Buying A Property In Bulgaria

Bulgaria shot from nowhere a decade ago to become one of the most talked about property markets in recent times. But will the boom bust?

By Gordon Miller

An Overview

The boom began around 2004, driven by cheap house prices, available finance and British and Russian buyers flush with cash and with an eye for a quick profit. Those who got in early (and out again) were rewarded with official capital price increases of 37 per cent in 2005, 16 per cent in 2006 and 27 per cent in 2007, as Bulgaria geared up for successful accession to the European Union. Many people thought the boom couldn't end but it did - eventually.

Last year saw a late rally - at a time when many other markets worldwide had already collapsed - with house prices increasing by 11.7 per cent on a year earlier. But the downward trend began in the last quarter of 2008 - down 4.1 per cent on the previous quarter - and has continued in 2009. The number of sale transactions has fallen by 35 per cent on a year earlier. House prices tumbled by 21.9 per cent to the end of the second quarter compared to a year earlier, according to the Knight Frank Global House Price Index.

So, is Bulgaria now a spent force for residential property? It may be too early to discard the Balkan country altogether, but the prognosis does not look good in the short to medium term. The downward trend has affected all major cities and seaside resorts, with Sofia, Varna and Samokov region, including upscale winter resort Borovets, collapsing by around 50 per cent, according to data from the Registry Agency. A recent report by Raiffeisen Real Estate shows that property sales are down on average by 42 per cent with Sofia transaction volumes down 58 per cent.

Ani Angelova, manager of Raiffeisen Imoti and executive manager of Raiffeisen Bank, said: 'Potential customers at all real estate sectors are waiting, with the only active on the market currently being those with riskier profile, or who are ready to gamble with the prospect of improving their capitalisation for the future.'

Experts expect the number of new properties being built to drop off considerably because of low demand. Estimates from Acro Real Estate indicate a 25 per cent drop in new construction projects to come onto the market in 2009. Data from the National Statistical Institute shows that 3,897 new housing units had come to market in the first quarter of 2009 compared with 20,924 for all of 2008. The number of new building permits granted halved in the first three months of 2009. Developers who have permits are holding off. Acro said this could create a vacuum with no finished new housing units appearing on the market in 2010.