After peaking in mid-2008, residential property prices in Bulgaria continued to fall in Q1 2010. A massive house price boom led prices to surge by around 300% from 2000 to 2008.
As of Q1 2010, the average price of existing flats in Bulgaria was BGN978 (€500) per sq. m., according to the National Statistical Institute. The national average price was down 17.8% from a year earlier and 2.3% from the previous quarter. It was also 31% below the peak price of BGN1,418 (€725) per sq. m. in Q3 2008.
In Sofia, the capital, the average price of BGN1,558 (€797) per sq. m. in Q1 2010 was down by 21.3% y-o-y and 1.7% q-o-q. Compared to its peak level, the average price has fallen by 37%.
Property prices in all 28 provinces were down from their peak levels, with price falls ranging from 6.6% for Sofia Province to 42% for Pleven in central northern Bulgaria. Provinces that registered the biggest price gains during the boom tend to have the largest price falls.
Contagion from the global financial crisis caused the Bulgarian property bubble to burst. Demand from foreigners keen to get their hands on properties near the Black Sea and the Danube River dried up. The number of dwellings completed and building permits issued has fallen. For instance, only 3,201 dwellings were completed in Q1 2010, down from a peak level of 6,811 in Q4 2008.
With the weak economy expected to continue, the housing market is expected to remain in the doldrums for the next few years. After contracting by 5% in 2009 and by 3.6% y-o-y to Q1 2010, Bulgaria’s GDP is expected to grow by a mere 0.2% for the entire 2010. The unemployment rate, at 8.8% in April 2010, was up from 6.3% a year earlier. Economic recovery is hampered by Bulgaria’s image as one of the most corrupt countries in Europe.
As of Q1 2010, the average price of existing flats in Bulgaria was BGN978 (€500) per sq. m., according to the National Statistical Institute. The national average price was down 17.8% from a year earlier and 2.3% from the previous quarter. It was also 31% below the peak price of BGN1,418 (€725) per sq. m. in Q3 2008.
In Sofia, the capital, the average price of BGN1,558 (€797) per sq. m. in Q1 2010 was down by 21.3% y-o-y and 1.7% q-o-q. Compared to its peak level, the average price has fallen by 37%.
Property prices in all 28 provinces were down from their peak levels, with price falls ranging from 6.6% for Sofia Province to 42% for Pleven in central northern Bulgaria. Provinces that registered the biggest price gains during the boom tend to have the largest price falls.
Contagion from the global financial crisis caused the Bulgarian property bubble to burst. Demand from foreigners keen to get their hands on properties near the Black Sea and the Danube River dried up. The number of dwellings completed and building permits issued has fallen. For instance, only 3,201 dwellings were completed in Q1 2010, down from a peak level of 6,811 in Q4 2008.With the weak economy expected to continue, the housing market is expected to remain in the doldrums for the next few years. After contracting by 5% in 2009 and by 3.6% y-o-y to Q1 2010, Bulgaria’s GDP is expected to grow by a mere 0.2% for the entire 2010. The unemployment rate, at 8.8% in April 2010, was up from 6.3% a year earlier. Economic recovery is hampered by Bulgaria’s image as one of the most corrupt countries in Europe.
Analysis of Bulgaria Residential Property Market »
RENTAL YIELDS
Last Updated: Aug 16, 2011
Apartment prices in central Sofia range from €130,500 to €360,700 and cost an average of €1,659 per sq. m. In the suburbs on the other hand, starting prices for apartments are €105,800.
Gross rental returns are around 5.1% and 5.88% in Central Sofia and the suburbs. Yields are similar for apartments ranging from of 60 to 180 sq. m. with only a 0.32% difference between its highest and lowest. This is also true of suburb apartments with 0.69% difference in rental yields.
Gross rental returns are around 5.1% and 5.88% in Central Sofia and the suburbs. Yields are similar for apartments ranging from of 60 to 180 sq. m. with only a 0.32% difference between its highest and lowest. This is also true of suburb apartments with 0.69% difference in rental yields.
TAXES AND COSTS
Last Updated: Aug 18, 2011
Rental Income: Gross rent earned by non-residents is taxed at a flat rate of 10%, withheld at source. Deductions are not allowed for nonresidents.
Capital Gains: The sale of real estate by nonresidents in Bulgaria is subject to 10% withholding tax on the net gains received.
Inheritance Inheritance of direct descendants is not taxed. For all other beneficiaries, the inheritance tax rates vary, depending on the relationship between the donor and the heir.
Residents: Residents' worldwide income is taxed at a flat rate of 10%.
Capital Gains: The sale of real estate by nonresidents in Bulgaria is subject to 10% withholding tax on the net gains received.
Inheritance Inheritance of direct descendants is not taxed. For all other beneficiaries, the inheritance tax rates vary, depending on the relationship between the donor and the heir.
Residents: Residents' worldwide income is taxed at a flat rate of 10%.
BUYING GUIDE
Last Updated: Feb 04, 2011
Total roundtrip transaction costs range from 4% upwards. If the seller is a company, VAT is required if the company is registered for VAT, or if property value is over 50,000 Levs (around 26,000 Euros).
VAT is then payable at 20% of the ‘taxable base’ - the difference between the sale price and the ‘base turnover’ of 50,000 Levs – so if you sell for 51,000 Levs, VAT is payable at 20% of 1,000 Levs. If your purchase price was above 50,000 Levs, VAT is 20% of the difference between your purchase and your sale price. It is hard to do justice to this subject in brief. There is a more in-depth discussion in our Bulgarian buying guide.
To these transaction costs, of course, the foreigner may have to add the costs of forming and administering a company, see forming a company in Bulgaria.
VAT is then payable at 20% of the ‘taxable base’ - the difference between the sale price and the ‘base turnover’ of 50,000 Levs – so if you sell for 51,000 Levs, VAT is payable at 20% of 1,000 Levs. If your purchase price was above 50,000 Levs, VAT is 20% of the difference between your purchase and your sale price. It is hard to do justice to this subject in brief. There is a more in-depth discussion in our Bulgarian buying guide.
To these transaction costs, of course, the foreigner may have to add the costs of forming and administering a company, see forming a company in Bulgaria.
LANDLORD AND TENANT
Last Updated: Dec 31, 1969
The laws are pro-landlord
Bulgarian law is pro-landlord.
Rent: There are no rent controls, so rents and terms and conditions can be freely negotiated between the parties. Any method of rent increase can be agreed upon, including indexation, and periodic progressive increases.
Tenant Eviction: Bulgaria’s weakness is the inefficiency of the court system, which can, in practice, make it difficult to evict a tenant. Usually it is the landlord who initiates litigation. But the length of proceedings often dissuades them. It takes an average of 660 days to evict a tenant.
Rent: There are no rent controls, so rents and terms and conditions can be freely negotiated between the parties. Any method of rent increase can be agreed upon, including indexation, and periodic progressive increases.
Tenant Eviction: Bulgaria’s weakness is the inefficiency of the court system, which can, in practice, make it difficult to evict a tenant. Usually it is the landlord who initiates litigation. But the length of proceedings often dissuades them. It takes an average of 660 days to evict a tenant.
ECONOMIC GROWTH
Last Updated: Feb 04, 2011
Bulgaria suffers recession, but modest growth is expected by end-2010
Bulgaria has succumbed to the global crisis. The economy contracted by 5.1% in 2009, and further declined by 3.62% (year-on-year) in Q1 2010. These were in sharp contrast to the outstanding increases in the past years- 6% in 2008 and 6.2% in 2007. The unemployment rate rose to 10.2% in Q1 2010, significantly higher than last year’s 6.8% and the highest since 2006.The global financial crisis, which has crippled many developed European economies, reached Bulgaria in late 2008. Foreign direct investments, the main driver of the preceding economic boom, dropped by 26% in 2008 and by 52% in 2009. It further fell by 85.8% over the year to Q1 2010. Investments in real estate was down 67.1% in 2009 and 66.5% over the year to Q1 2010. This led to a house price drops which started in Q1 2009. By end of 2009, house prices were down by 26.3% (year-on-year). The housing bust continued in Q1 2010, with house prices down by 17.8% from a year earlier.
With the global economy’s recovery, the International Monetary Fund recently projected Bulgaria’s real GDP to grow by 0.2% in 2010. Exports will drive growth. However, investments are expected to fall further.
Bulgaria enjoyed an economic boom from 2000 to 2008, with the economy expanding at an average of 5.6% per year. Bulgaria was overwhelmed with foreign direct investments, mostly from the Netherlands, Austria, Germany, Russia and the UK, in 2000. The FDI peaked in 2007 and soared to €9.1 billion. The 2007 FDI was higher than the sum of investments from 2002-2005. Foreign investments mostly went to the real estate and construction sectors. Consequently, house prices rose enormously. In 2008, dwellings were sold at BGN 1,359 (EUR 696), more than 100% higher than the price in 2006.
Exports continuously increased from 1995 to 2008. The economic boom translated to lower unemployment rate. By 2008, the unemployment rate was reduced to 5.6%, the lowest since 2003.
Bulgaria joined the European Union in January 2007. Bulgaria’s transition from communism has not been easy. Things only really started to improve when Bulgaria’s last Tsar Simeon II became the democratically elected prime minister from 2001 to 2005. His government pushed market reforms intended to ease accession to the EU.
In June 2005 elections, the Socialist Party led by Sergei Stanishev won most seats in parliament. After weeks of wrangling the main parties signed a coalition deal under which he became prime minister, but he has largely continued previous policies (partly constrained by EU membership conditions). However, the political environment remains volatile. In July 2009 elections, the Citizens for European Development of Bulgaria (center-right party) led by Boyko Borisov, defeated the Socialist Party.
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