Bulgaria Housing Market Favors Buyers but Far Away from Collapse - Report
During this period housing prices in the country began to go down, reaching a 20% decrease in some areas of Bulgaria's largest cities.
Sofia has registered a price decrease in 70% of its districts. In Sofia's "Manastirski Livadi' district, current apartment prices are down by EUR 50 per square meter compared with the end of 2008, in "Mladost" they are EUR 60 down, in "Lyulin" - EUR 100 down. In the "Studentski Grad" district prices are up by EUR 50.
The overall housing prices in Bulgaria in 2008 have registered an increase of 22%. The increase has been the highest in Plovdiv - 32%, followed by Sofia - 30%, Veliko Turnovo and Ruse - 27%.
High land prices in areas with good location have been an additional factor for the registered price increase while, at the same time, the number of perspective buyers has gone down significantly.
Currently there are 115,000 housing units listed for sale in Sofia, making buyers very demanding about quality and delaying their purchase decision.
80% of construction businesses register a direct negative effect from the crisis with those with the best image or with own means to finance their projects showing more stability.
The "Address" company data shows that in 2008, 63% of the purchased properties were new construction, 15% were those bought "off plan," 6% were older brick units while the concrete panel ones made for 16% of the purchases.
The panel units' prices have shown a drastic decrease in the third trimester of 2008 - down by 23% compared with the beginning of the year.
Landing restrictions imposed by the banks and bad economic forecasts compelled many potential buyers, in need of new housing, to choose renting instead of buying. However, the fact that a high percentage of people owning a second house, purchased as investment, began offering those properties for rent, has kept rent prices at the same level.
Despite the fact that the wealthiest buyers are the least affected by the crisis and a good volume of luxury property deals in 2008, the sales in this market segment also register a decline during the last months of 2008.
Grim forecasts about the "busting of the bubble," however, failed to realize and the Bulgarian housing property market is far from collapse, the "Address" report states.
The supply is several times higher than the demand, but owners are still not ready to sell at any price. At the moment, in Sofia, all buildings where apartments have been sold-out are going to be finished and buyers will receive their properties.
The banks that began restricting the granting of loans before the crisis was even felt in the country played an important preventive role by limiting bad credit, the large volume of second mortgage apartments and a price collapse.
The changes registered in the beginning of 2009 have turned the market into a buyers' and cash market, without the presence of profiteers or foreign investors, including Bulgarians living abroad.
In the light of the above changes, "Address" announced that beginning Monday, February 9% their agency's commission was going to be 0% for the buyer's agent and 6% for the seller's since sellers needed most support. Until now the commission was split between the two agents.
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Its about time there was an 'adjustment' in the Bugarian property market. The next 2 years are going to be great for buyers wanting to buy into real estate but terrible for those real estate agents and developers who have been reliant on foreign money to swell their coffers. Greed has driven all of this and now the tables are turning in favour of the consumer. :-)
"Current real estate prices in BG bear no relation to reality and are clearly are not aimed at the average Bulgarian worker on average Bulgarian wages."
That's the problem in a nut shell. That's what made the real estate bubble burst in the US. Houses selling at prices the average buyer can't afford. This is true for any business, not just real estate. You have to do your market research, identify your client base, come up with a good business plan and your business has a good chance of success. If you just plunge into building expensive trash all over the place and trying to sell it at exorbitant prices, you will eventually run out of idiots to swindle and your bubble will burst. Your only hope is to swindle enough people and recoup your investment before your bubble bursts. Get rich quick and get out of real estate.
Nellie, your theory works well until you consider the fact that current real estate prices in BG bear no relation to reality and are clearly are not aimed at the average Bulgarian worker on average Bulgarian wages.
The sooner the market realises that they have to drop prices just to survive the better. Those that do will get through this recession and be well placed to benefit when the market strengthens again, those that stick their heads in sand and pretend that Bulgaria is immune will go bust along with many investors and developers. And that can only be a good thing in my opinion.
What a cute nick! Are you red or green chushki? Or perhaps you are a kapia kind of chushka?
The prices of real estate have to be in sync with the income of the clients. If most of your client base has an income of 600-800 lev/month, then their mortgage payment can't be more than say 200-300 lev/month. Assume a 30-year mortgage at 6-8% interest. Work backwards starting with the income of the customer to find out how much house he can afford. Ignore the asking price, that may or may not be realistic.
These Real Estate agents are kidding themselves if they think that Bulgaria is immune or even partly immune from the crash in real estate prices.
Its typical agent speak to talk up the value of property in order to create the illusion of market stablility and keep prices artificially high. After all, these are the same people who have talked up huge and unsustainable increases in unit prices across Bulgaria over the past few years despite demand dropping.
Whilst the timing of the credit crunch on Bulgaria may be several months behind the rest of Europe, the impact on real estate will be immense with prices dropping as the inflow of foreign money to buy up all these shiny new flats in Sofia, Plovdiv, the Black Sea and the ski resorts just dries up.
What goes up in good times must come down during bad, and with real estate in Bulgaria it will be one almighty crash landing.
Lets see what the 'experts' at Address are saying in 6 months time............
This statement :
"Currently there are 115,000 housing units listed for sale in Sofia" supports the notion of MUCH lower prices coming.
It all depends on ones defintion of a"Collapse". Is it -20%, -30& , or -50% ?
Well Nellie or Resp or Kolg?
Hang in their Goerge, your going to have the greatest inventory to choose from-next year!