CLOSE X

Register - if you don't have an account

Fortnightly updates from the global property arena directly to your inbox


Login - for registered users

Forgot Password?
Explore destinations
continent map couldn't be loaded Pacific Europe & Russia North America Latin America Asia Africa Middle East Caribbean

 


Financial Overview

Directory

Property Search

Global Statistics

Regional Statistics






Jul 24, 2010


The crash continues in Bulgaria, but there are positive signs


The Bulgarian housing market remains in the doldrums. House prices continued to drop in Q1 2010, amid a poor economic environment

  • Foreign and domestic housing demand remains subdued.
  • Mortgage rates have gone down – yet credit demand remains weak.
  • But some areas are beginning to see price increases

Dwellings in Bulgaria sold for an average of BGN 978.7 (€500) per square metre in Q1 2010, down by 17.81% (-18.55% inflation-adjusted) from a year earlier, and down by 2.30% during the quarter, according to the National Statistical Institute.  This is 31% lower than the peak price of BGN1,418 (€725) per sq. m. in Q3 2008.

This past year’s 17.81% drop, although dramatic, was a significant improvement from the year-on-year declines in the three previous quarters: 21.9% down to end-Q2 2009, 28% down to end-Q3 2009 and 26.3% down to end-Q4 2009. This has brought hopes that prices will bottom out within the year.

Signs of market revival?



Despite sharp drops in many areas, prices rose in three provinces for the first time since the housing slump. Sofia province rallied strongly, up 7.46% year-on-year to Q1 2010. Vidin and Haskovo had modest increases of 1.61% and 0.37% respectively. These price recoveries have powered hopes that market conditions will improve.

Price falls were experienced in 25 out of 28 provinces over the year to Q1 2010.  Pronounced drops were recorded in provinces that had enormous increases during the boom years.  In the capital city, Sofia, house prices were back to its 2007 level.  In Q1 2010,dwellings were sold at BGN1,558 (€592) per square meter, 21.30% below the price in Q1 2009, and 37% below the peak level in Q3 2008.

The sharpest fall was seen in the North Western province of Vratsa, where house prices dropped 28.24% year-on-year to Q1 2010. Furthermore, there were drops of over 20% in eight provinces: Pernik (-26.77%), Burgas (-25.74), Pleven (-23.77%), Lovech  (-22.12), Sofia (-21.82), Razgrad (-21.36%), Smolyan (-21.30) and Silistra (-20.19).

Foreign demand has fallen off a cliff

A large part of foreign investments (FDI) entering Bulgaria in recent years went into real estate, and these have shrunk dramatically. Real estate FDI was only €61 million in Q1 2010, down from €182.2 million a year ago, and massively down from the peak of €853.6 million of Q3 2007.

The housing downturn in Bulgaria started when the global financial crisis hit Europe in late 2008.

Are sales picking up?  Real estate agents don’t agree

Despite the weak prices, some agents say sales surged by 40% in Q1 compared to the same quarter last year.  According to Colliers Bulgaria, sales began to pick up as early as August 2009, after months of stagnation. Houses priced below €1,000 per square metre were the most marketable.

However Foros, another real estate firm, reported a decline of 26% in completed purchase transactions over the year to Q1 2010.

British and Russians are the top foreign buyers of Bulgarian real estate, buying holiday houses near the Black Sea and the Danube River.  Hit by the financial crisis, in Q1 2010 there was a net outflow of €30 million of UK investment from Bulgaria, in sharp contrast to the inflow of €129.8 million in Q1 2009.

Russians remain net buyers.  There was an investment inflow from Russia of €43.6 million in Q1 2010, down from €73.7 million the year earlier, in Q1 2009.

The economy is in recession

 The global financial crisis sent Bulgaria into recession in 2009. After growing by 6% in 2008, the Bulgarian economy shrank  5% in 2009. Exports, consumption and capital formation were all down. The economy continued to deteriorate in Q1 2010, with GDP down by 4% from Q1 2009 – the second largest GDP fall among European Union countries.

The unemployment rate rose to 10.2% in Q1 2010, significantly higher than last year’s 6.8%. This was also the highest since 2006.

Many housing construction projects have been halted. Dwellings completed in Q1 2010 were 26.9% down from Q1 2009, and building permits were 32.8% lower. But the really significant decline had happened a year earlier - Yambol and the capital city of Sofia had huge declines of more than 70% year-on-year to Q1 2009.

The struggling mortgage market

 Weak credit demand and stringent loan policies have meant a decrease in the amount of housing loans New housing loans granted from January to May 2010 amounted to BGN501.3 million, 4.9% higher than during the same period last year, but 65.9% lower than during the same months in 2008.

In May 2010, non-performing housing loans reached BGN 48.6 million, or 13.1% of the Bulgaria’s total bad debts. In response, banks lowered the maximum loan-to-value ratio to 50%, and have implemented strict income and property requirements.

The average mortgage interest rate in May was down to 8.55%, from 10.09% in 2009, for BGN-denominated loans.  Euro-denominated loan rates were down to 8.29%, from 8.59% in 2009.

 





Comments


Be the first to comment on this article!



Login or Register to submit a comment!

In order to promote open and spam-free conversations, Global Property Guide moderates commetns on all articles. You can expect that your comment will be published within 24 hours.



News & Discussion
OCTOBER 2010
AUGUST 2010
MARCH 2010

More news & discussion »

Compare Countries



Free Newsletter

Fortnightly updates from the global property arena directly to your inbox.


Email Address:





Connect to professional advice in Bulgaria





PROPERTY RECOMMENDATIONS

 
Download free property reports from international research houses

Our Newsletter

 
Fortnightly updates from the global property arena directly to your inbox.

Manage subscriptions