The apartment prices in the Bulgarian capital Sofia have declined below EUR 1 000 per square meter for the first time in five years, according to a report by Arco Real Estate, a consultancy.

Housing prices in Sofia have declined by a total of 6% over the past year, with prices in the western parts of the city dropping by 9%, and prices in the northern-northeastern outskirts collapsing by 19%, down to as little as EUR 433 per square meter, the firm said in a report Tuesday.

At the same time, the prices of real estate properties situated along the soon-to-be opened second line of the Sofia Metro have seen a slight increase, the report concludes based on a research of the Sofia real estate market since the start of 2012.

The permits issued for the construction of new apartment buildings in Sofia declined by 23% in H1 of 2012 year-on-year; some 56 000 square meters of residential space is under construction in the Bulgarian capital as of mid 2012, a slight increase.

However, the construction of office buildings in Sofia has almost stalled, with permits issued for less that 5 000 square meters of office space since the start of 2012, the report says.

It concludes that the oversupply of office space coupled with the lack of a substantial demand by tenants in Sofia keeps rental rates low, while leaving substantial amounts of office space free.

Class A office space deals are said to be made for EUR 10-12 per square meter per month, while less high-profile locations see rates of EUR 3-5 per square meter per month.

The report also notes that the upcoming opening of two large shopping malls with office centers – Paradise Center and Bulgaria Mall – scheduled to be launched in Sofia by the end of 2012 – will boost the total office space for rent in Sofia's mall complexes by 50% to 320 000 square meters.

While the average rent for office space in the shopping mall complexes in Sofia is estimated at EUR 24 per square meter per month, some of the most high-profile locations can see rates of up to EUR 45 per square meter per month, the Arco report says.

It also forecasts an improved dynamic of the real estate market in the Sofia downtown after the completion of the ongoing construction and rehabilitation works there.