Bulgaria Housing Market Favors Buyers but Far Away from Collapse - Report

Business | February 8, 2009, Sunday // 00:00

The real effects of the financial crisis were first felt by the Bulgarian housing market in the third trimester of 2008, data from a report prepared by the Bulgarian real estate agency "Address" reveals.

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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