By Ivan Vatahov MILDLY but constantly decreasing spending power is driving down the prices of real estate in Bulgaria’s capital Sofia. The measures the Bulgarian National Bank has already introduced to curb lending growth and the expected new additional limitations on mortgage credits have prompted customers to make quick purchases of properties in Sofia, according to an analysis by the real-estate agency Address Group, published on January 27. Address has found out the first signs on the property market of shrinking money capabilities of the population. The clearest example is in the dropping average price of apartments in the Bulgarian capital. According to Address data, in 2005 buyers were paying an average price of about 40 000 euro for a flat in Sofia. Currently, the single average housing price starts from 30 000 euro for low-profile neighbourhoods like Nadezhda and Lyulin (in the western and northern part of Sofia) and hardly reaches 50 000 euro for the more prestigious southern neighbourhoods. Only the luxury boroughs like Lozenets and Iztok, as well as the ideal centre are seeing deals at an average price between 65 000 and 80 000 euro for a flat. Research by Address shows that only 10 per cent of the customers that have expressed intend to buy a property through credit can prove they have enough income to pay on the mortgage and to correspond to the banking requirements. In spite of this, credits are still extended and the clients of the banks are serving them duly, saidSvetoslava Georgieva, regional manager for housing property in Sofia at Address Group. An average of 35 per cent of all deals in Sofia in 2005 was paid through mortgage. In some neighbourhoods of the city, this percentage reached 38 per cent. Nevertheless, the cases in which buyers are forced to sell their property if unable to serve the loan are very few. These are just single cases where the owners have explicitly shown they want to get rid of their property. Usually, when borrowers cannot repay their loans, the banks prefer to renegotiate and refinance the deal rather than resort to sequestrate housing. What Address experts have found out comes as a surprise after the hopeful latest data published by the National Statistical Institute (NSI) on real estate prices in 2005. The NSI said in mid-January that the average price of a housing property in Bulgaria’s cities increased by 36.6 per cent in 2005. The average price for a sq m stood at 738 leva in 2005, up from 540.5 leva in 2004. Prices were highest in Sofia at 1222.4 leva a sq m, the registered increase being 20.2 per cent year-on-year. The respective prices in Varna and Bourgas (both on the Black Sea) were 1198.1 leva and 1126.5 leva a sq m, rising 25.6 per cent and 46.2 per cent compared to 2004. Flats in Vratsa (North-Western Bulgaria) top the table with the steepest rise of 86.1 per cent in a year to 464.8 leva for a sq m, followed by Yambol (in the southeast) and Silistra (in the northeast), where prices rose respectively 72.1 per cent to 513.6 leva and 70.1 per cent to 406.5 leva a sq m. The average prices remained lowest in Vidin (northwest) at 356.8 leva a sq m, Kyustendil (southwest) 365.4 leva a sq m and Lovech (north) 365.8 leva a sq m. Property investors from the UK have been watching the market intently in the past few years and it is generally perceived as being one of the best prospective investment spots in Europe. With a number of problems still to be ironed out, however, many have watched cautiously from afar, while others have taken a gamble and acquired property for astonishingly low prices, the UK property news website news.assetz.co.uk said. After citing the NSI data, the site adds the encouraging fact that growth appears to be evident throughout Bulgaria, with Sofia no longer necessarily the best option for investment. “Nonetheless, an increase of 20 per cent in Sofia means that the capital is still one of the most exciting prospects, with an expected commercial boom in the capital likely to push prices up considerably before 2010,” Assetz said. Varna fared even better last year, with a 25 per cent increase drawing attention to Bulgaria’s third biggest city. The main port for both naval and commercial shipping, Varna is developing a cosmopolitan atmosphere that will undoubtedly make it attractive to local and foreign house buyers. As Bulgaria prepares for EU accession in the next couple of years, property prices are continuing to rise in even the most unlikely areas and the decision of where to invest is unquestionably becoming more difficult. Bourgas, for instance, saw a rise in property prices of 46 per cent last year. As a Black Sea city, its climate is certainly favourable, while an excellent transport infrastructure has laid the foundations for strong growth in both the tourism and industrial sectors. Many investors will prefer the prospect of buying property by Bulgaria’s ski resorts, however, with the reputation of the snow season growing each year and a bid for the 2014 Winter Olympics attracting a great deal of attention to the constantly improving facilities, Assetz said. With higher levels of mortgage lending in the country and an influx of foreign investors, Bulgaria is undoubtedly becoming one of the most rewarding investment options in Europe, they say. http://www.sofiaecho.com(06.02.2006)