Bulgaria's Property pinch

Real Estates

altBanks might hold the key to what will happen with Bulgaria’s real estate sector in 2010 if they decide to start selling foreclosed properties,  Address, one of Bulgaria’s leading real estate companies told a January 25 news conference.
Together with foreign investors, banks were a major factor in the real estate boom in the previous five years, when banks fought for every customer by bringing down interest rates on loans.

Inevitably, the economic downturn has meant a drop in incomes and led to a rise in non-performing loans as bank clients struggled to meet monthly payments.

For now, banks have been trying to stay away from an overall policy of foreclosing, but if 2010 proves to be a more difficult year than 2009, banks might change this policy and appear on the market as one of the big players.

This, according to property experts, will mean a significant drop in real estate prices. Were this to happen, and banks started selling foreclosed properties in search of quick returns, there was a serious risk that the property market could collapse altogether, Address said.

According to its statistics, prices in 2009 dropped by 28 per cent on an annual basis, with 47 per cent of buyers paying in cash, while 22 per cent of deals were financed with bank loans.

According to data presented by estate agency Colliers on January 20,  the value of real estate was expected to decline by an additional 10 per cent on average by July 2010.

The ongoing drop in value in the first half of the year was expected to be followed by "stabilisation in the market" in the second half, Colliers’ Tatyana Emilova was quoted as saying by Dnevnik daily.

In 2009, real estate prices dropped by about 20 per cent on average nationwide, compared to 2008 figures, according to Colliers data.

For 2010, however, analysts believed that there would be an increase in demand on the market, augmented flexibility, given the lower prices, and investors were said to be "willing to negotiate".

Address said that if banks managed to hold these defaulted loan properties off the market, the market would soon run out of what customers saw as the most attractive properties. 

The most "popular" price-tags for real estate in Sofia and the third largest city in the country, Varna, for the final quarter of 2009 were in the range of about 40 000 euro. About 73 per cent of buyers from both Sofia and Varna said that they were prepared to purchase real estate at that price, if available on offer, Address’ marketing manager Kaloyan Bogdanov said.

In the current market, in Sofia 40 000 euro currently buys a 60 to 70 sq m flat. But because of the declining market, customers were waiting for prices to reach a new low before they made a final decision, Bogdanov said.

Another driving factor in real estate transactions in 2010, according to Address manager Tsvetelina Tasseva, would be so-called "double estate deals" whereby a customer sells a property to finance the purchase of another one.

And while "desirable" homes may be purchased at affordable prices in Sofia and Varna, it was revealed that in spite of the global economic downturn, Varna retained the steepest prices for real estate in 2009.  The Black Sea city was home to the most expensive real estate in 2009, according National Statistics Institute (NSI) made public on January 25.

With real estate values retreating on all fronts across Bulgaria during the year, properties in Varna were offered for a whopping 1686 leva a sq m. Sofia came in second with 1585 leva a sq m, followed by Bourgas with 1360 leva a sq m. Overall, real estate in Bulgaria lost about 20 per cent of its value in 2009, according to the NSI. In the fourth quarter of 2009 alone, levels dropped in 16 municipalities across the country which, given property brokers prognoses, could make 2010 the year of speculative real estate deals.

Textsource: sofiaecho.com
Photo: Krassimir Yuskesseliev

To see the presentation of the company, please follow the link:
Presentation of Mirela Real Estate

(29.01.2010)