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Bulgarian Real Estate Market Report - 1Q 2010
The first quarter of 2010 was relatively successful for the real estate market in Bulgaria as the average activity on the market was 40% higher compared to the same period in 2009 – the most difficult period on the property market in Bulgaria.
The first quarter of 2010 was relatively successful for the real estate market in Bulgaria as the average activity on the market was about 40% higher compared to the same period in 2009. Property sales in January and February 2010 remained the same as those in the second half of 2009, while March brought a higher activity on the market.
The number of deals in March reached a record high since the beginning of the crisis and a growth of 50% compared to the average monthly levels in the last 10 months. The more dynamic market in March was mainly connected to properties in regions around the country some of which had registered almost no deals in the last few months. The activity on the market of city properties in Sofia and Varna remains unchanged compared to the last six months and property prices based on actual concluded deals remain stable.
The concluded deals are still mainly with luxurious properties or with very cheap properties, as the main requirement of the buyers is the bargain price. This trend started in 2009 and still continues.
If we have to describe the current situation on the market in one sentence it would sound like this: “Buyers are returning to the market, there is interest on their side, the number of concluded deals is increasing but all this is true for properties offered at attractive prices.”
II. CHARACTERISTICS OF THE PROPERTY MARKET IN THE DIFFERENT MARKET SEGMENTS
1. City properties in Sofia and Varna
In the city property segment and mostly in Sofia we witness a calmer market and an overcoming of the initial shock from the crisis. It’s a fact that the decrease in property prices in Sofia is much smaller compared to that in most parts of Bulgaria – a 23% decrease in 2009 compared to 2008 for Sofia on the background of an average price decrease of 36% for the country according to BULGARIAN PROPERTIES’ data from actual concluded deals. In the first quarter of 2010 property prices in Sofia and Varna based on actual concluded deals remain unchanged compared to the last quarter of 2009.
1.1. Sales of residential properties in Sofia
Average price of sold apartments in the first quarter of 2010 – 1,040 EUR/sq.m.
In January the apartments in Sofia were sold at an average price of 980 EUR/sq.m. which is similar to that of the last quarter of 2009. In February the average price was 1,220 EUR/sq.m. (mainly luxury properties were bought) and in March the average price of sold properties dropped to 940 EUR/sq.m.
In the last year or so the residential property market in Sofia keeps relatively stable prices as property prices didn’t fall significantly and many of the buyers are still waiting for better prices. As this volume of deals, which balances the market in the last year, is very small for the capital there might be a second wave of decrease in property prices in Sofia, especially for properties with bad location, bad environment, Soviet-type properties and properties in need of overall repair works. These apartments could be sold only at bargain prices.
1.2. Rental levels of residential properties in Sofia
There is an increase in the number of concluded rental deals in Sofia since the beginning of the year by about 30% compared to the last quarter of 2009. However, now deals are concluded at prices that are 30% lower. If at the end of last year the concluded rental deals were mostly with luxury apartments at about 600-700 Euro/month, in 2010 rentals of apartments under 450 Euro/month prevail – an average of 390 Euro/month for January, 430 Euro/month for February and 400 Euro/month for March 2010. Moreover, in February and March the demand for luxury apartment rentals increased slightly and there were deals concluded at over 1,000 Euro/month.
1.3 Sales of residential properties in Varna
Prices of city properties in Varna remain stable and the interest towards them – relatively low. The average offer price per square meter in Varna is about 900 Euro making the properties there more expensive than the buyers expect and the market there continues to be not very active.
1.4 Rental levels of residential properties in Varna
Regarding rental levels in Varna there is a decrease of 30% in the number of concluded deals compared to the first quarter in 2009 and a decrease of 27% compared to the last quarter in 2009. The average price at which a new one-bed apartment was rented out in the first quarter of 2010 is 380 Euro as deals are concluded after additional bargaining, while according to the data of BULGARIAN PROPERTIES in 2009 the average rental price was 540 Euro. There is also a decrease of 20% in the number of realized rental deals in Varna in 2010 compared to 1Q 2009.
Due to the slow market lessors are often willing to rent their properties out for a shorter period (1-3 months). Foreign and Bulgarian clients are already looking for holiday homes to rent for the summer season in the Golden Sands resort and in the top central area of Varna.
2. Holiday homes
The fate of the already built but unsold properties is to be decided this or the next year as most probably they will be sold at prices that are much lower than their cost price and their owners/developers will face significant losses.
This is also backed up by the trend that started in the beginning of this year when builders and sellers of holiday homes in Bulgaria’s seaside and ski resorts started lowering the offer prices significantly.
Although prices of holiday homes are now quite attractive candidate buyers are very demanding and have a long list of requirements – a very lucrative price (300-500 Euro/sq.m.), good location, good quality, good property management and maintenance of the building, possibilities for renting of the property and generating an income from the investment.
There are no off-plan sales as there are no potential buyers even for properties offered at extremely low prices. We have reasons to believe that there will be no sales in this segment in the next few years.
A number of builders have halted their projects in the initial stage due to the lack of financing and oversaturation of the market. Even a greater number of projects with an allocated plot and a building permit have been halted. More and more such projects are offered for sale on the market but there are no potential investors as well due to the gloomy perspectives for the new construction segment.
2.1. Holiday properties in the area of Varna
Since the beginning of the year sellers have been decreasing prices of holiday properties in the resorts of Byala, Kavarna, Golden Sands and other resorts around Varna. Property prices in these destinations start from 360 Euro/sq.m. for fully finished apartments.
2.2 Southern Black Sea Coast
Since the beginning of 2010 we are witnessing a return of the buyers’ interest in the Bulgarian Black Sea resorts – mainly in expensive and elite properties at prices from 80,000 to 130,000 Euro or in very cheap properties between 25,000 – 30,000 Euro.
2.3 Bansko - http://www.bulgarianproperties.com/
We had a relatively successful winter season regarding property sales in Bansko with a threefold increase in the number of realized deals compared to the first quarter of 2009. The average price of the sold properties in Bansko in the period January-March 2010 is the same as that in the second half of 2009 – 650 Euro/sq.m. and the average price is 40,000 Euro. The offer prices of Bansko apartments start from 500 Euro/sq.m.
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