Bulgaria Might Face Second Real Estate Crisis

"Bulgarian Properties" predict a second crisis in the real estate market in the country. Photo by BGNES

The real estate agency “Bulgarian Properties” has announced a possible second crisis in the real estate market, a report from the agency for the second quarter of the year has showed.

“It is very possible for the European economy, including the Bulgarian economy, to face a second crisis, which this time would be triggered by the worsen fiscal situation on a local level. In this case scenario, we will face a second crisis in the real estate,” the report said.

According to Polina Stoykova, the Operations Director of “Bulgarian Properties”, the real estate market is very dynamic and is reacting immediately to all economic and political news and tendencies.

“The insecurities about the government's anti-crisis measures and the contradicting signals for the tax policies had a negative effect on the real estate market in May. There was also a decline in the search of properties in Bulgaria by foreigners because of the crisis in Greece and the threats for the European economy,” Stoykova said.

“Bulgarian Properties” believes that the record low volume of sales, similar to the lowest one in the beginning of the crisis, is connected to the Bulgarian Stock Exchange, which, according to them, has also had a low turnover in May.

According to Stoykova, the next few months will show the direction in which the real estate market will go until the end of the year.

“The real estate market is a complete opposite to what is happening every consecutive month from the beginning of the year, which makes us believe that the recovery will not be as stable and smooth as we have planned,” she said.

“Bulgarian Properties”'s report accounted an increase in the volume of sales in March and in April reached “record high levels” from the beginning of the year.

In May, however, in comparison to April, the agency faced a “drastic drop by 60% in the sales from all over the country”, the report says.

In June, the volume of sales have reached the level of March and April 2010 and June 2009, which was one of the most profitable months for the real estate market last year, according to the agency.

“Activity- and price-wise, the market went back to the levels in 2009,” Stoykova said.

She noted that the average price for apartments in Sofia, sold in the second quarter of 2010, was EUR 870 per sq.m, which was the lowest average price for “Bulgarian Properties” since the beginning of the crisis.

The report shows a drop by 16% in the prices, in comparison to the first quarter of 2010, when the average price was EUR 1040 per sq.m.

During the second quarter of 2009, the average price was EUR 1020 per sq.m, which means that “Bulgarian Properties” experienced a drop by 15%, year-on-year.

According to the data, there is also a difference in the size of the sold properties. In 2010, the average price of an apartment is EUR 86 000, while a year ago the price was EUR 66 600. In 2009, people have been buying small apartments of around 60 sq.m. for the average price of EUR 1020 per sq.m. In 2010, people spend more money on properties in Sofia and bought larger apartments of around 100 sq.m.

In the first quarter of 2010, properties in the luxury segment have been sold for the average of EUR 119 300, with EUR 1 200 - 1 400 per sq.m.

In the second quarter, about 50% of the real estate deals have been in the low price segment with the average of EUR 35 000, with EUR 500 – 600 per sq.m.

The volume of sales in Sofia for the second quarter of 2010 is relatively stable on a monthly basis from the fall of 2009.

The average rental price of apartment in Sofia for the second quarter of 2010 is EUR 480. This is a raise by 20% in comparison to the first quarter when the average rental price was EUR 400.

However, the volume of the rental deals in the second quarter has dropped by 26% in comparison to the first quarter of 2010.

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