the other resorts, they can hardly afford a place in the cities.

Of course, for exclusive properties, prices are different, but there are really not many exclusive projects in Bulgaria - construction standards are all the same, just adding a few swimming pools and nice decoration of interior doesn't add a lot to quality :)

We've helped 204 UK and Irish families resell their apartments/villas in 2012 and the average they got was 500 euros per square metre...

Cheapest property we sold was a 210 sq.m. 3-bedroom apartment at 65 000 euros, highest was a front-line maisonette with 3 bedrooms and fantastic views in Old Nessebar, 195 sq.m. for 150 000 euros.

Have a lovely 2013 from the 'Bulgarovo' team!

All I can add is that Bulgarians bought our first home and others have either bought in the village or are renovating old family homes. I am talking seriously rich Bulgarians by the looks of the workmanship and a tribute to Mindya that they chose the village for a second home away from the city. Statistics can be made to say whatever answer is required. Not all Bulgarians are poor.

oldun wrote:

All I can add is that Bulgarians bought our first home and others have either bought in the village or are renovating old family homes. I am talking seriously rich Bulgarians by the looks of the workmanship and a tribute to Mindya that they chose the village for a second home away from the city. Statistics can be made to say whatever answer is required.

Not all Bulgarians are poor.

Just look at the standard of family cars now compared with ten years ago

Indeed. Ladas seem to be relegated to village use nowadays and I rarely see them in Veliko Turnovo.

Yes, Bulgarians are magicians in surviving with average monthly salary of 350 euros... Sofia citizens get more but Veliko Turnovo people often get even 150-200 euros per month...

Cars are either company cars or imported second-hand from Italy/Germany or simply under a lease where one family member's salary goes to cover the lease.

Surely, even 10 years ago and now the number of BMW and Mercedes one would see on the roads exceeded 10 times the number in the UK, but this is not a factor.

According to KAT Veliko Turnovo the most registered car for 2011 is Fiat Bravo/Brava from 2000 which is really not more than 2000 euros.

The property prices in Bulgaria are the lowest in Europe. Now is the time to buy and I believe there is only one way the market will go. That can only be up. I would bet my bottom dollar that in 5 years time most property owners on this forum will make money from their investment. I could be wrong and much will depends on what you bought and when. I still think that if you invested at the right time, and in the right place you will make money. 5K now will buy you a house and 10K will buy you a 'turn key'. There are not many places in the world were you are going to do that.

The economic downturn is world wide. Bulgarian property prices are in a far better position to deal with it and come out successfully the other end.

Yes, I would agree and disagree - by buying now one would almost guarantee himself that he won't lose on his investment.
But to make profits on it, he can only hope for...
As market has sobered up, these can be the prices for many years ahead.

And yes, Russians appear to be wiser as they are buying now, during the recession. Deals with Uk/Irish people are more than sporadic over the last 3-4 years - again talking about seaside and ski property.

prawler wrote:

And yes, Russians appear to be wiser as they are buying now, during the recession. Deals with Uk/Irish people are more than sporadic over the last 3-4 years - again talking about seaside and ski property.

I also agree to a point but looking at this from another point of view, are there going to be that many that will invest in Bulgaria? As we have seen in the past many countries did grab the bull by the horns and cashed in on it but as we all know Bulgaria didn't make any efforts to capitalize on the market and as a result many have been very disappointed with their investment/home. Yes the Russians are buying but they are used to such a life and poor conditions whereas most of western Europe aren't.

Blink wrote:

prawler wrote:

And yes, Russians appear to be wiser as they are buying now, during the recession. Deals with Uk/Irish people are more than sporadic over the last 3-4 years - again talking about seaside and ski property.

I also agree to a point but looking at this from another point of view, are there going to be that many that will invest in Bulgaria? As we have seen in the past many countries did grab the bull by the horns and cashed in on it but as we all know Bulgaria didn't make any efforts to capitalize on the market and as a result many have been very disappointed with their investment/home. Yes the Russians are buying but they are used to such a life and poor conditions whereas most of western Europe aren't.

Well put Blink and how very very true

110 000 properties owned by Russians on south coast only, add another 50 000 on North Coast, 20 000 in ski resorts and you can round it up to 200K with Sofia properties included... translate this: [You must be registered and logged in to see this link.] ... 96718.html
You need to understand that if building cost is 250-300 euros per sq.m. - it is unrealistic for Bulgarian government to be aiming at price increases so that one's investment capitalises... this is stupid, people must be buying in Bulgaria only because it is cheap, has beautiful nature and lovely climate.

Also, whoever thinks that Russians are poor, are quite lame - Russians from middle-class are driving 5-6litre Land Cruiser SUVs, own 300-400000 euro apartments and have rural resthouses. They spend from 3000 euros on holidays and rarely live on credit.

Government has so many social problems rather than encouraging property price increases as they are already unaffordable for the average citizens. In other words, can you imagine a family with 2 kids, with a monthly income of 800 euros being able to afford a mortgage on a 60 000 euro 2-bedroom apartment with average interest rate of 9% per annum?

Building cost is cheap, so properties had to be cheap in 2005-2008. But western Europe investors never bothered to do a research and were buying bulks of BG property conveniently overpriced by BG developers as they were attractive by various advertising campaigns... as a result - Bansko developers managed to make up to 1000% profits from their projects and still prices of 2000 euros per sq.m. were considered cheap by Europeans as they were hoping prices would reach miraculous 3000, or 5000 euros, I always wonder and smile on this...

And in the end, Bulgaria has absolutely no fault in what happens to appear as 'poor investments in Bulgarian property' - it's recession and property decreased in every single European country but Russia /not sure of Scandinavian countries and Switzerland, of course/.
Actually 40% average decrease in Bulgaria is nothing compared to 75% in Spain/Greece for some type of properties.

PS>
This article states 337 000 Russians own property in Bulgaria: [You must be registered and logged in to see this link.] ... moti_u_nas and remember, they are a vast nation and are only entering European markets at the moment. If Bulgaria gets Schengen admittance they will buy everything here :)

I tend to agree with you Rakiaplease and what you say about the property values. I have no real sympathy, however for those folk who came, saw and purchased properties as an investment with a view to making a killing (financially). From where I sit, it's purely a case of "
ya pays ya money and ya takes ya chances"
. As most of you know, I own more than a few properties here, but none were purchased with a view to sell on at a later date for a perceived profit.. Instead, each was obtained to fill a need ie. the farm provides the income which supports our lifestyle and the houses on and around it provide housing for our employees. The city apartment is our school terms and winter home..it's very close to both the institutions which our children attend. The villa in the mountains is our short break escape and doubles as a B+B when we aren't using it. Strangely, we have just received an offer to purchase this property (we had no plans to sell and it wasn't listed) from a Russian family who stayed there last summer.

Anyway, getting back to business, we have no plans to unload any of our places because they will, in turn, become our childrens inheritance and I like to think that they will use them well. None have mortages or liens of any kind, so all should be well in the long run. If property values go up or down they will still have something concrete which is theirs and theirs alone.

Just a small thing I picked up from a previous post...Plovdiv is probably the used car captital of Bulgaria and you can buy yourself a tidy Fiat Brava or Bravo for much less than 2000leva (God only know why you would want one!).